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The Knight Frank Wealth Report 2023 is an annual treasure trove that provides insight to investors, developers, and industry professionals on how the wealthy spend their money to inform their decision-making processes. Once again, their artful delivery in illuminating an accumulation of the global trends did not disappoint the team. After reviewing the report Amelia Bardot and Mark Tredwell from REDD have isolated their four key findings from the firm's leading annual publication. Here is what you need to know…
Amelia observed, “after the events of the last few years it’s little surprise that the report starts on a more sceptical note, but overall the tone is one of positivity and a brighter outlook as we look at the immediate year and into 2024.”
2022 saw a year of “permacrisis” where the total wealth of the world’s UHNWIs shrank by 10%. That’s almost US $10 trillion. Shocks to the global energy industry, ongoing geopolitical crises and the cost of living crisis have all contributed to making this a tough year for investors. However, according to the paper things are looking up for wealth expansion as we head into 2023.
Super-prime Growth
At the very top of the market the number of super-prime (US$10 million+) sales in 2022 dipped below the 2021 total, although they still remained significantly higher than 2019. Positively, the report spotlighted that New York, Los Angeles and London dominated in terms of numbers of sales. In addition to this, London and New York also cornered the even more rarefied ultra-prime (US$25 million+) market, with the former seeing the highest sales since 2014.
“London remains a stronghold for overseas investors, its economic cultural power drawing the ultra set in. They seek to resume business and life as normal - theatre, fashion, food, art and travel - in the wake of the pandemic”, added Mark
Prime International Property Market
At REDD we continually keep an eye on overseas opportunities for clients. Dubai also managed to maintain its position at the top of Knight Frank’s Prime International Residential Index (PIRI100) and cementing its status as a global hub for ultra-high-net-worth individuals (UHNWIs).The prime residential prices in Dubai accelerated by almost 50% in 2022.
Notably, of the 100 markets tracked in PIRI, coastal and rural locations in sunnier climates and ski resorts saw a price growth. This surpassed both their 2021 record. This is likely to be due to the more ‘nomad’ style of remote work people are continuing to embrace going into 2023, since the COVID-19 pandemic.
Commercial property
Remarkably, commercial property still makes up a large portion of the super rich’s portfolios (34%), continuing to pip equities to the post. The report splits commercial property investment into direct and indirect investments. The average portfolio sees 21% put directly into commercial property, while a further 13% is invested through debt funding or real estate investment trusts (REITs).
Nearly half of all the respondents say their clients currently invest in offices, which was the most common type of commercial property, whilst healthcare was the most popular sector with 35% representation.
It is also important to note that ‘green trends’ are playing a significant role in how the wealthy are choosing which properties to invest in, something we also prioritise on the ventures we work on. 57% of participants said their clients look at whether the construction or reconstruction of a project has a renewable energy source.
Investments of passion
Diversification appears to be on the minds of investors going into 2023, with an interesting inclusion of “investments of passion” making up 5% of all portfolios. There was an evident boom in investments in art, cars, watches, jewellery and fine wine over the course of 2022, similarly reflecting the upward trend over the last decade.
Art (up 29%) and classic cars (25%) came out on top, propelled by record-breaking sales and some huge and unique collections coming to the markets. Watches and wine were the next most popular, closely followed by luxury handbags.
We identified that overall the main goals of UHNWIs going into 2023, is capital appreciation and preservation. The latter being particularly true for Europe’s most wealthy, who are also the keenest to deleverage debt, mainly due to the rising interest rates.
“The wealth report provided us with an exclusive exploration of index findings, insightful commentary from experts, forward-looking perspectives, and data that illuminates crucial factors influencing lifestyle, career, investments, and philanthropy. By applying these learnings, we at Redd can enhance the outcomes for our clients through our comprehensive strategy for property development and management.”
