The Wealth Report is Knight Frank’s flagship annual publication, offering a unique perspective on global wealth, prime property and investment. Headquartered in London and an exclusive partner of Douglas Elliman, Knight Frank believes that by understanding the wealthy, you can better understand moves in markets and assets, capitalizing on any insights discovered. Let’s dig into some of the major trends and opportunities identified in the 2022 report. A video version of the report is available to those who prefer video over text.
The pandemic rebound saw massive wealth creation. In 2021, the number of UHNWIs grew 9.3% compared to 2.4% in 2020. India exceeded the average with 11% growth. 82% of wealth advisors and private bankers saw their clients’ wealth increase last year, and roughly the same amount believe their clients’ wealth will increase in 2022.
Luxury investments had a record year. A pair of Michael Jordan’s earliest professional game-worn sneakers fetched $1.5 million. The first printing of the US Constitution sold for $43.2 million, a record for any book, manuscript, or historical text. A slice of a 4.5 billion year old meteorite sold for £525,000. Sotheby’s had record sales of $7.3 billion.
Crypto, NFT’s, and metaverse assets are increasingly popular. 18% of UHNWIs own some sort of crypto, with many clients increasingly seeking 1-5% of their portfolios allocated to crypto. Expect regulation to increase as more and more banks accept and manage crypto assets for their often younger clients. Bitcoin surged 60% in 2021.
Inequality has become more pronounced, and politicians seek to alleviate the problem through asset taxation and China’s common prosperity initiative. People who earn more than $1 million a year or have more than $5 million in assets are seen as those who should pay more taxes. AOC’s “tax the rich” dress at the 2021 Met Gala reflects the sentiment.
Globalization is rising as 15% of UHNWIs plan to apply for a second passport or citizenship. Passports have renewed power in 2022 compared to earlier in the pandemic. Cross-border exports and real estate investments are at record levels and are predicted to have another record year in 2022.
Driven by demand in the inflationary environment, private capital real estate investment surged by 52%, making it account for 35% of all investment transactions. Private equity and venture capital are increasingly used as avenues of investment for UHNWIs.
80% of wealthy investors want more Environmental, Social, Governance (ESG) assets. ESG is synonymous with sustainable investing, socially responsible investing, or mission-related investing. Investors expect ESG to drive future returns, not just feel good. Prince William has launched the Earthshot Prize organized by 5 categories: protect and restore nature, clean our air, revive our oceans, build a waste-free world, and fix our climate. Each category has a £1 million prize.
The world’s 1% is responsible for more carbon emissions than the world’s poorest 50%. Luxury houses are responding by refusing to burn unsold goods for rarity purposes and instead have smaller collections meant to last longer. Real estate investors are increasingly seeking homes with sustainable energy and materials.
Global luxury residential prices rose by 8.4% in 2021, and LA prices rose 18.5%, a record setting year since Knight Frank started measuring in 2008. Prices are expected to keep rising, with the cities of Dubai, Miami, and Zurich leading the charge at 10% to 12%.
The Knight Frank report consistently provides excellent insight into the concerns and aspirations of the global wealthy. I recommend it to anyone seeking to better understand current events and trends as they relate to macro and microeconomics on a global level.