At a glance: The key findings of the Knight Frank Wealth Report 2022

The aim of the asset report is to provide an annual assessment of asset formation on the investment markets and to highlight opportunities and risks. This year’s Wealth Report paints a dramatic picture. Trends on the economic, asset and real estate markets are accelerating in the wake of the global pandemic, opening up an ever wider range of opportunities for investors – but systemic risks are also becoming increasingly apparent.

Definitions and data
UHNWI: Ultra-high-net-worth individual – Someone with a net worth of more than US$30 million incl. Main residence

A boost to prosperity…

The global economic upturn of the past year has driven up asset accumulation. The number of UHNWIs worldwide rose by 9.3% over the course of the year, which corresponds to an increase of 52,000 very wealthy people compared to the previous year. This growth was evenly distributed, with North America (+12.2%) just ahead of all other regions. Only Africa recorded a decline in assets. As we discuss in our Wealth Report 2022, the rise of younger, self-employed UHNWIs (21% of the total) will continue to drive new investment themes and innovation.

Lockdown or not – globalization is on the rise

Compared to the pre-pandemic situation, the number of arrivals at international airports fell by 72% as travelers had to work around last-minute border closures, our report suggests that demand for more, not less, international travel is on the rise again. Around 15% of UHNWIs plan to apply for a second passport or a new citizenship and 36% of them plan to do so for a better quality of life. With record global exports and cross-border real estate investments, globalization is on the rise.

Technology, accelerator of change

Digital pioneer Stephanie Shirley confirms the speed of change: “When she started out, computers were still programmed using punch cards. Their considerations make it clear that the global market for cryptocurrencies will be worth 2.4 trillion US dollars by the end of 2021, which corresponds to a twelve-fold increase in less than two years. Don’t understand cryptocurrencies? Don’t worry – with 8000 cryptocurrencies, you’re sure to find one you like. In fact, 18% of UHNWIs now own some kind of cryptocurrency, 11% have invested in non-fungible tokens (NFTs) and more than 60% of respondents see an opportunity in blockchain technology. Still not convinced? We report on a digital Gucci bag that was sold for more money than a real one. If that’s not enough, you should form an opinion on the Metaverse to protect your digital property – open or closed?

Private capital drives real estate investments

A growing proportion of private capital is flowing into real estate. While private investors increased their exposure to real estate investments by 52% in 2021, the institutional investment volume rose by only 29%. Private capital now accounts for 35% of all investment transactions. With 23% of UHNWIs planning to invest in real estate this year, offices will be the biggest target, while logistics properties will take second place for the first time.

Real estate innovation

The pandemic is driving upheaval in the economy and real estate is at the epicenter. Priorities identified include: green hydrogen production, renewable energy in Africa (data centers will be located near the major geothermal sources of the Rift Valley), agricultural technology and aquaculture in the Middle East, as well as opportunities in childcare and education, forestry and viticulture. We also look at the latest trends in hybrid working. What does that mean for you? Well, if you’re only working from home or the office, you definitely haven’t fully explored your future options. 

ESG on the rise – and under observation

Environmental Social Governance, or ESG for short. These three letters, which are increasingly dominating investment debates, have become mainstream. Some 80% of high net worth investors want more ESG-compliant investments, mainly to future-proof their portfolios – and why wouldn’t they when we’re reporting a value premium of up to 18% for the greenest offices? The biggest obstacle to future investment is the “lack of opportunities” – a clear call to action for developers. With private jet travel up 47% in one year, we offer a timely discussion of the luxury business, but also point to some hopeful innovations that address five major environmental challenges.

Luxury real estate is becoming the preferred investment sector

The average value of luxury residential properties rose by 8.4% in 2021, the highest annual increase since the introduction of our international Prime Residential Index (Piri 100) in 2008. Prices fell in only seven of the markets surveyed in 2021. We get to the bottom of the numbers and reveal the outperformers (44% growth in Dubai), the most expensive (it takes 34 million US dollars to get to the top of the market in Monaco) and the most sought-after (53 nationalities own property in Provence, Europe’s most diverse market).

Forecast

The boom in the luxury real estate market is far from over and is expected to continue. Dubai, Miami and Zurich lead our forecast for 2022, with prime prices expected to rise by 10 to 12% by the end of the year. Asian cities are expected to fall slightly behind in 2022, but prices will rise here too. Key issues: Realtors will complain about rising taxes and cooling measures, and urban markets will be in demand again – but watch out for the impact of China’s real estate slowdown.

Fine wines and watches spur investment

The luxury collectibles sector was in no way inferior to prime real estate and recorded a strong performance last year with record-breaking sales figures at the major global auction houses. Our luxury investment indices were led by fine wines and watches, which both rose by an impressive 16% over the year, while the art market achieved double-digit returns of 13%. Digital innovations helped to expand the circle of collectors, and the NFT boom encouraged a rise in new, younger market participants.

Superyachts, Nemo, volcanic cities and more…

In a jam-packed issue, we also find space to report on the superyacht boom; orders increased by 6% in 2021, led by buyers from the Gulf region (set to be the next superyacht hub alongside the Red Sea). Andrew Shirley combines clownfish and Jurassic Park with an innovative 75,000-hectare nature reserve with sustainable tourism and underwater data centers. Our assessment of new urban forms covers 150 new centers in 40 countries, including a Bitcoin-funded one at the base of a volcano in El Salvador, and we take a look at the final frontier – real estate in space. Read all this and more in the Knight Frank Wealth Report 2022

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