In its fifteenth annual “Wealth Report,” Knight Frank looked at how the fortunes of the rarified group of “ultra-high-net-worth individuals (“UHNWI”) have changed amid a global health pandemic, where they spend time, what they invest in, and what they are likely to do next” in order provide a larger indication of “market and asset performance.” The London-headquartered estate agency, residential and commercial property consultancy revealed that with “lower interest rates and more fiscal stimulus, asset prices have surged over the past 12 months, driving the size of the pool of UHNWIs – i.e., individuals with a net worth of over $30 million including their primary residence – across the globe to more than 520,000, up by 2.4 percent on a year-over-year basis.
On a regional basis, growth in the number of UHNWIs between 2019 and 2020 could be seen across North America and Europe, according to Knight Frank. But the consulting firm asserts in the newly-released report that it was Asia – which saw 12 percent annual growth in the number of UHNWIs – that boasted “the real upswing.” While the U.S. “is, and will remain, the world’s dominant wealth hub over our forecast period,” Knight Frank states that Asia will see the fastest growth in UHNWIs over the next five years, and by 2025, will host 24 percent of all UHNWIs, up from 17 percent in 2015. “The region is already home to more billionaires than any other (36 percent of the global total),” with the Chinese Mainland – which is expected to see an estimated 246 percent growth in very wealthy residents in the decade to 2025 – serving as “the key to this phenomenon.”
Having set the stage in terms of growth in the UHNWI space, Knight Frank looked specifically at the investment habits of the global pool of UHNWIs, finding that even despite “logistical challenges” that resulted from the onset and enduring effects of COVID, “Investors continued to drive values higher for key collectible assets over the past year – led by handbags (+17 percent), fine wine (+13 percent), classic cars (+6 percent), and watches (+5 percent).”
At the top of the totem pole when it comes to investment grade handbags? Hermès handbags, which topped the Knight Frank Luxury Investment Index (the consultancy’s running system that tracks the performance of a group of selected collectable asset classes), for yet another year in a row, with prices rising by 17 percent. “An established online auction presence and the appetite for relatively affordable luxury pick-me-ups during the Covid-19 pandemic, particularly in Asia where many bag collectors are based, helped the [handbags] asset class retain pole position,” according to Knight Frank, which found that prices in the handbag class grew by almost 20 percent in 2020, and by 108 percent over the past decade.
Also on the up: watches, whose prices grew by 5 percent in 2020 and by 89 percent since 2010. The consultancy specifically pointed to an engraved stainless steel Rolex Daytona Ref. 6263 that was previously owned by actor Paul Newman – which sold for $5.5 million at Phillips’ Racing Pulse sale in New York in December 2020 – as among the “year’s top-selling and most noteworthy sales” at auction. Similarly, it highlighted an Hermès Himalaya Niloticus Crocodile Retourné Kelly 25, which broke the record for a handbag sold at auction when it was sold by Christie’s for HK$3.4 million ($437,330) in November.
Interestingly, while handbags topped the list in terms of rising prices and presumably investor returns, art was the “most popular investment of passion among clients,” according to Knight Frank’s survey of more than 600 global wealth managers and private bankers regarding their clients’ behavior/interests. Art was followed by classic cars, which took the number 2 spot in Knight Frank’s ranking, followed by watches, wine, and jewelry. Handbags ranked lowest, in the number 10 spot, among respondents across the globe.
As for its forecasts beyond luxury-level investments: Knight Frank asserts that it – “unsurprisingly” – found that “international travel will remain weak among UHNWIs, with 84 percent of [its survey] respondents expecting to continue to travel less this year.” In connection with the survey, 84 percent of wealth advisors/bankers revealed that they expect their clients are likely to reduce international travel both for business and leisure purposes.
In terms of real estate, the same survey “points to a growth in demand for rural and coastal properties, with access to open space the most highly desired feature,” and also suggests that wellbeing is a priority, as indicated by the demand in the real estate market for properties that “offer a surfeit of wellness – think mountains, lakes and coastal hotspots.” (On a similar note, the survey revealed that 83 percent of the wealth managers and private bankers stated that their clients are “are becoming more interested in healthcare/disease prevention; with 95 percent in North America saying this is true, the highest percentage for all geographic regions).