wealth report 2014

8/12/2019 Wealth Report 2014

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THE GLOBAL PERSPECTIVE ON PRIME PROPERTY AND WEALTH

thewealthreport

2014

K N I G H T F R A N K . C O M


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THE WEALTHREPORT2014

Written byKnight FrankResearch Published onbehalf ofKnight Frankby Think The Pall Mall Deposit124-128 Barlby RoadLondon W10 6BL

DEFINITIONSUHNWI Throughout this report, we use UHNWIas an abbreviation for ultra high-net-worth individual. Unless otherwise stated,a UHNWI is dened as someone withUS$30m or more in net assets excluding

their principle residence.PRIME PROPERTY

The most desirable and most expensiveproperty in a given location. Primemarkets often have a signicantinternational bias in terms of buyer prole.

FOR KNIGHT FRANK EditorAndrew ShirleyGlobalHead of ResearchLiam Bailey International

ResearchCo-ordinator Kate Everett-Allen Asia-Pacic ResearchNicholas Holt Marketing Susie Cain [email protected] Media enquiries [email protected]

FOR THINK ManagingEditor Louise Bell Art Director Darren Endicott Account Director Rachel Walder

ManagingDirector Polly Arnold

Cover illustration Cristiano Rinaldi Information graphics Paul Wootton Portrait illustrations Lauren Crow

PRINTING Printedby Pureprint Group Ltd

TheWealthReport:winneroftheInternational ContentMarketing Award2013 forBest SpecialistCommunication

Welcome to The Wealth Report , KnightFranks annual commentary on globalprime property markets, wealthdistribution and investment sentiment.

As the worlds largest independentproperty consultancy, Knight Frank works with UHNWIs and their advisors througha network of 330 offices across 48 countries.This makes us uniquely placed to provideadvice on all aspects of developmentand investment across the globes keyresidential and commercial markets.

Over the past eight years, againsta backdrop of unparalleled economicinstability, The Wealth Report hasdocumented the performance of primeproperty in the most sought-afterinternational locations. Our experts, led byKnight Franks unrivalled global researchteam, have explored the latest trends,pointed to current opportunities andhighlighted some longer-term plays.

I am especially pleased that this yearsreport features contributions from leading

commentators, including: Sir RichardBranson; Dr Pippa Malmgren, formereconomic advisor to US President GeorgeBush; entrepreneur and philanthropistLord Harris of Peckham; leading Malaysianindustrialist Tan Sri A K Nathan; LaurentPerignon, CEO of luxury yacht businessCamper & Nicholson; and James Lawson,founding director of Ledbury Research.

The biggest trend to emerge from thisyears report and one that is underlinedby our revealing interviews with leadingdevelopers such as Indias AbhishekLodha and Australias Lang Walker isthe increasing globalisation not only ofproperty investment, but also of fundingand development. This trend is reectedby Knight Franks strategy of offering afull range of residential and commercialservices and expertise in the locations where our clients want to invest, not justnow but in the future too.

Over the past 12 months, Knight Frankhas opened an additional six international

offices, and strengthened its presencein four further markets. We haveconsolidated our strategic partnershipSumitomo Mitsui Trust Bank in Japanexpanded our presence in South Afric with new offices across the Cape andJohannesburg. We have also entered ia strategic relationship in Canada,providing our clients with access to thimportant Vancouver market.

Knight Franks objective to providclients with a single platform for viewthe worlds best residential and commproperty opportunities has been reinfoby the translation of our Global PropeSearch website into 16 languages. Thmarket-leading initiative makes ourclients key assets more accessible toincreasingly global investor base.

I hope you enjoy reading the eightedition of The Wealth Report . If yany queries please do contact me or anmember of The Wealth Report te will be delighted to help.

C O N T R I B U T O R S

ANDREW SHIRLEY Editor of The Wealth Report,

Knight Frank

LIAM BAILEYGlobal Head of Research,

Knight Frank

GRINNE GILMORE Head of UK Residential Research,

Knight Frank

JAMES ROB Head of Commercial

Knight Frank

ANDREW HAYGlobal Head of Residential, Knight Frank

[email protected] +44 20 7861 1071

WELCOME


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6

Execut ive summary8

Access a l l a reas An overview of our annual Attitudes Survey and an introduction to our new Wealth Panel

16

Al l changeThe shifting patterns of global wealth distribution

26

World in mot ionThe metropolises that matter to UHNWIs, according to our Global Cities S urvey

32

Moving on up Inside luxury global property markets with our Prime International Residential Index

42

Beyond the tu rn ing poin tThe new spirit of adventure emerging among commercial property investors

52

Driven by des i re Key spending trends in luxury goods and collectables, and a new Luxury Opportunity Index

58

Databank66

Contacts

32 Residential

property

8 Attitudes Survey

16Wealth trends

26Global cities

52 Luxuryspending

42Commercial

property

F I N D O U T M O R E

OnlineTHEWEALTHREPORT

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BlogWWW.KNIGHTFRANK

BLOG.COM/WEALTHREPORT

Twitter@KNIGHTFRANK

@KFGLOBALBRIEF

App for iPad KNIGHTFRANK.COM

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The global response to the nancial crisiscontinues to boost property markets inmany parts of the world.

The latest results from our PrimeInternational Residential Index (PIRI)conrm that Asian markets, led by Jakarta,still lead in terms of price growth. Locationsthat were hardest hit by the downturn,like Dubai, Dublin and now Madrid, arealso bouncing back strongly. For the latesttrends and forecasts, see pp32-41.

Continued global wealth creation,particularly in emerging markets, has beena key driver for prime property markets.This trend looks set to continue with aforecast increase of 28% in the total numberof UHNWIs around the world by 2023.

Shifts in wealth distribution contributeto changing fortunes in our Global CitiesSurvey, which measures the most importantcities to the worlds UHNWI community. While London retains its top spot in 2014,

New York looks set to overtake by 2024.On pp26-31, we comment on the growingcompetition for urban supremacy in Asia,and point to some likely future hotspots.

As we note throughout this years report,investors appetite for risk is growing. The withdrawal of stimulus measures such asquantitative easing may be one catalyst,but so too is rising economic condence,especially in North America and Europe. As we explore on pp42-51, investmentdecisions are destined to take on anincreasingly adventurous avour; andrecovering European property markets, which were rmly off the radar two yearsago, are seen by many as a key opportunityfor this year and next (pp32-41).

This new-found desire for risk doesnot presage a wholesale ight from primeto secondary property. As we note in ouranalysis of UHNWI attitudes (pp8-15),the enduring appeal of luxury property

ensures that it will remain a central partof the wealth portfolio.

While Asias growing domination ofour rankings and league tables continues,the Middle East, Africa and Latin Americaare increasingly taking the lead in termsof demand for overseas education, luxuryspending and property investment.

With the introduction of a newLuxury Opportunity Index, our SkyscraperIndex, the comprehensive benchmarkingof the worlds most important citiesand analysis of 90 prime residentialmarkets, together with new data on luxuryinvestment performance, wealth trends andglobal property investment forecasts,The Wealth Report has the world covered.

Indeed, with our look at how sub-orbital travel could shape the future of theproperty market and open up investmentopportunities in space (p40), you could say weve gone one step beyond.

L I A M B A I L E YGlobal Head of Research

[email protected] +44 20 7861 5133

THE WEALTH REPORT 2014EXECUTIVE SUMMARY

The world in numbers

DISTRIBUTION OFTOP 10 LUXURYOPPORTUNITYMARKETS BY

WORLD REGION(P52)

NorthAmerica

10%

MiddleEast

30%

LatinAmerica

10%

Africa50%

20% 47% 28% 42% 37% 17% 21% 48% 30% 53% 54% 24% 35% 59% 18% 40% 45%

NORTH AMERICA LATIN AMERICA EUROPE AFRICA MIDDLE EAST ASIA-PACI

FORECAST UHNWI POPULATIONGROWTH 20132023 (P16)

% OF UHNWIS PLANNING TO INCREASEPROPERTY INVESTMENTS IN 2014 (P42)

% OF UHNWI WEALTH DEDICATEDTO RESIDENTIAL PROPERTY (P32)

Most important city for UHNW Is by world region ( p26)

s LOS ANGELES

+14%

+18%

DUBLIN s +17%

l DUBAI

+38%

s JAKARTA

+4.9%

s NAIROBI

l NEW YORK

l LONDON

l JOHANNESBURG

SINGAPORE l +13%

l SAO PAULOREGIONAL PRIME PROPERTYPRICE GROWTHHOTSPOTS (P32)


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T H E W E A LT H R E P O RT 2 0 1 4


We explore the ndingsfrom The Wealth Report sannual Attitudes Surveyand share the views andinsights of the UHNWIsand advisors on ournew Wealth PanelWords A N D R E W S H I R L E Y

8 A C C E S S A L L A R E A SANNUAL ATTITUDES SURVEY RESULTS

or the past four years The Wealth Report s AttituSurvey has provided a detailed and fascinating iinto the attitudes of the worlds UHNWIs, from allocation to favoured investments of passion.

This year the survey is more comprehensive tever. It reects the attitudes of over 23,000 UHNWIs waverage US$68m each, with a combined wealth of moreUS$1.5tr.For detailed results, go to Databank (pp60-62)

We also include some very personal perspectives on covered by the survey. The views of our Wealth Panel (sof UHNWIs and leading wealth experts and advisors fethe following pages, throughout the rest of t he articles ireport and also in our dedicated Wealth Panel Vox Pop c

Of course, the big question is: are the rich getting ric According to three-quarters of the surveys respondentsbankers and wealth advisors the answer to that questio

When asked how their UHNWI clients net worth haon average in 2013, 75% said it had increased and only had fallen. Respondents from Asia were the least positiveven they were still far from gloomy. Just under 70% reincrease, compared with 72% in Europe and 81% in Nor

Even if things do slow down a bit I dont think therecause for concern, says wealth panellist Lawrence Wona senior executive at Bank of China International LimitUSChina trade keeps on growing, business is becomimore transparent and Chinese UHNWIs are becomingmore comfortable dealing with international markets.

Looking forward, the global picture is slightly less boptimism still remains high. Almost two-thirds of resposaid their clients were positive about wealth creation prin 2014. Only 4% said they were downbeat, but the propexpecting the status quo to be maintained rose to 34%.

This more cautious view probably reects ongoing coabout the robustness of the economic recovery and whetlast years equities bounce can be sustained, as well as ofactors, such as a reduction in the US Federal Reservesquantitative easing programme. See pp17-18 for more d

Lord Harris of Peckham, one of the UKs most succeentrepreneurs and another wealth panellist, is becomingmore optimistic about the prospects for wealth creation.Nevertheless, he says economic recovery is still slow anthis is not the time to take risks. In this market you wanbe very safe. Invest in t he stock market, but be careful.

Malaysian steel magnate Tan Sri A K Nathan says his2014 will be to integrate new business ventures into hisgroup. We have been through many challenges, includicrisis of 2007, and come out stronger. Eversendai is a wdiversied group with presence across many regions and which should see us expanding further in the coming ye

ACCESSALL AREAS

MIDDLE EASTERN UHNWISSENDING THEIR CHILDREN

OVERSEAS FOR UNIVERSITY

57 %

LATAM UHNWIS WHOCOLLECT MAINLY FORPERSONAL PLEASURE

90 %

RESPONDENTS POSITIVEABOUT AFRICAN UHNWI

WEALTH CREATION IN 2014

69 %

PROPORTION OF ASIANUHNWI PORTFOLIOS

ALLOCATED TO PROPERTY

28 %

NORTH AMERICAN

UHNWI WEALTH IN FIRSTAND SECOND HOMES

28 %

RUSSIAN/CIS UHNWISTHINKING OF CHANGING

THEIR DOMICILE

37 %

WEALTH TRENDS

PRIME RESIDENTIAL PROPERTY

PROPERTY INVESTMENT

LUXURY INVESTMENTS

EDUCATION

MIGRATION


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3%

1%

12%

5%

4%

7%

4%

10 T H E W E A LT H R E P O RT 2 0 1 4K N I G H T F R A N K . C O M

haven the collectors among our wealth panellists are alsohopeful their collections will not lose value. David Leppan, forexample, favours Italian and Spanish Old Masters, which hebelieves are currently undervalued, for his art collection.

Personal passions can also affect business decisions. Australiasleading private property developer Lang Walker, who citeshis sloop SY Kokomo as his favourite investment of passion,says it is no coincidence that many of his luxury developmentsare near the waterfront. I just love being on the water.

However, luxury is not all about material matters, accordingto our panellists. The ability to learn or achieve something new,such as driving a racing car or climbing in the Himalayas, is thepreferred investment of passion for former US presidential advisorDr Pippa Malmgren. And, while art may be his favourite investmentof passion, lndian property developer Abhishek Lodha says the oneluxury he cant do without is organic food sourced from the mostauthentic producers. For Lawrence Wong it is early retirement.

Lord Harris is another art collector, but his main passion is sport.Unlike a growing number of UHNWIs he hasnt bought his ownfootball team, although he does sit on the board of English PremierLeague club Arsenal. Instead, he is joint owner of the show-jumpinghorse Hello Sanctos, which won gold in the team event at the 2012London Olympics. An individual gold in Rio is his next target.

For more on luxury spending and investment trends seeDatabank, p62.

NO PLACE LIKE HOME

For the majority of UHNWIs residential property is the biggestitem of discretionary spending. Indeed, almost 30% of their wealthis accounted for by their main residence and any second homes, of which they own an average 2.4, according to the Attitudes Survey.

Cities are the most popular locations in which tolive, with almost three-quarters of UHNWIs owning atownhouse. Just under 30% own a rural retreat, 22% a waterfront property and 13% a ski chalet or apartment.

The growth in demand for vineyards, especially in France,by UHNWIs from China has been widely publicised. Amongrespondents with Chinese clients, 45% said that interestin such properties was growing. We are seeing growinginterest in lifestyle properties from Asia, driven by peoplesinterests one of which is wine as well as by the commercialopportunities they offer, conrms Paddy Dring, who heads upKnight Franks international residential sales network.

T H E B E S T P L A C E T O P U T

Y O U R M O N E Y I S

Emerging markets, regardlessof whether you are investing in equities,

xed income or propertyLAWRENCE WONG

Invest in yourself or your businessMARK ODONNELL

W e a l t h P a n e l

V o x P o p s

Anything that has a genuineunimpaired cash ow and amargin that can be protected

from higher costsDR PIPPA MALMGREN

Property, particularly in LondonDAVID LEPPAN

I N 2 0 1 4 M Y I N V E S T M E N T

S T R AT E G Y W I L L B E

Bullish ABHIS HEK L ODHA

To observe interest ratesin emerging markets

LAWRENCE WONG

To nd opportunities where osee only challenges

LANG WALKER

To get more involvedin property

DAVID LEPPAN

F

GLOBAL

24%AVERAGE

ALLOCATION TOPROPERTY IN

UHNWI INVESTMENTPORTFOLIOS

HOW DID TALLOCATI

CHANGE IN

GLOBAL

AND HOW DO YOU THINK IT WILL CHANGE I

Although 58% of survey respondents said global economicconditions were likely to have a positive effect on theirclients ability to generate wealth in 2014, a third said theycould also pose the biggest risk. Only in Latin America werelocal economic conditions considered more of a threat.

While the overall results of the Attitudes Survey show the macroconcerns of UHNWIs around the world, our detailed Wealth Panelinterviews reveal some more nuanced individual views. Whenasked, for example, what poses the biggest risk to wealth creation,Lord Harris points to the growing number of 18 to 20-year-olds inthe UK and Europe without work and with little hope for the future.

Another successful entrepreneur, David Leppan, also highlightsEuropes younger generation as a potential barrier, but his view is slightly different. More and more young people seemto have a sense of entitlement, without having to do anything.He compares this with the attitudes of the less well off in India.The battle to survive means the entrepreneurship there ismind-blowing; you see examples of it on every street corner.

OBJECTS OF DESIRE

Unsurprisingly, as wealth increases worldwide, so too do levelsof spending on luxury goods. According to Torsten Mller-tvs,Chief Executive of Rolls-Royce Motor Cars, much of the companysrecord performance in 2013 was driven by emerging markets, withsales up 17% in the Middle East and 11% in China. Other hotspotsincluded Japan, Istanbul, Beirut, Lagos, Hanoi and Perth.

On average, 36% of Attitudes Survey respondents reckon theirclients will carry on spending more in 2014, with sentiment mostbullish in Africa (46%) and most cautious in Europe (30%).

Investments of passion collectables such as art andclassic cars feature high on the shopping list of manyUHNWIs. According to the Attitudes Survey, jewellery isthe most widely collected on a global level, particularly inemerging markets, followed by art, watches and wine.

Worldwide, art is seeing the biggest jump in popularity, withUHNWIs in emerging markets once again setting the pace.On balance, 86% of respondents with clients in Latin Americareported growing interest, followed by 58% in the MiddleEast and 57% in Russia and the CIS. Wine, watches and carsalso ranked highly in terms of their increasing desirability.

Although personal pleasure was cited as the biggest reason why UHNWIs collect investments of passion 61% compared with 22% as an investment for capital growth or as a safe

UHNWIS CONSIDERING CHANGING DOMI

AUSTRALASIA6%

RUSSIA/CIS37%

A C C E S S A L L A R E A S

ANNUAL ATTITUDES SURVEY RESULTS

WEALTH CREATION OUTLOOK FOR 2014

GLOBALECONOMIC

CONDITIONS33%

LOCAL ECONOMICCONDITIONS

19%

LOCAL POLITICALSITUATION

18%

LOCAL TAXATIONCONDITIONS

18%

GLOBALPOLITICALSITUATION

11%

THE BIGGEST RISK TO UHNWI WEALTH CREATION IS*

14

l UHNWI WEALTH WILL INCREASEl UHNWI WEALTH WILL REMAIN THE SAMEl UHNWI WEALTH WILL DECREASE

4%ASIA

I N

C R E A S I

N G

5 5 %

AFRICA

I N

C R E A S I

N G

6 9 %

AUSTRALASIA

I N

C R E A S I

N G

4 4 %

3% 12% 7%LATIN

AMERICA

I N

C R E A S I

N G

4 8 %

EUROPE

I N

C R E A S I

N G

7 0

%

MIDDLEEAST

I N

C R E A S I

N G

7 0

%

1% 5% 4%RUSSIA/CIS

I N

C R E A S I

N G

5 5 %

NORTHAMERICA

I N

C R E A S I

N G

6 7 %

GLOBAL

I N

C R E A S I

N G

6 3 %

GLOBAL

I N C R E A S E 4

7 %

l INCRl REMl DECR

*RESPONDENTS WEREASKED TO CHOOSE THE

ONE FACTOR THAT WOULDHAVE THE MOST NEGATIVEIMPACT ON THEIR CLIENTS

ABILITY TO GENERATEWEALTH OVER THE NEXT

FIVE YEARS

SOURCE FOR ALL DATA: WEALTH REPORT ATTITUDES SURVEY


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K N I G H T F R A N K . C O M12

Meet our g loba l panel of wealth expert s, advisors and UHNWIs.Their views and insights bring additional depth and some unique personal perspectives to th is years Wealth Report

W E A LT H PA N E L


ANNUAL ATTITUDES SURVEY RESULTS

LORD HARRIS OF PECKHAM

Chairman, Carpetright

Lord Harris is one of theUKs most successfulentrepreneurs. Thrustinto the world ofbusiness at the age of15 following the suddendeath of his father, hehas built the familyssmall carpet businessinto a European chain with over 600 stores.He is also one of thecountrys leadingphilanthropists,particularly in theelds of healthcareand education. He is anon-executive directorof Arsenal Football Cluband co-owns an Olympicgold medal-winningshow-jumping horse.

ABHISHEKLODHA

Managing Director, Lodha Group

An alumnus of AtlantasGeorgia Institute ofTechnology, where he was an award-winningstudent obtainingbachelors and mastersdegrees in industrialengineering, AbhishekLodha worked asa consultant forMcKinsey & Companybefore joining therm founded by hisfather Mangal PrabhatLodha in 1980. LodhaGroup is now Indiasbiggest prime propertydeveloper and recentlyannounced itself onthe international scene with the purchase ofthe former CanadianHigh Commission inLondons Mayfair.

LAWRENCE WONG

Alternative Chi ef Executive a nd Headof Business (Private Banking), B ank ofChina International

Limited

Lawrence Wong hasover 30 years bankingexperience. He has worked in numerouslocations across Asia,including Hong Kong,Shanghai, Beijing,Taiwan and Singapore,covering corporate,treasury, audit andprivate banking forCitibank, BNP, StandardChartered Bank, HSBCand Coutts, before joining Bank of ChinaInternational Limited.He believes one of thebiggest issues nowfacing Chinese UHNWIsis how to pass the new wealth created by onegeneration to the next.

DR PIPPAMALMGREN

Founder, DRPM Group

Dr Malmgren wasthe nancial marketsadvisor to US presidentGeorge Bush and amember of the NationalEconomic Council andthe presidents workinggroup on corporategovernance. Now livingin the UK, Dr Malmgrenhelps investorsunderstand how politics,policy and geopoliticsmove markets. She is anadvisory board memberat the MassachusettsInstitute of Technologyand participates inthe UK Ministry ofDefence working groupon global strategictrends. She is a guestanchor on Bloombergand CNBC and lecturesaround the world.

MARKODONNELL

Managing Director,Union Gold

Zambian-born MarkODonnell is one ofthe southern Africancountrys leadingbusinessmen. FormerlyManaging Directorof ERZ Holdings, oneof Zambias largestprivate companies,he went on to set uphis own business,Union Gold, which isnow involved in manysectors of the economy,including construction,development, retailand hospitality. Thegroup introduced thesupermarket chainSPAR to Zambia andowns seven Protea-branded hotels.Mark ODonnell isalso Chairman of theZambia Tourist Board.

TAN SRI A KNATHAN

Executive Chairman, EversendaiCorporation

One of Malaysias wealthiest and mostsuccessful businessmen,Tan Sri A K Nathanhas literally shaped theskyline of Asia and theMiddle East. Underhis leadership, theEversendai Group hassuccessfully completedthe steelwork forsome of the regionsmost iconic buildings,including the PetronasTwin Tower 2 in KualaLumpur and the Burj Al Arab hotel and the worlds tallest building,the Burj Khalifa, bothin Dubai. Eversendaiemploys over 10,000staff in 11 countries.

KAMAL RAHMAN

Partner, Mishconde Reya

As a partner and Headof the Immigrationgroup at leading lawrm Mishcon de Reya,Kamal Rahman is aninuential provider ofbespoke immigrationand citizenshipsolutions for UHNWIslooking to move to theUK. The majority ofher clients come fromRussia, the Middle East, Asia and increasinglyfrom China and Africa.They value her technicalknowledge, solution-based approach andability to obtaindiscretion in non-compliant situations.

LANG WALKER

Executive Chai rman,Walker Corporation

Lang Walkersdevelopments havehelped to redenecityscapes across Australia with theiremphasis on design andinnovation. He has built Walker Corporationinto one of the countrysbiggest privately ownedproperty developmentbusinesses and iscurrently undertaking Australias largestmixed-use commercialproject, Collins Square,in Melbournes CBD.Over the past 10 yearshe has developedover 200 projects andexpects to deliveranother 35,000 newhomes by 2020. He isalso developing master-planned communitiesin Malaysia.

JAMES LAWSON

Director, Ledbury Research

As the worlds UHNWIpopulation grows andbecomes more diverse,so too does the need forintelligence from brandsand service providerslooking to target their wealth. As a foundingdirector of LedburyResearch, whichspecialises in wealthand luxury research,James Lawson hasbeen at the vanguardof the sector for over10 years. Ledburysclients include almostthree-quarters of the worlds top 20 wealthmanagement providersand numerous prestigebrand businesses.

DAVID LE

Chairman, W

A self-confenomad, Dav was born anin South Afrin Singaporeand Ibiza, anBritish natiofounded andCheck, a piothe risk intelsector. Subsehe founded Wa leading proUHNWI inteas well as brinto publishithe creation Billionaire.cmagazine anplatform. Heclassic Rollsand Bentley and SpanishItalian Old M


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Just over a fth of UHNWIs, on average, are consideringbuying a new home in 2014, although the gure rises toalmost a third of UHNWIs living in Russia and the CIS.

This echoes the response given when respondents were askedhow many of their clients were thinking of permanently changingtheir domicile or country of residence. In the Russia and CISregion it was 37%, against a global average of 15%. Australians(6%) were the least likely to want to move elsewhere.

Globally, the UK is consideredthe number one destination forthose seeking a new domicile,although the US is still morepopular with Asian UHNWIs.See p37 for more on whichpassports are most in demand.

SOLID FOUNDATIONS

Property is not just a place to live; it is also a popular place to invest,accounting for 24% of UHNWI investment portfolios. Over 40% ofsurvey respondents said their clients had increased their allocationto property last year, with 47% expecting it to rise further in 2014.

In terms of commercial property investments, overallUHNWI interest is focused most tightly on office space, with a net balance of 33% of respondents saying theirclients were becoming more interested in the sector,compared with 24% for retail space and 21% for hotels.

Around the world, however, there are clear regional variations, For example, hotels are growing in popularity thefastest with UHNWIs from Africa and Russia and the CIS, whilestudent accommodation is attracting interest in the UK.

There are also mixed views across our Wealth Panel. A numberfavour offices in global cities, but Mark ODonnell, a Zambianbusinessman, is opening new hotels in the country to caterfor the increasing number of business visitors and tourists.

Lord Harris, a veteran player in the UK commercial market,chooses out-of-town retail parks because that is where moreand more people are doing their shopping. For those preparedto bet that rising wage costs in the developing world will leadto industry returning to the West, Pippa Malmgren points to warehousing and storage facilities near manufacturing centres.

For others, it can come down to personal taste. DavidLeppan says he likes boutique properties in the nest

Our wealth panellists have varying views on where they will be searching for growth, but emerging markets featurestrongly. I see our company expanding into East Africa, Australia and the CIS. The biggest growth potential is in theCIS as they have the resources to push for development,says Tan Sri A K Nathan. I am very optimistic about Asia,in particular India over China, says David Leppan.

GIVING IT BACK

One of the most socially contentious issues of recent years, andone we have reported on in previous editions ofThe Wealth Report ,has been the growth of plutonomy, or the increasing concentrationof wealth within a smaller segment of the worlds population.

Addressing this issue through wealth redistribution isimportant to many UHNWIs, including our wealth panellistsand survey respondents: only 6% expect their clients to decreasetheir philanthropic activities in 2014, with 21% predicting a rise.

David Leppan, who has been closely involved with charitySOS Childrens Villages, which works to improve childrenslives through educational and sustainable programmes indisaster areas, believes that the wealthy have a responsiblity tobe philanthropic. In the US, he says, it is ingrained, often goingas far back as three generations within families, but it is stilla relatively new concept in emerging markets such as Asia.

Many UHNWIs in China are denitely searching for new ways to give more back to society, agrees Lawrence Wong. Abhishek Lodha says: It is a must for the privileged to exhibitthat wealth creation contributes to society in a meaningful way.

The charitable work of Lord Harris, who gives away 20% ofhis wealth, is a prime example of how one persons wealth canmake a difference. Over 10,000 patients a year are treated atthe Harris Birthright Centre in London, which specialises infoetal medicine, while thousands of disadvantaged childrenin the city benet from attending one of the 28 academiesthat form part of the Harris Federation schools network.

State education in this country is so poor I knew I coulddo better, says Lord Harris, who prefers to be activelyinvolved in his philanthropy. Every place at his academiesnow receives almost 10 applications and many of the studentsgo on to win places at the UKs best universities. Once youhave done well in life you should help others, he says.

FOR FULL ATTITUDES SURVEY RESPONSES, SEE DATABANK, p60

locations that are a little bit quirky, such as the Londonheadquarters of his Wealth-X business, located in a historicgatehouse near the Ritz Hotel in Londons Mayfair.

Scale, diversication and design are important to Lang Walker, who looks for superbly designed spaces for the residential,retail, commercial, industrial and master-planned communitymarkets when choosing which schemes to develop.

GOLD RUSH

Outside property, equitiesare back in favour as the mostpopular asset class, with 70% ofsurvey respondents expectingtheir clients to increase theirstock market holdings in 2014.

Lawrence Wong sayshis banks clients are

moving more to equities, but still want to minimise risk. Theyare looking at big conglomerates with a good track record.

Goh Cheng Ean, Executive Director and Head of High-Net- Worth Banking at Malaysias United Overseas Bank, says: HNWIsin Malaysia are demonstrating increased condence in investing indeveloped markets, due largely to the s igns of economic recoveryin the US and the eurozone. This can clearly be observed in themarket fund ows from emerging market bonds into developedmarket equities. While they continue to invest locally, HNWIs arealso increasingly interested in overseas investment opportunitiesthat will diversify their portfolios and help them to manage risk.

At the other end of the scale, 40% of survey respondents predictreduced exposure to gold, which saw almost 30% wiped off its valuein 2013. A plucky 14%, however, reckon this year could be the timeto buy. St John Gardner, Head of Investment Management at UKbank Arbuthnot Latham & Co, says: What is clear to us is that thereis a large amount of cash from sales of gold and Western sovereigndebt sitting on the sidelines, which we think will be deployed in2014 into global equities and tangible assets like property.

When asked which parts of the world were likely to offerthe best returns in 2014 there was limited consensus fromrespondents, with Europe, for example, rated as the s econd-mostpopular area to deliver both the greatest and weakest returnsduring the year. The one area of agreement was the US. Mostconsidered it the area likely to offer the greatest returns, whileit was also considered the area least likely to deliver the worst.

M Y O N E P I E C E O F

I N V E S T M E N T A D V I C E

W O U L D B E

Invest in good human beingsDAVID LEPPAN

Invest in what you understandJAMES LAWSON

Dont read expert opinions.

Form your own, or give yourmoney to an asset manager ABHIS HEK L ODHA

Think, rationalise and actcarefully to always protect

your capitalTAN SRI A K NATHAN

F

P H I L A N T H R O P Y

IS

Something to which allthe worlds wealthy should feel a responsibility and

commitment DAVID LEPPAN

W e a l t h P a n e l

V o x P o p s

Providing basic

education for needychildrenTAN SRI A K NATHAN

Doing more good thingsall the time

DR PIPPA MALMGREN

About giving

your time as wellas your moneyMARK ODONNELL

A must for the privileged

ABHIS HEK L ODHA

outside property, equities areback in favour as the most

popular asset class, with 70% ofrespondents expecting clients

to increase holdings in 2014

PERSONAPLEASUR

61%INVESTMENTFOR CAPITAL

GROWTH16%

STATUS15%

SAFEHAVEN

6%

DECREASE8%

REMAIN THE SAME 61%

FASHION1%

THE BIGGEST RETURNSIN 2014 WILL BE IN...

THE WEAKEST RIN 2014 WILL

HOW UHNWI SPENDING ON LUXURYGOODS WILL CHANGE IN 2014*

WHY DO UHNWIS BUY INVESTMENTS OF PAS




ANNUAL ATTITUDES SURVEY RESULTS14

EUROPEAFRICA

INCREASE46%

REMAINTHE

SAME 46%

DECREASE8%

GLOBALGLOBAL

N O R T H A M

E R I C

A 2 9 %

FOR DETAIL, SEE DATABANK, p58

*Totals may not add up to 100% due to rounding


9/34

THE WEALTH REPORTK N I G H T F R A N K . C O M16

ALL CHANGEG L O B A L W E A LT H D I S T R I B U T I O N

As the impact of the economic downturn slowly starts to recede, weanalyse data from more than 90 countries to give a detailed picture

of current and forecast future global wealth distributionWords G R I N N E G I L M O R E Data W E A LT H I N S I G H T

The number of ultra-wealthy individuals across the globe rose by 3%last year, despite continued economic turbulence and uncertaintyin many countries. This means that nearly 5,000 people joinedthe ranks of UHNWIs in 2013, taking the number of individuals with US$30m or more in net assets to over 167,000 worldwide,according to exclusive new data prepared for The Wealth Report .

The number of UHNWIs across the world has balloonedby 59% since 2003, more than doubling in the Middle East,

Latin America, Australasia and Africa. The number of centa-millionaires those with US$100m in net assets has risen by62%, while the tally of billionaires has climbed by 80% to 1,682,according to WealthInsight, a leading wealth intelligence rm.

While UHNWI numbers in North America and Europe remainslightly below the levels seen back in 2007, these regions saw thestrongest rates of growth last year. An additional 1,500 individualsboosted their net value beyond US$30m in North America during2013, a 3.5% rise. The number of UHNWIs in Europe increased

by 3.3%, or almost 2,000 people, over the same period. Asiagained nearly 1,000 UHNWIs during the year, taking the regionstotal to 41,114, only slightly fewer than in North America.

This wealth creation and conservation came even as political,scal and economic headwinds buffeted some of the worlds biggesteconomies. Emerging economies, which have been the engines ofgrowth since the nancial crisis, faced upheavals during the year,and this took a toll on total globalgrowth, which dropped to thelowest level seen in four years.

BOUNCING BACK

Yet the accommodativemonetary policies adopted inmany countries, coupled with areturn in investors appetite for

risk, saw equity markets springback to life in 2013. The MSCI World Index rose by 23%, while theStandard & Poors 500 rose by 30% and the FTSE 100 ended the yearup over 14%, helping to boost wealth across many regions.

However, investors who veered towards gold, seen as thesafest of safe haven investments, would have felt the impactof a sharp drop in prices during the year the rst annualdecline since 2000. In dollar terms, gold fell by 28% in 2013,again reecting investors increased appetite for risk.

But the recovery of equity markets was not universal. Latin American markets had a turbulent time during 2013 and weakenicurrencies took their toll on the regions performance. One of theexceptions was Venezuela, where the benchmark IBC index surgby more than 480% during 2013. However, this massive growth was underpinned by fears that the currency would be devalued,and is likely to be unsustainable. GDP growth in Latin America

was slower than forec2013, as external and ddemand decelerated.

These challenges wreected in the low ratof UHNWI growth durthe year, with fewer th50 people joining theUS$30m+ wealth band

The results of The W Report s annual Attitudes Survey of wealth experts and privatebankers also indicated that more than one in 10 Latin AmericanUHNWIs had seen their wealth eroded in 2013, a higherproportion than in any other global region (see Databank, More than a third said the local economy was having a negativeimpact on their clients nancial situation.

However, the outlook is brightening somewhat for Latin America. Economic growth is expected to increase modestlyALLCHANGE

the number of uhnwis acrossthe globe rose by 3% last year,taking the number of peoplewith more than US$30m in assetsto over 167,000 worldwide

FORECAST GROWTH IN UHNWIS, CENTA-MILLIONAIRES AND BILLIONAIRES

+28%FORECAST

GLOBAL GROWTHIN UHNWIS20132023

FORECAST 10-YEAR GLOBALGROWTH BY WEALTH BRACKET

+53%

+51% A F R I C A

+52%

+21%

+22%

E U R O P E

+25%

+35%

+36%

M I D D L E E A S T

+35%

+20%

+20%

N O R T H A M E R I C A

+21%+42%

+44%

L A T I N A M E R I C A

+45%

+18%

+20%

A U S T R A L A S I A

+19%

+31%FORECASTGLOBAL GROWTH

IN CENTA-MILLIONAIRES

20132023

+38%FORECAST

GLOBAL GROWTHIN BILLIONAIRES

20132023

FOR FULL WEALTHDISTRIBUTION DATA FOR OVER 90

COUNTRIES, GO TO DATABANK p64

U H N W I S

( + U S $ 3 0 M

)2013 2023

AFRICA 1,868 2,858

ASIA 41,114 58,588

AUSTRALASI A 3,828 4,526

EUROPE 60,504 73,396

L ATI N AME RI CA 9 ,677 1 3,71 1

MIDDLE EAST 7,052 9,498

N ORTH A ME RI CA 4 3, 62 6 5 2, 53 6WORLD 167,669 215,113

C E N T A - M

I L L I O N A I R E S

AFRICA 509 767

ASIA 8,809 13,428

AUSTRALASIA 727 870

EUROPE 11,767 14,368

L ATI N AME RI CA 1 ,6 25 2 ,3 48

MIDDLE EAST 1,508 2,044

N ORTH A ME RI CA 1 2, 15 9 1 4, 64 8

WORLD 37,104 48,473

B I L L I O N A I R E S

AFRICA 25 38

ASIA 488 809

AUSTRALASIA 21 25

EUROPE 505 629

LATIN AMERICA 94 136

MIDDLE EAST 108 146

NORTH AMERICA 441 532

WORLD 1,682 2,315

+43%

+52% A S I A

+66%

UHNWIS (+US$30M)

CENTA-MILLIONAIRES

BILLIONAIRES


10/34

+166%

V I E T N A M

+144%

I N D O N E S I A

+116%

C O T E D I V O I R E

+109%

K A Z A K H S T A N

+100%

M O N G O L I A

THE WEALTH REPORTK N I G H T F R A N K . C O M

ALL CHANGEG L O B A L W E A LT H D I S T R I B U T I O N18

from the levels seen last year, and WealthInsight forecastsrobust growth in wealth creation over the next decade.

BRIGHT HORIZONS

The global outlook for 2014 is also brighter, with signs of sustainedgrowth in the US and the eurozone, and a stabilisation in key Asianeconomies. Earlier this year, the International Monetary Fund(IMF) revised up its global growth forecast for 2014 by 0.1 ofa percentage point to 3.7%, up from 3% growth in 2013.

However, it remains to be seen how a balance will be struckbetween stronger underlying growth and the hurdles ahead,not least the slowing, or tapering, of the multi-billion dollarinjections into the US economy via quantitative easing (QE).Dr Pippa Malmgren, founder of the DPRM Group, formereconomic advisor to US President George Bush and one of our

facing the worlds second-largest economy in the years tocome. China faces some key challenges as it seeks to rebalanceits economy away from dependency on exports and large-scale government investment towards domestic demand andthe opening up of consumer credit. The countrys relativelynew political leaders will also need to prove themselves,and engender condence in their ability to steer the nationon a course towards sustainable economic expansion.

Escalating tensions with Japan over the disputedSenkaku/Diaoyu islands in the East China Sea are alsoa growing geopolitical issue. There is a risk of a genuine

confrontation, especially given the immense value of thegas beds and sh supplies that lie in the disputed area.

LOOK EAST

Even with the hurdles facing China, its inuence should not beunderestimated, according to Jim ONeill, former chairman ofGoldman Sachs. He said recently: Unless China really slows downa lot more than consensus, its contribution to the world is just goingto get bigger and bigger. Although growing at a rate of around 7%,less than during the past 30 years, China will add an extra US$1trto global GDP every year this decade. Its the equivalent of addinganother Germany and Japan to the world by the end of the decade.

FORECAST GROWTH IN WEALTHY INDIVIDUALS 20132023

RANKED BY FORECASTGROWTH IN UHNWIS

RANKED BY TOTAL NUMBEROF UHNWIS IN 2023

RANKED BY FORECAST GROWTHIN CENTA-MILLIONAIRES*

RANKED BY TOTAL NUMBER OFCENTA-MILLIONAIRES IN 2023

RANKED BY FORECAST GROWTHIN BILLIONAIRES*

RANKED BY TOTAL NUMBEROF BILLIONAIRES IN 2023

2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023

Vietnam 110 293 166% USA 39,378 47,468 21% Vietnam 21 56 167% USA 11,454 13,807 21% Indonesia 23 56 143% USA 417 503 21%

Indonesia 626 1,527 144% Japan 16,450 18,974 15% Indonesia 185 451 144% China 2,639 4,745 80% India 60 119 98% China 179 322 80%

Cote dIvoire 25 54 116% China 7,905 14,213 80% Kazakhstan 58 121 109% Germany 2,529 3,007 19% China 179 322 80% Russia 92 128 39%Kazakhstan 179 375 1 09% Germany 11,392 13,546 19% India 383 761 99% UK 2,405 2,847 18% Ukraine 14 24 71% India 60 119 98%

Mongolia 45 90 100% UK 10,149 12,015 18% Nigeria 60 115 92% Japan 1,915 2 ,209 15% Philippines 13 21 62% UK 94 111 18

India 1,576 3,130 99% Brazil 4,122 5,940 44% China 2,639 4,745 80% Singapore 751 1,162 5 5% Chile 16 25 56% Germany 81 96 19%

Tanzania 75 148 97% Canada 4,248 5,068 19% Kenya 31 54 74% Switzerland 793 944 19% Singapore 13 20 54% Turkey 41 57 39%Ethiopia 35 69 97% Switzerland 4,137 4,924 19% Ukraine 174 300 72% Russia 634 8 79 39% Thailand 15 23 53% Indonesia 23 56 143%

Ghana 30 58 93% Singapore 3,154 4,878 55% Argentina 128 218 70% Brazil 602 868 44% Brazil 32 46 44% Hong Kong 40 55 38%

Nigeria 200 384 92% Italy 3,650 4,256 17% Uganda 12 20 67% Canada 705 841 19% Russia 92 128 39% France 45 49 9%

FASTEST-GROWING UHNWI POPULATIONS BY COUNTRY

wealth panellists, says the question of how the US and UK willexit from QE is the quadrillion dollar question. Literally.

The size of the US economy means that it has a disproportionateimpact on the rest of the world. Our Attitudes Survey results showthat North Americans are more concerned about the local politicalsituation and tax environment on their ability to create wealththan nearly every other region; perhaps not surprising given thedomestic consequences of tapering as well as the efforts at budgetbalancing that led to a temporary government shutdown last year.

Those outside the US are also concerned about the consequencesof tapering. If QE pushed emerging stock markets and pricesup, it follows that exiting QE will push them down. Clearly, whatever the US does next will have global ramications.

Likewise, the slowdown in the pace of growth in the Chineseeconomy recently has prompted speculation over the challenges

The outlook for wealth creation in China is certainly positive.Ouliana Vlasova, chief analyst at WealthInsight, says: In termsof future hotspots, China is encouraging the developmentof the nancial sector, which is the prime source of wealthand prosperity for many global markets. The new reformsannounced by the Chinese government designed to invigoratethe state-owned nancial sector and allow private ownershipof banks will inevitably lead to the availability of credit to thegrowing middle class. This will see their spending power rise while providing a new source of revenue for UHNWIs.

WealthInsight forecasts that the number of UHNWIs will grow by 80% in China over the next decade, whilethe number of billionaires will also rise by 80%, to hit322. This will exceed the total number of billionaires inthe UK, Russia, France and Switzerland combined.

Wealth creation in India, the worlds third-biggesteconomy, is also expected to accelerate, with the number

NUMBER OF BILLIONAIRES, US VS CHINA

china faces some challengesas it seeks to rebalance itseconomy towards domesticdemand and the opening up ofconsumer credit

4 1 7

U S A

1 7 9

C HIN A

2013

5 0 3 U

S A

3 2

2 C H I N

A

2023

FORECASTGROWTHIN NUMBEROF CHINESEBILLIONAIRES2013-2023

FORECASTBILLIONAIRES INCHINA BY 2023,MORE THAN INTHE UK, RUSSIA,FRANCE PLUSSWITZERLAND

80 % 322 43 %

*BASED ONCOUNTRIESWITH AT LEAST 10 BILLIONAIRESIN 2013.*BASED ONCOUNTRIESWITH AT LEAST 10 CENTA-MILLIONAIRESIN2013.

>100%

80 - 100%

60 - 80%

40 - 60%

20 - 40%

0 - 20% S O U R C E : W E A L T H I N S I G H T


11/34

20 ALL CHANGEG L O B A L W E A LT H D I S T R I B U T I O NTHE WEALTH REPORT


Head for the city

As well as analysing wealth distribution at regional and nationallevels, The Wealth Report looks at the status of key urban centres

Asian cities are expected to see thefastest growth in the number of ultra-wealthy individuals over the next decade.Nairobi is the only non-Asian city tofeature in the top 25 cities ranked bygrowth in UHNWIs, underlining theregions expansion and the increasedopenness of many of its economies.

Just as Vietnam tops the charts forUHNWI growth over the next decade,its largest urban centre, Ho Chi Minh City,is expected to head the cities list, withthe number of UHNWIs tipped to rise173% over the next 10 years.

However, this rapid growth must bebalanced against the fact that, as in manyof the fastest-growing cities, Ho ChiMinhs UHNWI population is coming froma very low base. Last year the city, witha total population of nine million, had anestimated UHNWI population of just 90.

Jakarta is in second place on the list,with expected growth of 148%, whileOrdos in Inner Mongolia claims thirdplace with 141%. The top Europeanentry is St Petersburg in Russia, whilethe fastest-growing Latin American cityis Buenos Aires. Houston is the most

buoyant urban centre in North America,with forecast growth of 57%.

London was home to the most UHNWIsin 2013, and this will still be the casein 2023, with nearly 5,000 expectedto be living in the UKs capital by then.Singapore and New York will leapfrogTokyo and Hong Kong to take second andthird places respectively. The prevalenceof wealth being attracted to, and createdin, cities is highlighted by the fact thatthe top six cities have more UHNWIsliving in them than the whole of LatinAmerica and the Middle East combined.

number of billionaires in Asia is also forecast to overtake thenumber in Europe over the next decade. In 10 years time,there will be more billionaires in India than in the UK.

Asian UHNWIs are among the most positive about theeffect of the economy on their ability to create wealth. Around 84% anticipate that global and local economicconditions will be the biggest positive inuence on theirability to create wealth over the next ve years.

MINTEDIndonesia, together with Mexico, Nigeria and Turkey, have beendubbed the MINTs by Jim ONeill: countries that he believes havthe right fundamentals to really accelerate their economic growthchiey their fabulous demographics. They not only have big

populations, but theres a balance between young and elderly, heexplains. This means they dont need to do that much to grow byeven faster rates in the decades ahead. WealthInsight forecaststhat the number of ultra-wealthy individuals in Turkey and Mexic

will rise by nearly a third, while the number in Nigeria will nearldouble over the next 10 years.

Globally, WealthInsight forecasts that the ranks of the ultra- wealthy will grow by 28% in the coming decade, reaching aroun215,000 by 2023. This is a slower pace of growth than over thepast 10 years, although much faster than the 8% growth seenbetween 2007 and 2013. The number of billionaires is expected trise to 2,315 by 2023 a 148% increase on the number in 2003.

The slowdown in overall UHNWI growth is perhaps to beexpected given the pre-crisis boom in equity and asset valuesand the scale of the shock from which the world economyis still recovering. We are not going to go straight back tothe old normal economy we used to have. Recoveries areinevitably deeply uneven, Dr Malmgren points out.

of UHNWIs forecast to nearly double over the next decade.This reects the more positive outlook for Indias economyafter 2013 was marked by capital outows and a sharpdevaluation of the rupee. This tough environment for wealthcreation and preservation was reected in the 1% decline inthe number of UHNWIs in the country during the year.

Nevertheless, the growth of UHNWIs in China andIndia, coupled with an eye-catching 144% increase inIndonesia and a stellar 166% hike in Vietnam, will help

push the total number of UHNWIs in Asia up by 43%.The Vietnamese government moved early this year to

allow foreign investors to take larger stakes in the countryslenders, which will help boost the banking system. There willalso likely be a loosening of the limits on foreign ownershipof listed companies. These moves, coupled with the countryssuccessful rebalancing of the economy away from agricultureto industry and manufacturing and the recent success inbringing ination under control, should help underpingrowth and augment opportunities for wealth creation.

The number of UHNWIs in Asia is set to reach 58,588 by2023, overtaking the total number in North America. The

GLOBALCITIES

RANKEDBY UHNWI

POPULATIONGROWTH

20132023

2013

2023

10-YEARGROWTH

H o C h i M i n h C i t y

9 0

2 4 6

1 7 3 %

J a k a r t a

3 4 5

8 5 7

1 4 8 %

O r d o s

2 2

5 3

1 4 1 %

M u m b a i

5 7 7

1 , 3 0 2

1 2 6 %

D e l h i

1 4 7

3 2 1

1 1 8 %

F o s h a n

2 5

5 3

1 1 2 %

N i n g b o

3 5

7 2

1 0 6 %

X i a m e n

6 0

1 2 1

1 0 2 %

T a i z h o u

2 0

4 0

1 0 0 %

C h o n g q i n g

9 6

1 9 1

9 9 %

D o n g g u a n

2 4

4 6

9 2 %

S u z h o u

4 2

8 0

9 0 %

J i a n g m e n

2 3

4 2

8 3 %

C h e n g d u

1 2 0

2 1 7

8 1 %

F u z h o u

6 7

1 2 1

8 1 %

W u h a n

1 1 1

2 0 0

8 0 %

N a i r o b i

6 5

1 1 6

7 8 %

H a n g z h o u

5 6 3

1 , 0 0 2

7 8 %

W e n z h o u

1 0 9

1 9 3

7 7 %

T i a n j i n

1 5 5

2 6 5

7 1 %

D a l i a n

8 9

1 4 9

6 7 %

C h a n g s h a

1 1 8

1 9 5

6 5 %

G u a n g z h o u

3 1 1

5 0 4

6 2 %

S t P e t e r s b u r g

9 9

1 6 0

6 2 %

B u e n o s A i r e s

2 6 4

4 2 5

6 1 %

M a r r a k e s h

1 5

2 4

6 0 %

X i ' a n

6 1

9 6

5 7 %

H o u s t o n

7 7 7

1 , 2 1 7

5 7 %

R i o d e J a n e i r o

5 5 0

8 5 6

5 6 %

S i n g a p o r e

3 , 1 5

4

4 , 8 7

8

5 5 %

Q i n g d a o

6 5

1 0 0

5 4 %

N a n j i n g

1 9 2

2 9 4

5 3 %

S h a n g h a i

1 , 0 2 8

1 , 5 4 2

5 0 %

M u n i c h

1 , 1 1 3

1 , 6 5 1

4 8 %

B a n g k o k

4 5 5

6 6 8

4 7 %

B e i j i n g

1 , 3 1 8

1 , 8 7 2

4 2 %

J o h a n n e s b u r g

2 8 5

4 0 3

4 1 %

S a o P a u l o

1 , 3 1 0

1 , 8 4 3

4 1 %

S h e n z h e n

3 7 7

5 2 8

4 0 %

I s t a n b u l

1 , 1 1 0

1 , 5 3 1

3 8 %

O s l o

4 7 0

6 4 8

3 8 %

C a p e T o w n

1 1 0

1 5 1

3 7 %

H o n g K o n g

2 , 5

6 0

3 , 5 0

2

3 7 %

D a l l a s

5 6 4

7 6 5

3 6 %

M o s c o w

8 2 1

1 , 0 9 6

3 3 %

M e x i c o C i t y

1 , 0 8 8

1 , 4 3 1

3 2 %

K u a l a L u m p u r

2 9 5

3 8 6

3 1 %

N e w Y o r k

2 , 9

2 9

3 , 8 2

5

3 1 %

A b u D h a b i

1 6 1

2 0 7

2 9 %

B e i r u t

1 3 2

1 6 9

2 8 %

S t o c k h o l m

4 6 5

5 9 1

2 7 %

V i e n n a

3 8 4

4 8 3

2 6 %

T a i p e i

1 , 2 5 5

1 , 5 7 6

2 6 %

D u b a i

3 6 8

4 6 1

2 5 %

H a m b u r g

8 4 3

1 , 0 5 2

2 5 %

B r u s s e l s

3 4 5

4 2 9

2 4 %

D u s s e l d o r f

5 2 4

6 4 7

2 3 %

B a r c e l o n a

4 3 2

5 3 3

2 3 %

T e l A v i v

5 0 2

6 1 9

2 3 %

T o r o n t o

1 , 1 8 4

1 , 4 5 6

2 3 %

S e o u l

1 , 3 0 2

1 , 5 9 5

2 3 %

M a d r i d

5 3 6

6 5 1

2 1 %

A m s t e r d a m

4 4 0

5 3 4

2 1 %

F l o r e n c e

1 3 6

1 6 5

2 1 %

V e n i c e

8 6

1 0 4

2 1 %

S y d n e y

7 4 7

9 0 3

2 1 %

G e n e v a

1 , 1 5 6

1 , 3 9 4

2 1 %

M e l b o u r n e

4 4 5

5 2 9

1 9 %

O s a k a

1 , 4 5 0

1 , 7 1 6

1 8 %

M o n t r e a l

5 2 0

6 1 3

1 8 %

L o n d o n

4 , 2

2 4

4 , 9 4

0 1 7 %

Z u r i c h

1 , 3 1 4

1 , 5 2 1

1 6 %

L o s A n g e l e s

9 5 0

1 , 0 8 9

1 5 %

R o m e

9 4 5

1 , 0 8 1

1 4 %

D u b l i n

3 6 5

4 1 3

1 3 %

W a s h i n g t o n D C

3 3 6

3 7 8

1 3 %

M i l a n

2 3 5

2 6 4

1 2 %

F r a n k f u r t

1 , 8 6 8

2 , 0 9

1 1 2 %

S a n F r a n c i s c o

5 1 1

5 6 5

1 1 %

P a r i s

1 , 5 0 0

1 , 6 5 6

1 0 %

V a n c o u v e r

2 5 5

2 7 8

9 %

T o k y o

3 , 5

2 5

3 , 8 1 8

8 %

A u c k l a n d

5 4 0

5 6 8

5 %

HO CHI MINH CITYTOPS THE LIST OF FASTEST-GROWING CITIES WITH FORECASTUHNWI GROWTH OF 173%OVER THE NEXT 10 YEARS

uhnwi numbers in turkey andmexico are predicted to riseby nearly a third over the nextdecade, while the number innigeria will almost double


12/34

22 THE WEALTH REPORTK N I G H T F R A N K . C O M

Over the next decade, the growth in UHNWIs will be highestin the Middle East, Latin America and Asia, with the biggestrise of all in Africa, albeit from a low base. The number of Africans with US$30m in assets is set to grow by 53% to 2,858 by 2023, faroutstripping the average pace of growth across the rest of the world.The number of centa-millionaires is set to rise by 51%,and by 2023 there will be 38 billionaires based on the continent.

Ms Vlasova says: Africas potential for wealth creation shouldnot be underestimated, given the amount of foreign investment,

including social investment, it has received and is likely to receivein the future. The economic outlook is also positive, with fastergrowth forecast for sub-Saharan Africa than for most developedcountries. But, as Ms Vlasova highlights, infrastructure mustbe in place before signicant wealth creation can ow from anexpanding economy (see p47 for more on Zambias growth story) .

Economic growth is a major factor in wealth creation.However, it takes time for GDP growth to create wealth growth. Wealth growth is heavily dependent on the strength of thelocal banking system. For instance, in countries such as CotedIvoire and Ethiopia, strong GDP growth has not yet translatedinto UHNWI numbers due to a weak banking system.

Ownership rights are also key as individuals are unlikelyto invest if they are unsure if they own an asset. A primeexample of this is Zimbabwe, where an erosion of theserights, among other issues, has had an impact on wealth.

At the other end of the spectrum, Australasia willexperience the most modest uplift in the number of wealthyresidents, with an 18% rise in UHNWIs and a 20% shift in

centa-millionaires. However, Ms Vlasova says: This slowingin growth takes into account the expected weakeningof the Australian dollar over the forecast period.

It also has to be remembered that Australia is already one ofthe wealthiest countries in the world on a per capita basis, rankingsecond in the world behind Switzerland. The average Australianis now worth over US$250,000, so this is not to say that there isnt wealth creation, but it is perhaps slightly slower at the very top end.

EURO CONFLICT

The eurozone may have faded from the headlines in 2013, but therisks facing the single currency area are still very much present.Dr Malmgren says: I think that this view that everything is calm is

Ups anddowns

Global wealth is onmore on the rise bthe repercussions othe economic crisisstill being felt

New data from WealthInsight shows theextent to which the number of UHNWIsfell in the aftermath of the nancial crisis.

The number of UHNWIs in Europe,which bore the brunt of the crisis in termsof wealth creation, is still nearly 3,000lower than in 2007. In North America,there are around 800 fewer UHNWIs thanat the 2007 peak.

WealthInsight says that the real damageto wealth creation and preservation wasfelt across 2008 and 2009 when nearly

20% of UHNWIs in Europe slipped downinto a lower wealth banding. Thiscompares with just 6% of UHNWIs in theAsia-Pacic region and less than 1% inNorth America. WealthInsights wealthbands start at US$1m, rising to US$5m,US$30m, US$100m and nally billionair

Monitoring the proportion that stayedwithin their original wealth bands is asimportant as analysing the uctuations,WealthInsight says. On average, 90%of wealthy individuals have seen nomovement between wealth bands overthe past 10 years: 85% in Asia-Pacic,88% in Europe, 92% in the Middle Eastand Africa and 94% in North America.

While this lack of movement may beseen as relief from volatility, it is also anindicator of stagnation; of how hard ithas been for the wealthy to grow theirnet worth. The periods between 2007and 2008 and 2012 and 2013 were bothcharacterised by no change, whereas

20102011 saw the biggest movementsbetween wealth bands.

FORECASTGLOBALINCREASEIN UHNWINUMBERSBY 2023

28 % 53 %MEXICO CITY: ALONG WITHTHE OTHER MINT COUNTRIES,FAVOURABLE DEMOGRAPHICSSHOULD SEE MEXICOSECONOMIC GROWTH SOARIN THE COMING YEARS

GLOBAL UHNWI GROWTH, PAST AND FUTURE

wrong. There is a dagger at the heart of the eurozone which is therising ination differential. She points to the European CentralBanks decision to cut interest rates to 0.25% in November lastyear. The rate cut delivered by the ECB was considered absolutelyinsufficient by Spain, which is suffering from deation, andabsolutely dangerous by Germany, where the price of goods is rising.So youve got a problem of conicting interests.

The Economist Intelligence Unit still rates the eurozoneas one of the key risks for the global economy in the future.

But, despite the worries over the fate of the single currencyzone, economic growth there did improve last year, withthe region tentatively emerging from recession.

There were also some notable pockets of optimism in Europein 2013, including Greece and Ireland, two of the countries thatsuffered most in the wake of the nancial crisis. Ireland gaveitself an early Christmas present last year by exiting the EU andIMF bailout package put in place in 2010. Although dealing

with the fallout from the crisis, especially in the banking sector,

will weigh on the country for years to come, some positive signshave emerged not least a pick-up in house prices and a robust35% rise in the Irish stock exchange during the year.

The Greek economy may have remained in recession last year,but stocks listed on the Athens exchange rose by 25%, and it is widely forecast that the country will nally emerge from recessionduring the coming year.

The number of UHNWIs in Ireland and Greece rose by3% and 2% respectively last year, although the total UHNWIpopulations remain between 23% and 19% lower than in2007. Given the painful austerity measures still in place, bothcountries UHNWI populations may have been boosted tosome extent by those arriving from overseas, rather than anunderlying growth in wealth. Attracting wealthy individuals asresidents can be benecial, especially if they also relocate theirbusinesses (see our feature on immigration on p37 for more) .

FROM RUSSIA WITH LOVE

By contrast, Russias UHNWI population is set to be depleted by

emigration. While the number of Russian UHNWIs has risen by372% over the last decade, the forecast for the next 10 years is for


economic growth in theeurozone did improve in 2013,with the region showingsigns of tentatively emergingfrom recession

0

5

10

15

20

25

30BOUNCING BACK:POST-CRISIS,GLOBAL UHNWINUMBERS ARE ONTHE RISE AGAIN

2 0 13 20 23

2 8 %

2 0 0 72 0 13

8 %


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THE WEALTH REPORTK N I G H T F R A N K . C O M24


a more modest 39% uplift. In fact, the data shows that the numberof UHNWIs in Russia fell last year.

Ms Vlasova explains: The data may not adequately reectthe wealth creation happening in Russia as the movement of

UHNWIs from Russia to live or run their businesses in otherparts of the world has affected, and will continue to affect,the gures. The departure of these UHNWIs from Russiahas boosted the number of UHNWIs in global cities such asLondon, New York and Dubai, and reects the trends in globalinvestment being experienced in those nancial centres.

Russia also faces other challenges in the decade to come, sheadds. These include a depreciation of the local currency against theUS dollar, the relative weakness of the local equity markets, anda reliance on commodities, which are expected to perform poorly.

UHNWIs, and in particular centa-millionaires andbillionaires, are often globally mobile, with property andbusiness interests in many different locations. This trend isonly likely to grow more prevalent, especially as an increasingnumber of countries seek to repair their balance sheetsby raising taxes across the board. The political benets ofimposing wealth taxes also make them an attractive option forgovernments. In recent years, this has resulted in more UHNWIsthinking very carefully about where to base themselves.

Dr Malmgren says: I would argue that the UK has nowemerged as the worlds most attractive residence for non-domiciles. The crackdown on tax havens in Switzerland hasremoved these old options for new capital. As a result, therehas been a huge inux of global capital into the UK and thisis reected in many things, including property prices.

So far London seems to have been the main beneciaryof investment into the UK, but Dr Malmgren says that there isscope for some investment to ow past the capital and into

the regions, underpinnedby the UKs burgeoningeconomic recovery.PricewaterhouseCoopers has

forecast that the UK economy will grow faster than any otherEuropean countrys this year.

Birmingham, for example, is seen as a net beneciary ofthe return of manufacturing in the Midlands, the fact thatproperty prices are rising across the country and the fact thatLondon cant keep expanding forever, says Dr Malmgren.

In January, it emerged that China had offered to investin both the proposed High Speed 2 (HS2) railway betweenLondon and Birmingham and in Birmingham Airport, wherea new runway should from this year allow many more directights to international destinations, including China.

TEXAS CALLING

Dr Malmgren argues that increasing labour costs in emergingeconomies are making manufacturing in developed economiessuch as the US and UK more competitive again. Apple, for example,is moving its production facilities back to the US, and Foxconn,the Chinese company that assembles Apples iPhones, is investing

in a new state-of-the-art manufacturing facility in Harrisburg,Pennsylvania, creating around 500 jobs.

States such as ArkaKansas and Texas are placed to benet. Arkis a massive beneciar

boom in agribusiness areturn of manufacturinDr Malmgren. Nation

transport networks and the cheap energy/fracking story are going well. When people get priced out of major cities like New York San Francisco, they move to cities like Kansas City and HoustonThe middle of America is where the economic action is now. Thnumber of UHNWIs in Houston, for example, is expected to rise 57% by 2023, far outstripping the overall US growth rate of 21%

Despite a slowing in the pace of growth, the US will stilltop the charts for the number of UHNWIs in 2023, with anexpected 47,468 individuals with US$30m or more in net assets,a fth of the worlds expected total, and three times as manyas in China. In terms of centa-millionaires and billionairesthe US is also on top, with 13,807 and 503 respectively.

There is increasingly heated debate as to when Chinas econo will overtake the US to become the largest in the world. But in teof wealth creation, and the population of ultra-wealthy individuathe US will be rmly holding the top spot for some time to come.

the uk has emerged as theworlds most attractiveresidence for non-doms, whichis reflected in property prices

FOR MORE WEALTH NUMBERS, SEE DATABANK p64

MIDDLE AMSUCH

ARE EMECOUNTRYS K

G

THINKING ABOUT MY OWN, ORMY UHNWI CLIENTS , WEALTHCREATION PROSPECTS, I AM More positive than I have been

over the past four yearsLORD HARRIS OF PECKHAM

Fascinated by the shifting patternsin the wealthy, their

behaviours and attitudesJAMES LAWSON

Very optimistic about Asia, in particular India over China

DAVID LEPPAN

F

THE BIGGEST OPPORTUNITY FORGLOBAL WEALTH CREATION IS Accessibility of information and

opportunities in emerging marketsLAWRENCE WONG

Investing in emergingmarkets such as Africa

KAMAL RAHMAN

Long-term investment in developingcountries with solid fundamental

prospects, when the market is weakTAN SRI A K NATHAN

F

THE BIGGEST OVER ALL THREAT TOGLOBAL WEALTH CREATION IS Bankrupt governments putting

in place short-term measuresto meet their overspending

MARK ODONNELL

The lack of understanding that wealthcreation is best done in an environment

where there is the opportunity for all ABHIS HEK L ODHA

Governments desire to default on theirown debt through quiet ination

DR PIPPA MALMGREN

Wealth Panel Vox Pops

FORECASTGROWTHIN UHNWINUMBERS INHOUSTON20132023

FORECASTGROWTHIN UHNWINUMBERSIN THE US20132023

57 % 21 % 20 %

167,669UHNWIS

US$ 20.1TRILLION

GLOBAL POPULATION 2013

TOTAL WEALTH HELD BY UHNWIS 2013


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THE SHAPE OF THINGS TOCOME: SAO PAULO IS THELEADING FUTURE UHNWI

HOTSPOT, ACCORDING TOOUR GLOBAL CITIES SURVEY


KNIGHTFRANK.

The top spots may be securefor now, but theres plenty ofmovement elsewhere in this yearsKnight Frank Global Cities Surveywords L I A M B A I L E Y

26 W O R L D I N M O T I O NTHE CITIES THAT MATTER TO THE WORLDS WEALTHY

MOTIONIN

nce again the results of our Global Cities Survey mean themayors of London and New York can sleep easy. No Asian,Latin American or Middle Eastern ingnue has brokenranks to trouble the long-standing dominance of the twomighty metropolises at the top of our rankings.

In fairness, it was never likely to happen this year; nor forthat matter do we expect it to happen in the foreseeable future.History, location and their long-established wealth meanthat London and New Yorks positions look unassailable, atleast for now. It is further down our leader board that the realcity wars are being waged. The main battleground is Asia, where a handful of locations are slugging it out in the hope ofestablishing a clear lead as the regions alpha urban hub.

Of course, there will always be a keen rivalry between Lond

and New York as to which takes the crown of leading globalcity. This year London is in rst place according to our surveybut, in reality, there is very little to separate the two cities.

While New York pulls ahead of London in terms of economactivity and political power two of the four categories used bythe Global Cities Survey to analyse city performance since itsinception in 2008 a pair of new measures incorporated intoour methodology this year help nudge London slightly ahead.

As well as relying on the detailed macro datasets that we uto rank cities on four key criteria economic activity, qualityof life, knowledge & inuence and political power we havealso taken into account each citys UHNWI population (seeas well as responses from The Wealth Report s annual AttiSurvey of wealth advisors from around the world.

When respondents were asked to select which cities weremost important to their UHNWI clients now, London scoredmore highly in the global popularity stakes than New York.However, looking forward, our results suggest that by 2024New York should surpass London as its share of the worlds

UHNWIs rises and the city becomes increasingly importantto Chinese, Russian and even European UHNWIs.

Leaving aside London and New York, Asia dominates the hend of our rankings, accounting for four of the surveys top 10 This is set to rise to ve in 2024. One of the key differences, hobetween Asia and Europe and North America is Asias lack of dominant city. This is why we are now seeing the power struggI mentioned earlier, with Singapore, Hong Kong, Shanghai andBeijing all contenders for the title of future leading Asian city.

WORLD


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K N I G H T F R A N K .W O R L D I N M O T I O N

THE CITIES THAT MATTER TO THE WORLDS WEALTHY28

THE WEALTHREPORTS GLOBAL

CITIES SURVEY ISBASED ON FOUR KEY

CHARACTERISTICS.WE ASKED

FOUR LEADINGCOMMENTATORS

FOR THEIR VIEWSON WHICH CITIES

ARE RISING UP

THE RANKS INEACH CATEGORY,AND ON THE

BIGGEST THREATSTO THE CURRENT

WORLD ORDER.THE CATEGORIESARE RANKED 14,

REFLECTING THEIRIMPORTANCE TO

UHNWIS BASED ONTHE RESULTS OF OUR

ATTITUDES SURVEY

William Braniff looks at theability of governments to protect life and property

Residents of the worlds keycities should be more worriedabout crime, pollution and thedaily commute than terrorism.But the question is, how will therisk evolve, and how preparedare governments to combat it?

In China, for instance,the risk is that wealth fails totrickle down and the systemis blamed for it. The statusof the countrys autonomousmovements may be unknown,but the risks are real. That

said, an authoritarian statecan stop isolated attacksturning into campaigns.

More broadly, terrorismtends to occur in denselypopulated cities and ours isan urbanising world. NewYork, London, Moscow andMumbai are more riskythan Beijing. Paris is one to watch as a locus for terroristgroups from Mali, Niger andMauritania, who see France asthe foreign power most directlyinuencing their affairs.

But the risk of a large-scaleattack, such as a dirty bombin a Western city, is, I think, very low, due to the detection

architecture in place toprevent terrorists obtainingand deploying such material.

Mark Yeandle assesses growing city rivalry in global nancial services

Being global centres fornancial services no doubtenhances the appeal of Londonand New York to the worlds wealthy. But while these citiesare secure for now withintheir respective time zones,the hottest competition isfor the title of Asian nancialcapital, currently split betweenHong Kong and Singapore.

Although Singapore hasbeen slowly closing the gap, onepotential determining factor is

the prospect of China shiftingto full currency convertibility,the lack of which has held backShanghais nancial sectoras well as Hong Kongs.

Overall, London is in agreat position, with its 300-year history of governance,institutions, knowledgeand infrastructure. But theemergence of a true MiddleEastern hub like Abu Dhabi,Dubai, Doha or Istanbul could see London lose someregional dominance.

If I could point to onerisk to London, it would beregulation. Unlike New Yorkthe city is answerable to a

supra-national authority(the EU), and this could poseproblems in the future.

Tim Luckhurst highlights theburgeoning inuence of themedia in the developing world

Most growth in media todayis taking place in parts ofthe world where freedom isrestricted. An investmentin the media is no longer aninvestment in free speech.

No doubt there is potentialif you can provide the type ofcoverage the regime wants.But the question is to whatextent your reputation suffersin the developed world.

Real openness still does notexist in Chinas key cities, but

there is evidence of censorshipbecoming less overt. A coupleof years ago, I would have beenastonished to see coverageof an event like the 2013Tiananmen Square car bomb.It was reported within hours,albeit by approved reporters.

China is a monolithicdeveloping state that oftenbehaves predictably. It isa greater uphill struggle inMoscow, with its less rational and less predictable system.

If I were investing inmedia today, it would be inIndia. There is a huge marketin cities like Mumbai forradio, newspapers and TV, a

young, affluent middle class,an exciting economy andlively political disputes.

Shamil Yenikeyeff ethe impact of change Middle East on Beij

A major geopolitical cthat will take place in years is the withdrawaUS from the Middle E Afghanistan after 201factor behind this is thshale gas boom and itssufficiency in energy t

So, who will ll ththe Gulf? While RiyadDoha will have a loudthe region, the gap wilbe lled by Beijing, cahuge changes over the

decades. We should stthe rst ickers of this

The result could bepartnership between Band Washington, aimemaintaining world secstability. China is partconcerned with the seof energy supplies froMiddle East, which isto continue to play a mrole in the global oil m

In Moscow, there ianxiety within the buscommunity over levelstate control in the domeconomy and Russiasto volatile energy marquestion remains as to

role Moscow will playaffairs: that of an eneror a service economy

MARK YEANDLE IS CR EATORAND PUBLISHER OF THEGLOBAL FINANCIAL CENTRESINDEX (GFCI). HE IS ASSOCIATEDIRECTOR AT Z/YEN GROUP

WILLIAM BRANIFF IS EXECUTIVEDIRECTOR OF THE US-BASEDNATIONAL CONSORTIUM FORTHE STUDY OF TERRORISM ANDRESPONSES TO TERRORISM

PROFESSOR TIM LUCKHURST ISPROFESSOR OF JOURNALISMAT THE UNIVERSITY OF KENTAND A FORMER EDITOR OF THESCOTSMAN NEWSPAPER

DR SHAMIL YENIKEYENERGY EXPERT ANDFELLOW AT ST ANTONCOLLEGE AND THE OXINSTITUTE FOR ENER

While Singapore leads the race at the moment, Hong Kongis set to overtake it by 2024. Despite the proliferation ofeconomic success stories across Asia, the dominance of Chinais unavoidable and Hong Kongs unofficial role as the portalbetween its big brother and the rest of the world will ensurethe growing dominance of the city over the next decade.

While Beijing and Shanghai will see a greater absolute rise intheir UHNWI populations between 2013 and 2023 compared withsome other major cities (see pp20-21 for full city wealth data) , they

will remain essentially domestic centres. It will be for Singaporeand Hong Kong to continue to act as Asias global entrep t cities.

REGIONAL CHAMPIONS

At a regional level, Johannesburg tops the African list, followedby Cape Town. Outside of South Africa, the continentskey wealth hubs include Cairo, Lagos and Nairobi.

The Middle East top ve includes two centres from ourhotspots list cities that are set to rapidly increase theirinuence on UHNWIs (see p30) with Istanbul and Abu Dhabiclose behind Dubai. One legacy of the Arab Spring is the enhancedstatus of Turkey as a safe haven location for investors from the Gulfand North Africa. This, added to the countrys strong economicgrowth rate, has propelled Istanbul higher in our rankings.

Although it still trails some way behind the top four citiesin Asia-Pacic, Sydney is steadily growing in importance as a wealth hub for the region. Despite its geographical remoteness, itcomes in as the fth placed hotspot. Sao Paulo heads the currentLatin American top ve list. Current trends suggest that the city

is also set to see its UHNWI population ranking rise from 11th toeighth position globally by 2023.

Forecast changes for UHNWI populations reect a broadernarrative. The big declines in terms of rankings (if notabsolute numbers) are set to be seen in Europe, with Paris,Geneva and Zurich all slipping steadily. Germanys economicstrength ensures that Munich remains an exception the cityis forecast to rise from 16th to 11th position for its UHNWIpopulation over the next decade. The cities with the largestforecast percentage uplift in UHNWI populations Sao Paulo,

Istanbul and Shanghai are all emerging market leaders.

CONNECTIVITY

On the facing page, four leading commentators give theirexpert perspective on some of the economic, political,security and communication trends that could create bothchallenges and opportunities for our leading cities in thecoming years. While there are undoubtedly rivalries beingplayed out, with big economic prizes on offer for cities

The cities with the largestforecast uplift in UHNWIpopulations Sao Paulo,Istanbul and Shanghai are allemerging market leaders

1ECONOMICACTIVITY

2QUALITY OF LIFE

3KNOWLEDGE& INFLUENCE

4 POLITICAL PO

30


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32 M O V I N G O N U PTHE PRIME INTERNATIONAL RESIDENTIAL INDEX (PIRI)T H E W E A LT H R E P O RT 2 0 1 4

KNIGHTFRANK.C

Featuring more locations than ever before, The Wealth Report Prime International Residential Index (PIRI) is the ultimate guide to the

worlds luxury home markets. Here we analyse the latest trendsWords L I A M B A I L E Y

INDONESIAS CAPITALJAKARTA ONCE AGAINOCCUPIES PIRIS TOP SLOT,POSTING ANNUAL GROWTHOF 38% IN PRIME RESIDENTIALPROPERTY VALUES

his year, our in-depth research has allowed us to include 90 of the worlds key luxury property markets in our Prime International

Residential Index (PIRI), up from last years 80 (see pp34The main theme that emerges from our analysis is a widesprea

strengthening of values. Last year prices fell in 39% of locations,compared with almost half in 2012. A fth of markets featured sadouble-digit price growth in 2013 against only 15% the year befo

Across PIRI, the main division is between generally booming Asian markets, which dominate the top positions in our ranking oprice growth, and the weaker European markets that account for80% of all locations where prices declined in 2013. Jakarta headsPIRI, with annual growth of 38%, almost exactly the same as therate seen in 2012. With Bali number three in our table (+22%),Indonesias key markets are continuing to outperform the rest.

Price growth in Jakarta is supported by limited supply while demand has remained strong. This is despite a slowing inIndonesias economic growth and the uncertainty created by theforthcoming presidential election in July this year, explainsHasan Pamudji of Knight Frank Indonesia.

New Zealands prime markets have also strengthenedsignicantly, with very strong annual growth in both Auckland

(+29%) and Christchurch (+21%). Layne Harwood, ManagingDirector of Knight Frank New Zealand, points to two key factorsstrong economic fundamentals, with GDP growth comfortablyabove 3% in 2013, and strengthening inward migration from Ain the main, but also powered by returning ex-pats.

As I noted last year, the rebound in markets most affected by downturn in 2008 has continued. Dubai experienced 17% growthin 2013, to add to its 20% gain in 2012. In Dublin, which witnesstentative increases in 2012, prices climbed 18% in 2013.


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M O V I N G O N U P

THE PRIME INTERNATIONAL RESIDENTIAL INDEX (PIRI)36

As wealth grows in emerging markets (see p16) , so does the dto protect it. Increasingly, wealthy individuals are looking for placeswhere their assets will be safe. Investor visas, which grant residencyor citizenship in exchange for investment, account for a small butgrowing percentage of immigration worldwide.

This growth is due to geopolitical pressure

wealth report 2014

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