The number of ultra-high-net-worth individuals (UHNWIs) globally rose 4.2% in 2023 to 626,619 from 601,300 a year earlier, according to Knight Frank's The Wealth Report.
This increase more than reverses the decline witnessed in 2022.
At a regional level, North America leads with the number of UHNWIs up 7.2%, the Middle East comes in second place (6.2%) and Africa takes third place, up 3.8%. Latin America is the only region to see its population of wealthy individuals decline (-3.6%).
In terms of key country performance, Turkey leads Knight Frank’s rankings with a 9.7% expansion in UHNWI numbers, followed by the US 7.9%, India 6.1%, South Korea 5.6% and Switzerland 5.2%.
Liam Bailey, global head of research at Knight Frank said: “The improving interest rate outlook, the robust performance of the US economy and a sharp uptick in equity markets helped wealth creation globally. At the end of 2023 there were 4.2% more UHNWIs than a year earlier, with nearly 70 very wealthy investors minted every day, taking the global total to just over 626,619"
The revival in wealth creation was supported by global economic growth and the improved fortunes of key investment sectors.
In the first half of 2023, despite ongoing rate tightening and rising bond yields, equities surged on the back of enthusiasm surrounding AI. Even as this trend waned in the second half of the year, declining inflation and the anticipation of earlier and more substantial rate cuts provided renewed momentum to equity markets.
The S&P Global 100 delivered a 25.4% annual increase in 2023, albeit this was hugely flattered by the outstanding performance of the “magnificent seven” US tech stocks.
While some sectors grappled with the lingering impact of elevated debt costs, particularly commercial real estate and private equity, residential property values surprised on the upside.
Residential capital values grew by 3.1% across the world’s leading prime markets through 2023. For investors, residential returns were supported by prime global rents rising at an average three times their long-run trend.
Other sectors delivered positive returns during the year, with gold up 15% and Bitcoin up 155%, reversing a large part of the losses sustained by this volatile asset in 2022.
According to The Knight Frank Wealth Report, the number of wealthy individuals globally is expected to increase by 28.1% over the next five years to 2028. While positive, this rate of expansion is noticeably slower than the 44% increase experienced in the five-year period to 2023.
The report points to strong outperformance from Asia, with high growth in India (50%), the Chinese mainland (47%), Malaysia (35%) and Indonesia (34%).
Bailey continued: “With the mobility of wealth increasing all the time, a key question is whether future growth remains within these and other high-growth markets, or whether there is a leakage of talent to Europe, Australasia or North America. Outside Asia, strong growth is focused on the Middle East, Australasia and North America, with Europe lagging and Africa and Latin America likely to be the weakest regions.”
He added: “The expanding cohort of wealthy individuals looks favourably on real estate. Almost a fifth (19%) of UHNWIs plan to invest in commercial real estate this year, while more than a fifth (22%) are planning to buy residential. Growth over the forecast period provides various opportunities for investors, particularly developers able to deliver property that suits the shifting tastes of the newly minted."
The report notes the opportunities open to wealthy investors looking to access real estate investment. The market disruption impacting offices in particular, but affecting other sectors as well, considered alongside the requirement for investment to “green” existing property assets, points to a need for very deep pools of equity to come into the sector – the rise of private capital investment in real estate points to a readiness to engage with this challenge.
With so much wealth due to be created in the coming years, there will be plenty of opportunities for those with the right skills and insights, Knight Frank said.
Each year, it said, The Knight Frank Wealth Report confirms what it takes to be part of the global 1%, easier to be part of the 1% than it is to gain UHNWI status. In all the markets Knight Frank has assessed, the 1% threshold starts far below the US$30m entry point for becoming a UHNWI.
European hubs top the list, led by Monaco, where US$12.9m is the threshold to join the 1% club. Following behind is Luxembourg at US$10.8m and Switzerland at US$8.5m. Perhaps surprisingly, bearing in mind its dominance in terms of overall wealth creation, the US comes in fourth, at US$5.8m. Within Asia-Pacific, Singapore leads the regional pack with a requirement of US$5.2m.
Bailey further said: “The Knight Frank findings confirm the substantial differences in wealth distribution between countries, with smaller hubs demonstrating a bias towards higher thresholds. As Western countries in particular grapple with government deficits and the need to raise tax revenue, expect greater policy focus on where wealth is located, how it is distributed across economies and how governments can both tax it and encourage its growth: not an easy mix of outcomes to secure.”
While the distribution of wealth may be shifting between world regions, an even bigger shift is happening between generations. Knight Frank points out five key themes to watch:
1) The great wealth transfer will super-charge existing trends: Over the next 20 years, a massive transfer of wealth and assets will occur as the silent generation and baby boomers hand over the reins to millennials. The shift will see US$90trn of assets move between generations in the US alone, making affluent millennials the richest generation in history.
The transfer is happening amid seismic changes in how wealth is put to use. The difference in outlook between younger and older generations will result in a substantial reappraisal of marketing strategies for anyone wanting to sell products or services to this newly wealthy group.
2) Wealth is becoming more diverse: It may be starting from a low base, but the trend is undeniable. Recent survey findings from Altrata suggest women make up around 11% of global UHNWIs. While still not a large share, this represents rapid growth from just 8% less than a decade ago.
3) Genz Z are most confident in their ability to create wealth: Knight Frank’s Attitudes Survey reveals that 71% of UHNWIs globally anticipate growth in their wealth this year. For HNWIs, Knight Frank’s ‘Next Generation Survey’ reveals a more conservative figure of 65%.
A clear pattern emerges when data is analysed by age: younger affluent groups are more confident about the economic outlook compared with older groups. Only 52% of HNWI boomers anticipate growing their wealth in the next 12 months, in contrast to 75% of Gen Z-ers, with 43% expecting “significant growth”. Male HNWIs express greater confidence than women.
This is particularly pronounced among male millennials, with 75% expecting their wealth to grow, compared with 64% of women. However, for Gen Z, these expectations are entirely reversed, with a remarkable 81% of women in this group expecting growth. Half expect “significant growth”.
4) Environmental concerns will influence investment decisions: Climate change is an area where Knight Frank’s results show clear generational differences in priorities. Millennials appear to have got the message when it comes to cutting consumption – 80% of male and 79% of female respondents say they are trying to shrink their carbon footprints. Male boomers take a different view with just 59% trying to reduce their impact, well below their female peers (67%). Recent work undertaken by The Future Laboratory confirms a shift in attitudes around wealth, with younger groups looking at the opportunity it provides to act as a force for change.
5) Property remains key for all wealthy groups: Where 22% of UHWNIs are expected to invest in a home purchase this year, only 19% of HNWIs are expected to take the same route. Boomers appear most reticent (8% and 7% for females and males respectively) while millennials are most active, with scores approaching UHNWI levels (23% for females, 21% for males).
When it comes to commercial property, 19% of UHNWIs are considering investing this year. Given the larger financial commitment required, it is probably unsurprising that a much smaller percentage of HNWIs are considering a similar move: only 7% overall, with male millennials the most committed (9%) and male boomers the least (3%).
