New York will overtake London as the top city for ultra-wealthy individuals by 2024 while the cities face fierce competition from Asia over that period, according to the 2014 Knight Frank Wealth Report.

New York will overtake London as the top city for ultra-wealthy individuals by 2024 while both cities face fierce competition from Asia over that period, according to the 2014 Knight Frank Wealth Report.

During the coming decade, the ranks of ultra high net worth individuals will swell by 30 per cent, it said.

Singapore, Hong Kong and Geneva round off the top five global locations for UHNW individuals this year; Shanghai is set to replace Geneva in fifth spot by 2023, the report said.

While some of the findings will not be a great surprise to wealth managers, the overall thrust of the report will reinforce the reasons why firms have beaten a path to the Asia-Pacific region in recent years. It also adds to growing awareness (see below) that Africa is a continent deserving of more attention.

“History, location and their long-established wealth mean that London and New York’s positions look unassailable, at least for now. It is further down our leader board that the real city wars are being waged. The main battleground is Asia, where a handful of locations are slugging it out in the hope of establishing a clear lead as the region’s alpha urban hub," said Liam Bailey, head of residential research at Knight Frank.

“Leaving aside London and New York, Asia dominates the higher end of our rankings, accounting for four of the survey’s top 10 places. This is set to rise to five in 2024. One of the key differences, however, between Asia and Europe and North America is Asia’s lack of a single dominant city. This is why we are now seeing the power struggle…with Singapore, Hong Kong, Shanghai and even Beijing all contenders for the title of future leading Asian city,” Bailey said.

Bailey continued: “While Singapore leads the race at the moment, Hong Kong is set to overtake it by 2024. Despite the proliferation of economic success stories across Asia, the dominance of China is unavoidable and Hong Kong’s unofficial role as the portal between its big brother and the rest of the world will ensure the growing dominance of the city over the next decade.”

“While Beijing and Shanghai will see a greater absolute rise in their UHNWI populations between 2013 and 2023 compared with some other major cities, they will remain essentially domestic centres. It will be for Singapore and Hong Kong to continue to act as Asia’s global entrepôt cities.

Property prices

According to the report, Asia experienced the biggest property price increase in 2013, led by Jakarta with an annual growth of 37.7 per cent, followed by Auckland, Bali, Christchurch and Dublin. The report also found that cities that were hardest hit by the economic downturn were bouncing back strongly. In terms of property performance, Dublin recorded an increase in annual growth of 17.5 per cent while Dubai experienced 17 per cent growth.

“Inevitable debates have ensued as to whether Dubai and Dublin are on the cusp of another bubble. However, in both cases average prices have yet to approach, let alone exceed, their pre-crisis highs," said Knight Frank’s head of PIRI analysis Kate Everett-Allen.

“Cash buyers are driving sales and regulation is tighter with some purchase and ownership costs higher than in 2008. This follows Ireland’s introduction of a new local property tax in 2013 and transfer costs in Dubai doubling to 4 per cent during 2013," added Everett-Allen.

Madrid has joined Dublin as a key European market in recovery, with prices climbing 5 per cent. Munich also saw 10 per cent uplift, emblematic of the surge in pricing in prime German city markets. This is partly being led by safe haven flows from investors in less secure eurozone countries looking to insure against the possibility of a collapse in the euro, Knight Frank said.

Africa

Despite continued economic turbulence, the number of ultra-wealthy individuals across the world rose by three per cent last year and those that have $30 million or more in net assets is set to grow by nearly 30 per cent over the next decade.

While Europe will remain home to most UHNW individuals, the biggest growth will be in Africa. The number of people with $30 million or more in assets will climb by 53 per cent by 2023, underpinned by a 92 per cent rise in Nigeria and a 74 per cent rise in Kenya.

“The growth of UHNW individuals in China and India coupled with an eye-catching 144 per cent increase in Indonesia and a stellar 166 per cent hike in Vietnam will help push the total number of UHNW individuals up by 43 per cent in 2023,” said Bailey.  

The report also predicts that UHNW spending is set to increase in 2014. Over a third of the wealth advisors surveyed said that they expect their clients’ spending on luxury goods to rise this year, while only 7 per cent predict a fall in expenditure.   

African respondents were most bullish about their clients' spending activity, with almost half anticipating higher levels of luxury purchasing activity, while Europeans were the most cautious, with 31 per cent expecting an upturn in activity.

The report highlighted how investments of passion, such as art and classic cars, are also growing in popularity around the world.

According to the survey, 49 per cent of the survey’s respondents said their clients were becoming more interested in art, while the latest results from the Knight Frank Luxury Investment Index, featured in the report, show that classic cars have grown in value the most (+456 per cent) over the past 10 years.

Overall, the index, which tracks nine asset classes including cars, art, wine, watches and stamps, grew by 8 per cent in 2013 and 179 per cent per cent over a 10-year period.

“This performance shows that objects that are beautiful to look at can also make good investments, but markets such as art can be very volatile and the performance of an index will not necessarily be reflected by individual works," said editor of the report Andrew Shirley.

One private investment business, Connection Capital, sees the report’s findings as demonstrating that “increased levels of wealth and improved attitudes to risk lead to a stronger appetite for self select, direct investment opportunities”. Connection capital provides clients, made up of more than 750 ultra-wealthy persons and family offices, with access to direct private equity, property and alternative assets.