The world’s super-rich continued their seemingly unstoppable rise last year with the number of people worth m (£19.7m) or more expanding to 172,850. Between them they control nearly tn in assets – more than the national output of the US and Germany combined.
Almost 5,300 people joined the ranks of so-called ultra high-net-worth individuals (UHNWIs), adding bn to the wealth of the global elite. Their numbers are forecast to swell by another third over the next decade to 230,000, according to the latest wealth report from upmarket estate agents Knight Frank.
The swelling of UHNWIs promises increasing competition among buyers for vineyards, ski chalets and riding stables. Asia’s wealthiest are keen buyers of wine estates, those from Africa and the Middle East favour equestrian properties while Europe and North America’s super-rich stick to second homes in the Alps or the Rockies.
Nearly a third plan to splash out more on luxury goods this year than last. Art, luxury watches, fine wine and classic cars remain the most popular “investments of passion”.
London has been home to more of the ultra-rich than any other city for the past three years (4,364 in 2014), with New York in second place.
London should still be in the top spot 10 years from now, Knight Frank said, but Singapore will be snapping at its heels, with 54% growth in its wealth brigade over that period, against a 21% rise in the UK capital.
But the country with the fastest growing class of ultra-rich is forecast to be Vietnam, which since the 1980s has been moving from a planned to a market economy and where agriculture still accounts for 19% of national output.
Mineral rich Kazakhstan, which has struggled with a reputation for corruption, is another country to watch with the numbers predicted to rise 114% – that far outstrips the 46% rise expected in neighbouring Russia, partly because many wealthy Russians are based overseas.
This year’s report showed that among the wealthiest concerns over the state of the world economy have given way to worries about higher taxes, increased government scrutiny and how to hand over family wealth to the next generation.
It comes weeks after an international outcry over revelations of how HSBC in Switzerland had helped wealthy clients potentially hide money from tax authorities, allowing practices such as withdrawals of “bricks” of cash with few questions asked.
Tax is now cited as the main reason why the ultra-rich would consider moving to a different country, with the mood around taxes becoming “febrile” over the past few years, said Liam Bailey, global head of research at Knight Frank.
Property taxes are an issue, in London and other places such as Hong Kong. While the threat of New York mayor Bill de Blasio’s “pied-à-terre” tax does not appear to have dampened house price growth there, recent hikes in stamp duty have hit properties worth more than £2m in London, keeping overall prime house price growth at 5.1% for the year, the report says.
Liam Bailey, global head of research at Knight Frank, said: “High-end property in London and the UK was pretty benignly taxed five years ago.” But this is changing.
The latest changes to stamp duty mean higher costs for those buying a property priced at £937,500 or above. In addition, the capital gains tax exemption for non-residents will be scrapped next month, with the introduction of higher annual charges for residential property held in corporate structures, traditionally favoured by wealthy overseas buyers.
Against these tax concerns, London wins in terms of lifestyle and education, Bailey said. A rising number of children from wealthy Russian, Middle Eastern and European families are moving to preparatory schools in London from the age of seven or eight, rather than 13 as a decade ago. This means private and international schools in central London are looking to expand but are finding it hard to find sites, amid competition from free schools.
The report comes after the publication of the Forbes magazine’s annual rich list earlier this week, which showed Silicon Valley alone created 23 new billionaires last year.
The charity Oxfam said the rate at which a “very few at the top are coining it in” was a moral outrage when more than a billion people were going to bed hungry every night.
Ouliana Vlasova, of research firm WealthInsight, said: “The growth in wealth could perhaps have been bigger had the world economy picked up more strongly in the second half of last year.”
Superyachts and private jets
The use of private jets is growing steadily around the world, driven by Asian jetsetters. At the 2014 Monaco Yacht Show, ship-builders, brokers and outfitters all said that the market was improving – 35% more superyachts were sold in the first half of the year than a year earlier, according to Camper & Nicholsons International. This is despite political uncertainty in Russia and the Middle East, traditionally seen as the biggest markets for superyachts.
Luxury brands, fine wines and spirits
The secondhand market for luxury bags, accessories, watches and jewellery is worth some bn, according to Bain & Altagamma. Leather goods and clothing account for bn of that, and the market is growing faster than the luxury industry overall, says Bloomberg. Some products fetch higher prices than retail, as customers bypass waiting lists for highly-coveted items such as new Hermès bags. Meanwhile, French wine and spirits exports such as Cognac have been hit by the Chinese government’s crackdown on gifting. But Scottish whisky sales are seeing an uptick in other Asian countries as scotch is associated with status.
The Historic Automobile Group International’s top index climbed 16% in 2014, albeit down from the 47% surge the year before. HAGI founder Dietrich Hatlapa said the market is returning to normal – although a 1962 Ferrari 250 GTO Berlinetta set a new world record of m at Bonhams in August. Overall, classic Porsche models performed best, while more modern supercars from the 1970s and 80s, like the Lamborghini Countach and Ferrari F40, are growing in popularity.
Jewellery and art
Women’s watches are booming as women’s purchasing power grows, pearls are no longer seen as old-fashioned and coloured diamonds are also en vogue among the ultra-rich. Fancy pink, yellow and blue diamonds have increased in value by 167% since 2005. Christie’s jewellery consultant Raymond Sancroft-Baker said: “There is a lot of demand from the Gulf States, who are buying back their heritage. I recently valued a pair of natural pearl earrings at a million pounds.”
After languishing for a few years, art has fully recovered from the economic crisis and bounced back with annual growth of 15% in 2014, according to Art Market Research. Alberto Giacometti’s bronze Chariot sculpture was the most expensive artwork sold at auction last year, fetching almost 1m at Sotheby’s record-breaking November sale of modern and impressionist art in New York.
Rare stamps and coins
Stamps have become less popular, except in Africa and Asia. The benchmark philatelic index – the Stanley Gibbons GB250 – rose just 3% in 2014, but the market for Chinese and Commonwealth stamps continues to grow strongly, says Keith Heddle, head of investments at Stanley Gibbons. Coins, on the other hand, achieved double-digit growth in 2014 with gains of 13%. A rare Edward VIII, 1937, gold sovereign made £516,000 when it was auctioned by Baldwin’s in May.
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