Dear Friends,
The early spring buying season and steadiness of the local NYC real estate market are giving us a great opportunity to look at what the wealthiest are doing around the globe, and where they will be spending their money next.
The fascinating report is extensive; this edition is longer than usual, and for a good reason!
Knight Frank and Douglas Elliman have just released the Wealth Report 11th edition. This report offers keen insight into the thought leadership that underpins the service provided by Knight Frank’s transactional, consultancy investment and valuation teams based in 413 offices, in 160 countries worldwide.
It took me about a week, and a snowy day, to dissect the mountain of information. The report was intriguing, exciting, and at the same time concerning, relevant to the unstable global environment we currently live in. Brexit and Trump, India and China, Temporary Space and Airbnb are some of the topics discussed. Wine was apparently the best investment in 2016, and soon you may be able to get a private jet through an app that is not much different from Uber.
The UHNWI: Ultra High Net Worth Individuals (those with investable assets of at least $30M) prefer to send their kids abroad to be educated, with UK still leading the charts. Additional passports are in greater demand than ever, and a tremendous amount of people will join the exclusive millionaires (and billionaires) club in the next decade. New York will continue to be the number one global concentration of UNHWI, easily overtaking London; although the world’s wealthy are a footloose group, and the place they call home is only a starting point in trying to unravel the location that resonates with them most.
Ian Bremmer, head of Eurasia Group, one of the world’s leading political risk consultancies, opens by saying:
“I’d like to think I’m a pretty optimistic guy, but 2017 is the most significant year for political risk since World War II.”
In an interesting article, he ranks the top 10 global risks: #3 is a weaker Markel (of Germany), a position that puts the EU in jeopardy; #2 is China overreacting (to Trump’s actions); and at the top of the list, Independent America. Evil forces are lurking in the dark; short of Batman, Gotham would become a (more) dangerous place.
In this “post-truth world,” uncertainty has never been greater. Yet despite this, the global UHNWI population continues to grow, with an anticipated 31% additional UHNWI in North America by 2026, and by 91% in Asia at the same year.
New Horizons: Some new global hotspots include India, which in a bold move late last year cracked down on its notorious “black economy” with the withdrawal of high denomination notes and new legislation, sending a powerful message about the government’s determination to modernize the economy and reduce corruption.
Another excellent example is the sub-Saharan countries, with a youthful population, and 60% of the world’s unplanted arable land that can be an ideal solution to growing global pressure on food production.
It’s not all rosy in the ultra-rich world. As the movement of wealth around the world continues to increase, so too does the desire of governments to regulate and control it. The growth in regulatory activity based on understanding where private wealth sits globally will surge further in 2017, ahead of the introduction of the OECD’S (The Organization for Economic Co-operation and Development) Common Reporting Standard (CRS), which will enable governments to exchange an unprecedented amount of financial data of foreign citizens.
“Demand for new nationalities is highest from China, Russia and the Middle East, with around 4/5ths of U.S. EB-5 Visas going to Chinese nationalists.”
Private aviation is another growing area for UHNWI. Although only 15% of this group uses private aviation for the majority of their flights, new apps and charter models that are competing to be the Uber of the airways will increase the use of private jets, rivaling the expense of first and business class on commercial flights.
Good schools are a key driver of the housing market, but UHNWI from a growing number of countries are choosing to educate their kids overseas. Although the U.S., Switzerland, Australia, and a number of other countries all attract international students, the UK private boarding schools are still seen as the gold standard by many. Furthermore, the weakened British Pound positions UK’s private education as the best value.
“Having your children make friends with lots of people of different nationalities is considered very attractive.“
Research into the world’s key prime residential property markets reveals a significant and growing gap between the top and bottom performers. “The top tier is dominated by cities in China, New Zealand, Canada and Australia, while oil-dependent markets such as Moscow and Lagos bring up the rear.“
Shanghai, Beijing and Guangzhou are all experiencing a huge appreciation of over 26%! During 2016. New York trailed far behind in 22nd place, with a modest 3.5% increase during that year.
City vs. Beach; The value of a city-based luxury home increased by 2.4% on average, while a beach coastal property slipped marginally by 0.5%.
Future View: Brexit and Trump took many by surprise. The same will not be true in 2017; Investors are now well aware that anything is possible when voters are called to the ballot box. Elections in Netherlands, France and Germany will have many looking to stay ahead of unfavorable results, with money on the move to safe havens.
The American Empire: A strong dollar will reinforce the spending power of America’s wealthy, and persuade capital elsewhere in the world that it would be better off spent in U.S.-based income-producing investments while exchange rates find their true levels. Investors will feel it is safer to sit out the storm amid the comparative calm of a growing American economy.
Although the narrative surrounding China’s economy shifted from “opportunity” to “risk” after the financial crisis, in 2017 Asia’s economy will begin to “pay dividends” as the threat of western protectionism recedes, and domestic consumption creates a more self-reliant Asia.
Temporary space: Geopolitical issues aside, the single-biggest trend shaping the investment pattern globally is digital disruption. Take Airbnb and similar sites as an example, and the way city authorities are struggling to work out how to police this process, with concern over the impact on both hotels and full-time residents. Expect investors to focus on these emerging sectors, with the world’s leading cities as the main investment targets.
We hope you enjoy the report, which is fully included in this link.
Please let us know if you would like a hard copy and we will send it to you. From snowy New York, we wish you a happy early spring.
Thanks for reading,
Ariel
Ariel Tirosh & Team
Licensed Associate Real Estate Broker at Douglas Elliman
917.750.5654 | atirosh@elliman.com