In the middle of a global pandemic and the related economic crisis, why should we be interested in the wealthy? Simply put, if we are to understand market and asset performance then they form a central part of the story.
Find below what the most important takeaways from the Knight Frank’s Wealth Report 2021 are:
Expect more private investment in property
Despite overall property investment volumes falling in 2020, the capital deployed by private investors was still 9% above the 10-year average, far stronger than the 6% fall in the amount committed by institutional investors. This theme will continue through 2021 with a quarter of UHNWIs planning to invest this year. In addition to development land, residential investments and logistics will lead requirements.
…but the wealthy still want options
Despite a reduced desire to travel, nearly a quarter of UHNWIs are planning to apply for a second passport or citizenship – a remarkable 50% growth in a year. As we note, there is a growing tension between rising transparency concerns over citizenship-by-investment schemes and a need to plug gaps in government finances through these schemes.
House prices are rising because of p32 the pandemic, not despite it
Our assessment of the world’s leading prime residential markets confirms that average price growth accelerated over the past 12 months. While Auckland led the pack with an 18% uptick, reflecting New Zealand’s sure-footed handling of Covid-19, even those markets hard hit by the pandemic are seeing growth. Low mortgage rates, a search for space, privacy and changing commuting patterns are helping push prices higher.
The pandemic is driving real estate innovation
The ubiquity of Amazon and Zoom has confirmed the ability of tech to concentrate wealth. However, the Attitudes Survey confirms that tech disruption is viewed as a key post-pandemic area for investment, driving demand in the still embryonic data centre market and the burgeoning life sciences sector. Spurred by the pandemic, life sciences, tech and advanced data analytics are creating new opportunities for rethinking office space in key markets. With 43% of investors more interested in environmental, social and governance (ESG) focused investments than 12 months ago, expect rapid growth in the demand for green and energy-efficient buildings.
The pandemic-induced residential mini-boom will continue through 2021
The Attitudes Survey reveals that 26% of UHNWIs are planning to buy a new home in 2021, with the biggest driver the desire to upgrade main residences. Our survey points to a growth in demand for rural and coastal properties, with access to open space the most highly desired feature. The pandemic is supercharging demand for locations that offer a surfeit of wellness – think mountains, lakes and coastal hotspots. Demand will help fuel price rises of up to 7% for our key markets this year.
The global response to the pandemic supported the wealthy
With lower interest rates and more fiscal stimulus, asset prices have surged, driving the world’s UHNWI population 2.4% higher over the past 12 months to more than 520,000. The process was seen across North America and Europe, but it was Asia, with 12% growth, that saw the real upswing. The expansion in wealth was not universal, with a fall in the number of UHNWIs in Latin America, Russia and the Middle East as currency shifts and the pandemic undermined local economies.
[Source: Knight Frank – full report]