The Wealth Report 2012

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In line with what experts have been saying and the various research reports that are coming out, the recent ‘The Wealth Report 2012’ has reinforced that the economic centre of gravity is shifting towards the East.

‘The Wealth Report’ is Knight Frank’s annual perspective on prime property and wealth, produced in association with Citi Private Bank.

The report, which is the sixth edition, is packed with data, research and analysis includes a variety of interesting results related to:

  • Prime International Residential Index (PIRI) – which tracks the performance of over 60 of the world’s leading luxury residential property markets
  • Special focus on the huge and growing demand from wealthy investors for trophy commercial office and retail space.
  • The changing distribution of wealth around the world
  • A host of multitude questions such as which cities are the most important to the wealthy, what are their favourite investments, how many of them own their own sports team, what percentage of Chinese high-net-worth individuals (HNWIs) like to buy a ski chalet

Top cities of growing importance

Beijing topped the list followed by fellow Chinese city Shanghai. London stood at third place.

The key factors for the ultra-wealthy investing in property were quality of life, knowledge and influence, political power and economic activity.

Dubai also found a place amongst world’s fastest growing cities in importance for high net worth individuals (HNWIs).

For quality of life, Dubai ranked 10th globally while it was ranked 11th for knowledge and influence and was ranked fifth for economic activity. However, it failed to make it to the top 20 for political power.

In Europe, despite the economic downturn, eight out of 10 top locations in the PIRI price rankings are in the UK, France or Switzerland.

Shift in wealth distribution

Despite slower global economic growth in 2010, Asia reported an economic growth of 7.9% in sharp contrast to the meagre economic growth of US (1.8%) and Eurozone (1.6%)

Danny Quah, professor at The London School of Economics forecasts that by 2050, the world’s economic centre of gravity, a theoretical measure of the focal point of global economic activity based on GDP, will have shifted eastwards to lie somewhere between China and India. Professor Quah calculated that in 1980 it was in the middle of the Atlantic.

Citi forecasts that the North American and Western European share of world real GDP will fall from 41% in 2010 to just 18% in 2050. Developing Asia’s share is expected to rise from 27% to 49% in 2050.

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“We believe the number and concentration of centamillionaires accentuates the trajectory of current global wealth flows,” says James Lawson, Director at Ledbury Research. “Trends seen in this wealth bracket are likely to be replicated in lower wealth tiers in years to come.”

These forecasts are influenced by the expected economic performance of countries in the Asia-Pacific region. While rapid GDP growth does not in itself guarantee a sharp rise in HNWIs, rapidly growing economies do provide key opportunities for large-scale wealth creation.

“Individuals can become millionaires or multimillionaires through saving their earnings, a trend most commonly seen in more developed and established economies. But, apart from those who inherit wealth, most people who are very wealthy, say with assets of $10m or more, are business owners,” Lawson said.

Global ultra-wealthy population continues to grow

The global economic downturn appears not to have had any impact on the rich.

There are now 63,000 people worldwide with $100m or more in assets, according to Ledbury Research, which specialises in monitoring global wealth trends. The number of these centa-millionaires ($100m or more in assets) has increased by 29% since 2006 and is forecasted to rise even further.

For the first time, the number of Asians with at least $100 million in disposable assets has overtaken those in North America. “There are now 18,000 centa-millionaires in the region covering South-East Asia, China and Japan. This is more than North America, which has 17,000, and Western Europe with 14,000,” the report says.

By 2016, Ledbury Research expects Asia to have 26,000 centa-millionaires, compared with 21,000 in North America and 15,000 in Western Europe

Andrew Shirley, editor of The Wealth Report, said: “This year’s Wealth Report contains even more evidence that the world’s wealthy are weathering the economic slowdown better than the wider population, and nowhere is this better reflected than in prime property markets.

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“Those markets considered ‘safe-haven’ locations continue to attract private investors looking for both prime residential and commercial property. Political and economic uncertainty across the world is only helping to exacerbate the trend.”

Luigi Pigorini, CEO Citi Private Bank Europe, Middle East & Africa said: “Wealthy individuals and families, especially those originating from Europe, the Middle East, Africa and Asia, have become extraordinarily global in nature.”

The report noted that although rapid GDP growth does not in itself guarantee a sharp rise in HNIWs, rapidly growing economies do provide key opportunities for large-scale wealth creation.

India to become world’s largest economy by 2050

Looking only at the GDP growth – 9 of the top 10 cities in the world are in China. The top 20 are all in China or India.

China would overtake US to become the world’s largest economy by 2020, which in turn will be overtaken by India in 2050. Indian economy will reach $85.97 trillion size in terms of purchasing power parity by 2050, while the Chinese GDP would be $80.02 trillion during the same period.

Other nations in the top ten list of world’s largest economies would be Indonesia (4th), Brazil (5th), Nigeria (6th), Russia (7th), Mexico (8th), Japan (9th) and Egypt (10th).

In terms of growth from 2010-2050, India would be the second fastest with its economy growing at the rate of 8% during the period. Nigeria would be the fastest growing economy during the same period with a growth rate of 8.5%

The Indian cities Surat and Nagpur were among fast-growing cities to watch in 2050.

Other Interesting Highlights

  • Cities of the future will include Cairo, Lagos, Johannesburg and Mumbai, as well as established global centres such as New York, London and Moscow
  • HNWIs from the Middle East and Africa rate Dubai as the location with the most rapid growth in importance, with HNWIs from North and Latin America rating Miami and Sao Paolo as strong contenders for future influence
  • Personal security (63%) now ranks above economic openness (60%) in HNWIs’ choice of cities to live
  • Monaco remains the most expensive residential location in the world, with one square metre there now worth $58,300 (Q4 2011), followed by the prime locations in Cap Ferrat, London and Hong Kong
  • Emerging economies have continued to build their huge influence on the real estate markets in established locations: wealth flows from developing economies underpinned prices across the leading prime markets in North America and Europe including Miami, Vancouver and London in 2011
  • Knight Frank and Citi Private Bank expect further growth in interest in commercial property from HNWIs, forecasting US$74.1bn of private transactions globally in 2012 (a 5% year-on-year increase).
  • BRIC is out and 3G is in. Russia and Brazil, which make up the BRIC nations alongside China and India, do not make it on to Citi’s list of Global Growth Generators – or “3G” countries. Instead, Citi includes countries such as Bangladesh, Egypt, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam on this list.
  • Measuring a country’s affluence in terms of GDP per capita shows that Singapore currently tops the chart, with Norway and the US in second and third place respectively. By 2050, Singapore is expected still to be in the top spot, with Hong Kong and Taiwan moving up to take the second and third places.


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