The Wealth Report’s objective is to provide an annual assessment of how wealth creation is shaping investment markets, and to highlight opportunities and risks. This year’s report paints a dramatic picture. Economic, wealth and property market trends are accelerating in the wake of the global pandemic, presenting an ever-wider range of options for investors – but there are growing systemic risks on the horizon.   

Definitionen und Daten
UHNWI: Ultra-high-net-worth individual – someone with a net worth of US$30 million or more, including their primary residence.

A WEALTH SURGE...

Last year’s global economic rebound supercharged wealth creation. Worldwide, the number of UHNWIs rose 9.3% over the year, creating an additional 52,000 very wealthy people compared with just 12 months earlier. This growth was evenly spread, with North America (up 12.2%) just ahead of the regional pack. Only Africa saw a decline in wealth. As we discuss, the growth in younger, self-made UHNWIs (21% of the total) will drive new investment themes and innovation.

… PROMPTS A BACKLASH

With 83% of our Attitudes Survey respondents expecting their clients’wealth to grow further this year, and our expectation of a further 28.3% rise in global UHNWI numbers by 2026, policy responses to tackle inequality are on the rise. Expect more wealth taxation, focused on assets rather than income, and a narrowing in the number of low-tax jurisdictions.

LOCKDOWNS BE DAMNED – GLOBALISATION IS ON THE RISE

While international airport arrivals plummeted by 72% compared with pre-pandemic levels, as travellers navigated last-minute border closures, our report points to a demand for more, not less, internationalism. Around 15% of UHNWIs plan to apply for a second passport or new citizenship and 36% of those are planning to do so for a better quality of life. With global exports hitting record levels and cross-border real estate investment on the rise, globalisation is in the ascendancy.

TECHNOLOGY, ACCELERATOR OF CHANGE

Digital pioneer Dame Stephanie Shirley confirms the speed of change; when she started out, computers were still programmed using punched cards (page 6). Her reflections put in context a global cryptoasset market worth US$2.4 trillion at the end of 2021, up 12-fold in under two years. Don’t understand cryptocurrency? Don’t worry – with 8,000 to choose from, one is bound to suit. Indeed, 18% of UHNWIs now own some kind of crypto, 11% have invested in non-fungible tokens (NFTs) and more than 60% of Attitudes Survey respondents see blockchain technology as an opportunity. Still not convinced? We report on a digital Gucci bag that sold for more than a real one. If that isn’t enough, get ready to have an opinion on the best type of metaverse to protect your digital property (page 9) – open or closed?

PRIVATE CAPITAL DRIVES REAL ESTATE INVESTMENT

A growing share of private capital is pouring into property. While private investors increased their exposure to real estate investments by 52% in 2021, institutional investment volumes rose just 29%. Private capital now accounts for 35% of all investment transactions. With 23% of UHNWIs planning to invest in property this year, we tip offices to be the biggest target, with logistics pipping residential to second place for the first time.

PROPERTY INNOVATION

The pandemic is driving business disruption, and property is at the epicentre. Priorities identified by our global team include: green hydrogen production (Australia has enough land to more than meet predicted global demand); renewable energy in Africa (data centres are being sited close to the Great Rift Valley’s geothermal springs); agritech and aquaculture in the Middle East; plus opportunities in the childcare and education sectors, forestry and vineyards. We also dive into the latest trends in hybrid working. The takeaway? If you’re only working from home or the office, you aren’t thinking hard enough about your options.

ESG ON THE RISE, AND UNDER SCRUTINY

The three letters that increasingly dominate investment debates have gone mainstream. Some 80% of wealthy investors want more ESG-compliant assets, the main reason being to future- proof their portfolios – and why not, when we report a value premium of up to 18% for the “greenest” offices? The biggest barrier for future investment is “lack of opportunities” – a clear call to action for developers. Yet with private jet journeys rising 47% in a year (page 78) we provide a timely discussion on the sustainability conundrum at the heart of the luxury business (page 26), but point to some hopeful innovations tackling five major environmental challenges (page 44).

LUXURY PROPERTY BECOMES THE INVESTMENT SECTOR OF CHOICE

The average value of luxury residential property increased by 8.4% in 2021, the highest annual increase since our Prime International Residential Index (PIRI 100) was launched in 2008. Of the markets tracked, only seven saw prices decline in 2021. We dive into the numbers pointing to the outperformers (44% growth in Dubai), the most expensive (you need US$34 million to access the top of the Monaco market) and the most in- demand (53 nationalities own property in Provence, Europe’s most diverse market).

PRIME FORECAST

Far from running out of steam, the luxury housing boom looks set to endure. Dubai, Miami and Zurich lead our 2022 forecast, with prime prices expected to end the year between 10% and 12% higher. Asian cities are expected to trail slightly in 2022, but even here prices will grow. Key themes to watch: agents will complain about stock shortages, buyers will complain about rising taxes and cooling measures, and city markets will be back in demand – but look for the fallout from China’s property slowdown. 

FINE WINE AND WATCHES LUBRICATE INVESTMENT

Not to be outdone by prime property, the luxury collectible sector saw a strong performance last year, with record-breaking sales volumes at the major global auction houses. Our Luxury Investment Index was led by fine wine and watches, both rising an impressive 16% through the year, and the art market delivering double digit returns at 13%. Digital innovation helped to widen the pool of collectors, with the NFT boom encouraging a rise in new younger market entrants.

SUPERYACHTS, NEMO, VOLCANIC CITIES AND MORE… 

In a packed edition we also find space to report on the superyacht boom; orders were up by 6% in 2021 led by buyers from the Gulf (which alongside the Red Sea is set to be the next superyacht hub). Andrew Shirley links clownfish and Jurassic Park to an innovative 75,000-hectare nature reserve with sustainable tourism and underwater data centres (page 90). Our assessment of new urban forms covers 150 new hubs in 40 countries, including one at the foot of a volcano in El Salvador funded by Bitcoin (page 80), and we revisit the final frontier – property in space (page 30). Read about all this and more, inside…

The full Knight Frank Wealth Report here for you to download: