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Wealth Report 2023 – a picture of changing times and a wealth of opportunity.

06 July 2023

Knight Frank recently published the 17th edition of its Wealth Report. This highlights the shift from wealth creation on the back of the post-covid bounce-back to the legacy of that economic rebound.

The Report opens with the comment that 'In every major sector there is a need for better, greener and more innovative space to meet occupier and purchaser requirements' and we wholeheartedly agree.

We summarise the key takeaways from this years’ edition and why despite surging inflation and the backdrop of an energy crisis, UHNWI and HNWI investors should still look to take advantage of very real opportunities arising across global real estate markets in the latter half of this year.

Key findings from the Wealth Report 2023:

1. Wealth of UHNWIs declined by 10% in the previous year, with Europe experiencing the sharpest fall at 17%. Africa demonstrated the most resilience with only a 5% decrease. Despite this, investors have a positive outlook for the current year, with 69% expecting growth in their portfolios. This optimism is driven by asset repricing, perceived value opportunities, and an anticipated economic rebound.

2. Real estate investments saw a decline in the second half of the previous year due to expensive debt and increased uncertainty. Nonetheless, HNWIs plan to invest their newly acquired wealth, with a focus on capital growth, capital preservation, and income generation. Property investments are seen as a hedge against inflation and a means of diversification.

3. The Prime International Residential Index (PIRI 100) indicates that luxury house price growth slowed to 5.2% in the previous year, but it was still the second strongest year on record. Positive price growth was observed in 85 out of 100 markets, with Dubai and Aspen leading the way.

4. Demand is being driven up in both (a) sun and ski locations due to wealth preservation, hybrid working, and early retirement trends and (b) in sectors such as healthcare, logistics, offices, and residential property being sought after by investors who wish to take advantage of income-producing properties.

5. The working from home trend hasn’t dampened the spirits of US wealthy investors in the office market. Offices are expected to be the leading sector for cross-border allocations, with London being the top target with strong activity also anticipated from Singapore, Canada, UAE, Switzerland and the wider UK market.

6. In the residential sphere, global rule changes, such as the Canadian ban on non-residents buying properties, a new mansion tax in Los Angeles, tighter lending rules in Singapore, higher fees for Australia's non-resident buyers, and a new Spanish wealth tax, will require UHNW and HNW purchasers to navigate new regulations when searching for primary, secondary or investment homes.

We look forward to seeing how investment allocation and property demand changes in the latter half of the year. One thing is certain, change means opportunity, but the ‘safe havens’ of residential and commercial property in established global hubs will remain.

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