Attention, brokers: Here’s what’s happening with the world’s ultra-wealthy

China minting 100K new millionaires each year: Knight Frank

Wealth Report 2017 (Credit: Knight Frank, click to enlarge)
Wealth Report 2017 (Credit: Knight Frank, click to enlarge)

The number of ultra-high net worth individuals — those with assets of $30 million or more who’ve got the funds to purchase the world’s most desirable properties — jumped 42 percent over the past decade to 193,000 worldwide, according to a new Wealth Report from Knight Frank. New York City is home to more than 6,500 of these individuals, more than any other city in the world, the report shows, and the city is poised to see that number swell to over 8,500 by 2026.

On an annual basis, that’s 8,225 new UHNWIs each year across the globe since 2006. Some 60 percent of UHNWIs already own real estate overseas, Knight Frank said, a growing phenomenon that’s impacted property global values.

“This whole stateless, rootless wealth doesn’t feel tied or indebted to a single country,” said CNBC’s wealth editor Robert Frank, who moderated a panel that discussed the report’s findings.

And lest anyone fret that Chinese buyers will vanish from the market due to China’s crackdown on capital flows, the report shows that the country is still churning out heaps of millionaires, at the astounding rate of 100,000 new millionaires per year.

“This is market-moving levels of wealth,” said Liam Bailey, global head of research for London-based brokerage Knight Frank, which presented the report at the New York Public Library in partnership with Douglas Elliman.

Chinese investors alone pumped $30 billion into real estate around the world last year, a massive leap from $300 million a decade ago, according to the report. And despite the government’s new capital controls, which took effect in January, Bailey projected 80 percent more cross-border purchases over the next five years.

Andrew Hay, head of Knight Frank’s residential division, spoke of the two unexpected global events that will define the narrative for the flow of wealth in the next few years: The U.K.’s decision to leave the European Union, and the U.S. presidential election of Donald Trump.

“Brexit means Brexit’ and “America first and only America first'” will set the tone for the high-end real estate market, Hay said, influencing everything from interest rates to flight of capital to where buyers will choose to put down their funds.

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Bailey addressed the drop in prices seen in London, viewed as New York’s biggest competitor for high-end home purchases. Following Brexit, London property values dropped more than 6 percent, and the number of UHNWIs there is projected to grow to 6,175 by 2026

In the U.S., Seattle’s luxury market saw the biggest upside, with prices growing 9.7 percent, while Los Angeles values rose 5.3 percent and New York values rose 3.5 percent. “More moderate growth is something we’re seeing increasingly around the U.S.,” said Bailey.

But that could change under President Trump and amid shifting geopolitics. Howard Lorber, chair of Elliman and a member of Trump’s economic advisory team, predicted on the panel that deregulation and tax reform under Trump would lead to “sustained growth,” or, practically speaking, “more money in people’s pockets.”

Addressing a question about the dearth of construction financing for new condos in New York, Lorber said that banking regulations were mostly to blame, and that more relaxed regulations under Trump would cause banks to loosen the purse strings.

While panelist Reaz Jafri, a partner at Withersworldwide, expressed concern about the administration’s immigration policy — including a travel ban on citizens from seven countries — Lorber dismissed those headwinds as a “short term issue.”

“There will be some suffering during this while it’s being worked out,” he said. “But, I don’t think a year from now we’ll be having this same conversation.”

Among the top 100 luxury markets, the the biggest gains in property values were seen in Shanghai, where prices jumped 27.4 percent. Other Asian cities dominated the list, including Beijing in the No. 2 spot with 26.8 percent, followed by Guangzhou (26.6 percent) and Seoul (16.6 percent).

Meanwhile, prices in Dubai were down 4 percent while Istanbul, which has been rocked by terrorist attacks, saw an 8.4 percent drop.

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