A total of $483 billion (€443.5 billion) is expected to be invested worldwide by 2024. What is the smart money betting on?
Last year, there were an average of 70 affluent investors per day, and this trend is expected to continue.
According to real estate consultant firm Knight Frank, the global ultra-wealthy population increased by 4.2% and is projected to increase by 28% over the next five years until 2028.
According to the current Wealth report, the global number of ultra-high-net-worth people (UHNWIs) with a net worth of $30 million (€27.6 million) or more increased to 626,619 from 601,300 the previous year. This was owing to increasing investment in shares in anticipation of lower interest rates, which resulted in a surge in the value of equities markets. The US economy’s strong performance also aided the elite in their wealth accumulation.
North America saw a 7.2% increase in the number of ultra-wealthy individuals, followed by the Middle East (6.2%).
According to Liam Bailey, Knight Frank’s Global Head of Research, while there has been a 1.8% increase in the number of super-rich in Europe, the continent still houses the top 1%.
Latin America’s number of rich individuals decreased by 3.6%.
The gain in 2023 comes after a year in which the wealth of the wealthy decreased by a startling $10 trillion (€9.18 trillion) as energy, economic, and geopolitical shocks followed one another.
“This year, we confirm a rise in the number of UHNWIs globally, led by growth in the US and the Middle East, and continued demand from these investors for real estate,” wrote Bailey, adding that “the need for capital in the property sector has never been higher.”
How much do you need to join the club?
It depends on the country, but generally, being among the top 1% is easier than being an ultra-high-net-worth someone with $30 million. Even in Monaco, the required minimum net worth is less than half.
What are the wealthiest people investing in this year?
The analysis suggests that despite a weakening global economy, a total of $483 billion (€443.5 billion) is set to be invested this year. Global GDP is expected to be at 2.9% in 2024, down from 3.1% the previous year.
The analysis predicts more investment in vital industries like technology, energy, and defense as US-China relations continue to deteriorate.
Furthermore, the analysis suggests that 2024 could be the year when the property market recovers from the impact of high interest rates last year, with the residential market faring better than commercial real estate (CRE).
More than one-fifth of worldwide UHNWIs intend to purchase residential property in 2024.
Prime properties (the most costly in a specific place, often defined as the top 5% of each market’s value) are in high demand among the world’s wealthiest.The survey revealed that, despite high global interest rates and lower sales volumes in 2023, the value of these premier properties increased by 3.1% globally.
Also, approximately one-fifth of the wealthiest explore commercial real estate investment, despite a catastrophic year in 2023, when investment volumes fell by nearly half due to excessive debt expenses.
According to Knight Frank, Middle Eastern and Asian investors are the most likely to buy commercial real estate.
“Lower values, lower interest rates and some forced selling will allow for a much anticipated improvement in investment volumes,” noted the report.
AI and climate change in the real estate investments
According to the survey, AI-related initiatives will account for nearly 40% of corporate IT expenditure by next year, potentially benefiting some commercial property types.
Data centers near cost-effective energy sources are projected to experience significant demand growth. Research-focused office spaces near universities or technology hubs will be in high demand.
AI-driven building management, including energy efficiency, climate control, and security, will be a key focus in the premium office market.
The survey shows that over two-thirds of UHNWIs prioritize sustainability in their CRE investments and strive to lower their carbon impact.
Climate change is having a significant impact on the property market, affecting agriculture yields, tourism patterns, property damage, and infrastructure.
In the short term, an increasing number of properties face rising insurance prices or are outright denied by insurers.
Tenants and investors increasingly want low-risk homes and energy-efficient buildings.Property owners will require technology to prepare, adapt, and recover from climate-related threats and damage.
Luxury collectibles are shining less bright
Despite record-breaking individual sales in 2023, the survey showed that certain assets in the luxury sector are dropping, including rare whiskey (-9%), antique automobiles (-6%), handbags (-4%), and furniture (-2%).
The analysis predicts severe volatility in the art, jewelry, and watch markets, despite their continued growth.
What is in store for the world’s wealthiest in the next years?
The analysis predicts a 28.1% increase in the number of affluent individuals globally between 2023 and 2028, which is lower than the 44% increase seen in the previous five years.
Asia, particularly India and the Chinese mainland, will be the driving force behind future growth.
More than two-thirds of the world’s wealthiest (UHNWIs) expect to increase their fortune this year, with younger people expressing greater optimism.
By 2023, women will account for around 11% of the world’s ultra-high net worth individuals. Among Gen Z individuals with a net worth of $1 million (€920 million) or more (high-net-worth individuals), 81% foresee growth in the coming years, with half expecting “significant growth”.