Knight Frank Wealth Report Outlook 2023: 40% of UHNWs Wealth Grew in 2022, 68% Expect Wealth to Grow in 2023, Owns 4.2 Homes on Average with Top 5 Locations in United States, United Kingdom, Spain, Australia & France
4th February 2023 | Hong Kong
Knight Frank has released the Wealth Report Outlook 2023, providing key insights into UHNWs, UHNW wealth, investment perspectives, and UHNW preferences on Real Estate. 40% of UHNWs wealth grew in 2022 (66% Decrease, 16% Unchanged), and 68% of UHNWs wealth are expected to grow in 2023 (14% Decrease, 18% Unchanged). The top opportunities for wealth growth in 2023 are Real estate, Tech, Equity markets, Volatility, Interest rates, Fixed income, United States, and Private equity. The top risks for wealth growth in 2023 are Inflation, Interest rates, Political / Geopolitical, Recession, War, United States, Currency, Volatility, and Covid. On Properties, UHNWs own 4.2 homes (residences) each on average with 33% of wealth in residences and 25% overseas properties. The top 5 locations for UHNWs to buy Real Estate are United States, United Kingdom, Spain, Australia & France and UHNWIs allocate more than 20% to Commercial Properties. The Top 5 Target Sectors for Properties are Healthcare, logistics / industrial & offices, Private rented sector (PRS) & Hotels / Leisure. For Real Estate Investment, 20% of UHNWs to invest in Direct Real Estate, and 13% to invest in Indirect Real Estate. 2nd Passport / Citizenship decrease from 15% to 13%, but desire to be mobile remains resilient. UHNWs Top 3 Investment of Passion – Art (59%), Watches (46%), Wine (39%) and UHNWs Top 3 Investment of Passion by Spending – Art, Classic Cars, Wine. The Knight Frank Wealth Report Outlook 2023 uses data from Knight Frank annual Attitudes Survey of more than 500 private bankers, wealth advisors & family offices, and in-depth conversations with industry experts to provide an assessment of the key themes for wealth in 2023. See below for key findings & summary. View Report here
“ 40% of UHNWs Wealth Grew in 2022, 68% Expect Wealth to Grow in 2023, Owns 4.2 Homes on Average with Top 5 Locations in United States, United Kingdom, Spain, Australia & France “
Knight Frank Wealth Report Outlook 2023
Knight Frank has released the Wealth Report Outlook 2023, providing key insights into UHNWs, UHNW wealth, investment perspectives, and UHNW preferences on Real Estate.
Knight Frank Wealth Report Outlook 2023:
Key Insights:
- UHNW Clients Wealth Growth in 2022 – 40% of UHNWs Wealth Increased (16% Unchanged, 44% Decrease)
- UHNW Clients Expected Wealth Growth in 2023 – 68% of UHNWs Wealth to Increase (18% Unchanged, 14% Decrease)
- Top Opportunities for Wealth Growth in 2023 – Real estate, Tech, Equity markets, Volatility, Interest rates, Fixed income, United States, Private equity
- Top Risks for Wealth Growth in 2023 – Inflation, Interest rates, Political / Geopolitical, Recession, War, United States, Currency, Volatility, Covid
- 5 Key Themes for 2023 – Rate of Inflation, Opportunities to Reset, Real Estate, Geopolitical Tensions, The Big 3 (China, India, US)
UHNWs Insights:
- No. of homes per UHNWI – 4.2 Homes Per UHNWI
- Residences / Homes – 33% of Wealth in Residences, 25% Overseas. UHNWs in Middle-East with 41%
- Top 5 Locations for UHNWs to Buy Real Estate – United States, United Kingdom, Spain, Australia & France
- Commercial Properties – UHNWIs Allocate More than 20% to Commercial Properties
- Top 5 Target Sectors for Properties – Healthcare, logistics / industrial & offices, Private rented sector (PRS) & Hotels / Leisure
- Considerations for Properties – Energy source (57%), Opportunity for refurbishments (33%), Materials used / the embodied carbon footprint (30%)
- Real Estate Investment – 20% to invest in Direct Real Estate, 13% to invest Indirect
- To Buy in Real Estate in 2023 – 15% of UHNWIs to buy property in 2023, Middle East UHNWIs most active
- 2nd Passport / Citizenship – Decrease from 15% to 13%, Desire to be mobile remains resilient
- Top 3 Investment of Passion – Art (59%), Watches (46%), Wine (39%)
- Top 3 Investment of Passion by Spending – Art, Classic Cars, Wine
1) UHNW Wealth Growth
UHNW Clients Wealth Growth in 2022
- > 10% Increase – 17%
- 1% to 10% Increase – 23%
- Remain the same – 16%
- 1% to 10% Decrease – 28%
- > 10% Decrease – 16%
UHNW Client’ Expected Wealth Growth in 2023
- > 10% Increase – 21%
- 1% to 10% Increase – 47%
- Remain the same – 18%
- 1% to 10% Decrease – 11%
- > 10% Decrease – 3%
Top Opportunities for Wealth Growth in 2023
- Real estate – 46%
- Tech – 33%
- Equity markets – 28%
- Volatility – 22%
- Interest rates – 15%
- Fixed income – 15%
- United States – 11%
- Private equity – 11%
- Attractive valuations – 10%
- Distressed assets – 8%
- Business – 7%
- Currency – 7%
- Inflation – 4%
- Political / Geopolitical – 4%
- Energy – 3%
- ESG – 3%
- Value – 3%
- Cash – 3%
- Recovery – 3%
- Economic – 2%
Top Risks for Wealth Growth in 2023
- Inflation – 67%
- Interest rates – 59%
- Political / Geopolitical – 53%
- Recession – 13%
- War – 13%
- United States – 8%
- Currency – 8%
- Volatility – 7%
- Covid – 7%
- Economic – 5%
- Real Estate – 5%
- Tax – 4%
- Energy – 4%
- Equity Markets – 3%
- Business – 3%
- China – 3%
- Cost – 3%
- Value – 3%
- Climate – 2%
- Supply Chain – 2%
2) 5 Key Themes for 2023
- Rate of Inflation – will dictate when central bankers can end the current cycle of rising interest rates (Impact borrowing costs & global asset prices)
- Opportunities to Reset – New investment environment, despite recessions across many major economies
- Real Estate – Top cited opportunity among seeking diversification and a hedge against inflation (Survey)
- Geopolitical Tensions – Dominant in 2022 and will continue to weigh on sentiment through 2023. Many will be familiar, but there will undoubtedly be surprises
- The Big 3 (China, India, US) – Outsized impact with the reopening of the Chinese mainland, India’s rise and the agility of the US economy
3) 2023 Knight Frank Attitudes Survey Top 10 Findings of UHNWIs
- 4.2 Homes Per UHNWI – The average UHNWI owns 4.2 homes globally. UHNWIs in Asia have the greatest appetite, owning an average five homes each. This demonstrates the unwavering global appeal of residential property.
- Top 5 Locations – The US, UK and Spain are the top 3 locations for purchasing homes. Australia and France round out the top five.
- 33% of Wealth in Residences, 25% Overseas – Globally, a third of total wealth is allocated to UHNWI’s primary and secondary homes. More than a quarter is held outside their country of residence, on average. UHNWIs in the Middle East (41%) have the highest global footprint.
- 15% of UHNWIs to Buy Property in 2023, Middle East UHNWIs Most Active – Higher interest rates will temper demand for residential property in 2023. Some 15% of UHNWIs are looking to purchase a residential property this year, down from 21% in the previous year’s survey. Appetite is highest amongst Middle Eastern UHNWIs.
- UHNWIs Allocate More than 20% to Commercial Properties – UHNWIs are increasingly diverse, both by geography and asset class. More than a fifth of our respondents’ investable wealth is directly invested in commercial property and a similar proportion is held overseas.
- 20% in Direct Real Estate, 13% Indirect – Real estate was identified as a top opportunity, both for direct and indirect investment. One in five UHNWIs are planning to invest directly in 2023, with 13% looking for indirect opportunities. This is broadly in line with the 20% of last year’s survey, indicating the attraction of property as a haven during economic uncertainty.
- Top Target Sectors for Properties – Healthcare, logistics / industrial and offices are the top target sectors for UHNWIs in 2023. The private rented sector (PRS) and hotels / leisure complete the top five. Around a third of respondents are interested in each of the top five sectors in 2023.
- Considerations for Properties – Energy source (57%), opportunity for refurbishments (33%) and materials used / the embodied carbon footprint (30%) are increasingly being looked at by UHNWIs when purchasing investment property.
- 2nd Passport / Citizenship Decrease from 15% to 13%, Desire to be Mobile Remains Resilient – Global movement has been tempered by the pandemic, but the desire to be mobile is proving resilient. Some 13% of UHNWIs are planning to apply for a second passport or new citizenship, down from the 15% recorded in 2022 report.
- UHNWs Investment of Passion – Art is set to remain the most sought-after investment of passion in 2023 with 59% of UHNWIs likely to make a purchase. Watches come in second, with 46% looking to purchase, followed by wine with 39%.
- UHNWs Investment of Passion by Spending – In terms of how much they will spend – art is at the top, followed by classic cars and wine.
4) Selected 5 Global Investment Opportunities Popular Among Asian Investors
Auckland, New Zealand Project in Spotlight – Elevation: Elevation is a landmark development in Northcote, and only minutes from Auckland’s Central Business District, developed by TLC Modular as an exemplary apartment project showcasing Modular construction within New Zealand and designed to allow owners and occupiers to have access to an elevated style of living with Onewa (one of the apartment buildings of Elevation) comprising of 104 apartments, ranging from one to three bedrooms.
Sydney, Australia Project in Spotlight – Maeve: Maeve is a new luxury residential development, a collection of 24 contemporary apartments and townhouses in Sydney’s wine region of Bowral in the Southern Highlands. Bowral-based Tziallas Architects designed the homes, with Chloe Matters Design as the interior designer, with the residences designed to provide the best of country life in Bowral, just 1.5 hours from Sydney’s Central Business District, with a cosmopolitan twist, perfect for investors seeking for a country holiday home.
Batam, Indonesia Project in Spotlight – Villa Harimau: Perched on top of a panoramic plateau at Bukit Harimau in Batam, Riau Islands, the luxurious 6-bedroom Villa Harimau priced at USD 3.6 million was designed by world-renowned Balinese architect Popo Danes and built in 2017. Villa Harimau was completely retrofitted in 2022 with custom-built Balinese furnishings, modern interior design and accessories as well as the installation of an entirely new kitchen, new appliances and a separate breakfast area. The luxurious 6-bedroom Villa Harimau with spectacular sea views includes a combination of indoor and outdoor rain showers and teak baths, a charming children’s room with 4 built-in bunk beds and an adjoining standalone two-storey guest house and three-bedroom staff house.
London, United Kingdom Project in Spotlight – Chelsea Barracks: Situated in Belgravia, an affluent historic district in Central London, Chelsea Barracks is a world-class development comprising a rare collection of apartments, penthouses and townhouses, set around seven garden squares and built over 12.8 acres. A highly coveted central London address, this prestigious district is bordered by Sloane Street and the infamous King’s Road; abundant with luxury stores, iconic boutiques, contemporary furnishing stores, and fine art galleries. An exceptional selection of the highest-ranking schools and universities in the United Kingdom are also within close proximity of Chelsea Barracks.
New York Project, United States in Spotlight – Towers of The Waldorf Astoria: From its inception, The Waldorf Astoria was a true palace in New York City and a haven for cultural figures. Marilyn Monroe, Frank Sinatra and Elizabeth Taylor were regulars while in 1957 Queen Elizabeth II had a Royal Suite created for her stay and a gala dinner thrown in her honour. Timeless and opulent, Waldorf Astoria has a special place in the affections of New Yorkers, Americans, and international visitors alike. Now, ninety years after it first opened, the Waldorf Astoria is preparing for the next stage in its illustrious life with an extensive facelift to offer 375 branded residences for sale alongside 375 gracious hotel rooms and suites. For the very first-time buyers have the opportunity to own a piece of history.
5) Insights on Key Trends, Opportunities & Risks in 2023
- David Bailin, CIO at Citi Global Wealth Management Investment
- James Wey, Head of Singapore & Southeast Asia, Wealth Management, JP Morgan Chase & Co
- Annabelle Bryde, Head of UK Private Bank & Crown Dependencies at Barclays
- Graham Wainer, CEO Investment Management, Stonehage Fleming
- Kunal Lakhani, Director, Family Office & Major Family Groups at National Australia Bank (NAB)
- Alexandre Tavazzi, Global Strategist & Head of the CIO Office, Pictet Wealth Management
- Vincent Magnenat, Limited Partner, Global Head of Strategic Alliances & Asia Regional Head at Lombard Odier Group
- Rosie Bullard, Partner at James Hambro & Partners
- Sheldon Halcrow, CEO of Caleo Capital North America
- Jonathan Fenby, Author & China Analyst
1) David Bailin, CIO at Citi Global Wealth Management Investment
Opportunities: 2023 is likely to present many investment opportunities after a mild recession. We see the next 12 months as a sequence of events, although we cannot predict the precise order of them. First, active cash management will increase portfolio wealth. Then, as we believe interest rates will be lower in 18 months, comes the demand for intermediate bonds. As stocks bottom, different sectors, first growth then cyclicals will become attractive. Finally, we see alternatives – real estate, private equity, and venture capital – as being more attractive post-recession. 2023 will also provide a broader opportunity for non-dollar assets
On Risks: There are little fires everywhere – any one of which could be big. The biggest two risks we see are a self-reinforcing global recession that prolongs the downturn and a credit crisis caused by an absence of liquidity due to the Federal Reserve over tightening.
Real Estate: Real estate and alternatives will be where wealth is grown over the coming decade. With the rapid rise of interest rates, we have witnessed the value of these assets change, but the fundamentals for many sectors have not. We are bullish on residential, industrial and warehousing. The ‘onshoring’ trend is seeing the building of capacity as companies move production closer to home in the US and across Europe.
2) James Wey, Head of Singapore & Southeast Asia, Wealth Management, JP Morgan Chase & Co
Opportunities: The reopening and economic recovery of the Chinese mainland is of particular interest. Economic growth will likely bottom this winter, and cyclically recover in 2023 and 2024. Meanwhile, valuation looks attractive to long term investors. We like consumption and tech names which should benefit from the service sector recovery. But we note in the near term price actions could remain quite choppy. We also see some tactical opportunities for investors who are more nimble.
On Risks: The well documented ones – such as inflation continuing – we can prepare for. However, it can be challenging to predict geopolitics. We must be acutely aware of trends and developments and be nimble in cycles that are compressed and can change quickly.
Real Estate: In an inflationary world, real assets provide some hedge and uncorrelated returns from financial markets. Investors are increasingly thinking about direct investment as there is more predictability and control. We are also looking at sustainable forestry as returns are attractive and not correlated with other markets and assets. Another area is investment in food technology and responsible agritech, particularly given the focus on food security.
3) Annabelle Bryde, Head of UK Private Bank & Crown Dependencies at Barclays
Opportunities: We think recessions will broadly be shallow and short-term, and aggressive interest rate hikes from central banks should ease off. For investors, it won’t be plain sailing but there’s reason enough for longer-term optimism.
On Risks: There are so many unknowns. When and where inflation and interest rates will peak, the pace of reopening of the Chinese mainland and the ongoing impact that has on supply chains, whether labour markets loosen, the war in Ukraine. People are taking longer to make decisions because of it.
Real Estate: Property is a passion for many and will remain so, however, decisions are typically driven not only by returns, but sentiment and need. Whether looking for family use or a specialist asset that drives diversification and yield across a broader range of investments, our clients like the idea of combining passion with practicalities. This becomes more important, and a driver, as global leverage funding costs increase.
4) Graham Wainer, CEO Investment Management, Stonehage Fleming
Opportunities: We are extremely bullish on the US. Policy is at a higher level of competency and determination than anywhere else in the world – the Federal Reserve is much more resolved to get it right. The economy has benefitted from this as well as globalisation, deep capital markets, a diverse labour market and technology.
On Risks: Long term, its ensuring that returns are matched against personal inflation. Inflation varies person to person due to spending habits, e.g. holidays, private school, homes etc. Higher levels in these discretionary areas means a need for riskier assets, but with that comes a higher degree of volatility.
5) Kunal Lakhani, Director, Family Office & Major Family Groups at National Australia Bank (NAB)
Opportunities: 2022 provided a notable shift from a tech centric high growth strategy to more traditional methodologies around value and quality of business management. I said last year that “a good PowerPoint deck doesn’t make a good investment” and many experienced a significant drawdown, especially in venture capital and private equity investments valued at high multiples. With the sudden higher-rate environment, there is a need to review investments on a longer-term approach and lower down the risk curve.
On Risks: Geopolitical. There are so many geopolitical risks currently impacting global investments as we have seen from trade wars to the energy crisis in Europe. Will there be pullback from global companies in certain regions?
Real Estate: We see prime offices as strong. Big corporates are committing to floorspace and increasing amenities to incentivise workers to return to offices. Also, on a smaller scale, we are seeing families seek out safe havens in regional areas and island retreats to escape their cities. Prime residential is also still very strong.
6) Alexandre Tavazzi, Global Strategist & Head of the CIO Office, Pictet Wealth Management
Opportunities: Cash now provides 4-5% return, which hasn’t happened in years, meaning there is greater consideration on risk versus return, but high-quality debt and the traditional 60/40 portfolio is making a resurgence.
On Risks: Inflation and central banks. Inflation will be structurally higher in the next five years than the past five making the costs of doing business higher. If central banks insist on bringing inflation back to 2%, they will need to hike interest rates well above what is currently priced in markets.
7) Vincent Magnenat, Limited Partner, Global Head of Strategic Alliances & Asia Regional Head at Lombard Odier Group
Opportunities: We see 2023 as the year of consequential pivots. For long-term investors, we emphasise the need for sustainability as a key factor for equity investments because consumer choice and regulation will favour companies that are making adjustments and investments to thrive in this transition to a carbon neutral, more sustainable economy.
Real Estate: Interest in alternative assets is on the rise, but investors are cautious. Findings from our recent HNWI study show that APAC investors believe that private assets are a way to capture future structural changes in a regulated and risk-managed way. We are currently cautious on the property sector, but once the dovish pivot in interest rates arrives, we believe it will start recovering more substantially.
8) Rosie Bullard, Partner at James Hambro & Partners
Opportunities: If inflation is going to be structurally higher, not at the current elevated level but around 4-5%, then equities are attractive, especially for companies with pricing power, i.e. ability to raise prices to cover costs without losing demand. However, you are unlikely to find the top performers of the last decade, such as certain tech companies, being the top performers of the next.
On Risks: China is more of a risk because there are an increasing number of politically driven decisions being taken that affect businesses and investors, which are expected to contribute to the political aims of the leadership. Some underlying societal challenges are also surfacing. Property became the main channel for savings in China, particularly for the burgeoning middle class, and the continual increase in property prices was part of the economic/ political bargain. But, the fall in property prices raises problems.
Real Estate: Clients are thinking about their properties and operation costs, particularly in Europe. Property has a well-founded place in the portfolio, but there is now more scrutiny over liquidity and, for example, who the tenants of commercial properties are.
9) Sheldon Halcrow, CEO of Caleo Capital North America
Opportunities: There is a lot of noise, but boiling it down to the fundamentals we have developed four I’s. Infection, which is largely moot now apart from in the Chinese mainland. Inventory, where global supply chains have been disrupted and are gradually improving but shifting geographically. Inflation, which has been surging and is now peaking and, by consequence, interest rates, which have risen aggressively but will peak in Q2 2023. Investors need to position with these in mind.
Real Estate: Real estate is still favourable. Whether it’s the desire to have the ‘plan B’ residence or sophisticated investors looking for opportunities among assets that have repriced due to the pandemic and increasing rates.
10) Jonathan Fenby, Author & China Analyst
Opportunities: I don’t believe a decoupling between China and the West will happen in a full dramatic way. However, there is, and will continue to be, a shift to China+1 strategies, where companies have production capability in the Chinese mainland and another country, or a reconfiguring of supply chains to prevent vulnerability.
Victoria Garrett, Head of Residential at Knight Frank APAC:
”Global movement has been tempered by the pandemic, and although inflation (67%), interest rates (59%) and political/geopolitical risks (53%) were indicated as top risks by UHNWIs, the desire to be mobile is proving to be resilient from our research recorded in Knight Frank’s 2023 Wealth Report where 13% of UHNWIs indicated that they are planning to apply for a second passport or new citizenship and cited real estate as the top opportunity to grow their wealth.
We have been seeing this trend through the growing number of international residential deals that have been transacted with a higher capital value from Asian investors with interest in residential properties located in the United Kingdom (London), United States (New York), Japan, Singapore, and Australia, indicating strong interest in outbound investments. We believe the region’s property market is better anchored to its economic fundamentals, which will also continually revive from reopening dynamics. The region’s economic growth story will remain urban-centric, and its residential investment landscape will continue to be defined by its prime urban cores. Underpinned by its high rates of urbanisation, investors can look forward to a more sustainable growth trajectory and wealth preservation profile.”
About Knight Frank
Knight Frank LLP is the leading independent global property consultancy, serving as our ‘clients’ partners in property for 126 years. Headquartered in London, Knight Frank has more than 16,000 people operating from 384 offices across 51 territories. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Firm, please visit knightfrank.com.
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