The Wealth Report 2021 by Knight Frank

Why should we be interested in the wealthy in the midst of a global pandemic and the associated economic crisis? It’s simple: market and wealth trends are significantly influenced by them.    

The aim of The Wealth Report is to assess how the wealth of the super-rich is changing, where they spend time, what they invest in and what they are likely to do next.

From policy makers to investors, a lack of insight into the behavior and attitudes of the “1%” risks a serious misinterpretation of economic trends. This is the knowledge gap we are filling.

The global response to the pandemic supported the wealthy

With lower interest rates and more fiscal stimulus, asset prices have skyrocketed, increasing the number of high net worth individuals worldwide by 2.4% to more than 520,000 in the last 12 months.

This process was seen across North America and Europe, but the real upswing took place in Asia, where growth amounted to 12%. Wealth growth was not universal: in Latin America, Russia and the Middle East, the number of super-rich declined as currency shifts and the pandemic undermined local economies.

Asia has the highest drive for prosperity

The US remains the dominant wealth center in the world over the forecast period, but Asia will see the fastest growth in high net worth individuals over the next five years, at 39% compared to the global average of 27%.

By 2025, Asia will be home to 24% of all UHNWIs, up from 17% a decade earlier. The region is already home to more billionaires than any other (36% of the global total). Mainland China is key to this phenomenon, with a projected 246% growth in very wealthy residents in the decade to 2025.

Inequality will increase risks for wealth creation

While Covid-19 is seen as the single biggest risk to future wealth creation, almost half of respondents to our attitudinal survey (wealth managers and private bankers) expect the growth in wealth inequality to fuel demand for policy measures to curb it – particularly wealth taxes, with new or proposed plans in Argentina, Canada and South Korea likely to be emulated elsewhere.

The world will be less global…

Unsurprisingly, our survey confirms that international travel will remain weak. 84% of respondents expect to continue to travel less this year. Where this trend could become entrenched is in the notable decline in demand for international education that our survey shows.
However, with 11% of Asian super-rich home purchases expected to be driven by educational motives, we could see an increase in permanent family relocations to educational hubs, with London being the main destination.

…but the wealthy still want options

Despite less desire to travel, nearly a quarter of the very wealthy plan to apply for a second passport or citizenship – a remarkable 50% increase in one year. As we note, there is a growing tension between rising transparency concerns about citizenship by investment programs and the need to close gaps in government finances through these programs.

Long live the city

As Professor Dr. Prof. Saskia Sassen explains, history shows us that cities rise and fall, but always rise again. Far from undermining the city, the pandemic has shown the potential for rebirth – expect to hear more about the 15-minute city, green cities, place-making and the coming redevelopment boom.

So it’s no wonder that building land is the third most popular Real Estate investment for the super-rich this year. Our top performers in 2021 in terms of wealth, investment, economic power and innovation: London and New York. For well-being: Helsinki and Madrid.

House prices are rising due to the pandemic

Our analysis of the world’s top residential real estate markets confirms that average price growth has accelerated over the last 12 months. While Auckland led the way with an 18% increase, reflecting New Zealand’s safe handling of Covid-19, markets hit hard by the pandemic are also seeing growth. Low mortgage rates, the search for space and privacy and changing commuter flows are driving up prices.

The pandemic-related housing mini boom will continue into 2021

The Attitudes Survey shows that 26% of the very affluent plan to buy a new home in 2021, with the biggest driver being the desire to upgrade their main residence. Our survey indicates an increasing demand for rural and coastal properties, with access to open space being the most desired feature.

The pandemic is boosting demand for locations that offer an abundance of wellness – think mountains, lakes and coastal hotspots. Demand will contribute to prices rising by up to 7% in our key markets this year.

Expect more private investment in real estate

Although the total volume of real estate investments fell in 2020, the capital invested by private investors was still 9% above the 10-year average, far outstripping the 6% decline in the amount committed by institutional investors.

This theme will continue in 2021, as a quarter of the super-rich plan to invest this year. In addition to building land, residential investment and logistics will lead the demand.

The pandemic is driving real estate innovation

The ubiquity of Amazon and Zoom has confirmed tech’s ability to concentrate wealth. However, the attitudinal survey confirms that tech disruption is seen as a key area for investment post-pandemic, driving demand in the still nascent data center market and the burgeoning life sciences sector.

Spurred on by the pandemic, life sciences, technology and advanced data analytics are creating new opportunities to rethink office space in key markets.

With 43% of investors more interested in environmental, social and governance (ESG) investments than 12 months ago, demand for green and energy-efficient buildings is expected to grow rapidly.

Luxury investments confirm the ongoing search for yield

Despite logistical challenges, investors continued to drive up values for important collector’s items last year – led by handbags (+17%), fine wines (+13%) and classic cars (+6%).

However, the shift to private sales as auctions were put on hold caused the art market to stutter and values to fall. With disruption in these very global markets likely to continue in the first half of 2021, investors are likely to see the longer-term direction of investment performance in the second half of the year.

The Wealth Report is Knight Frank’s masterpiece annual publication, providing a unique perspective on global wealth, prime real estate and investments. Download the full Knight Frank Wealth Report here: 

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