The global perspective on prime
property and investment

18th edition

2024

knightfrank.com/wealthreport

18th edition

Definitions and data

Liam Bailey

EDITORHNWI: High-net-worth individual – someone with a net worthof US$1 million or more.

WRITTEN BY

UHNWI: Ultra-high-net-worth individual – someone witha net worth of US$30 million or more.

Knight Frank
Research
James Culley
Kate Everett-Allen
Patrick Gower
Antonia Haralambous
Flora Harley
Christine Li
Ian McGuinness
Andrew Shirley

How we chose our cover

PRIME PROPERTY: The most desirable and most expensive
property in a given location, generally defined as the top
5% of each market by value. Prime markets often have asignificant international bias in terms of buyer profile.
 HE PIRI 100: Now in its 17th year, the Knight Frank Prime
T
International Residential Index tracks movements in luxury
prices across the world’s top residential markets. The index,
compiled using data from our research teams around theworld, covers major financial centres, gateway cities andsecond-home hotspots – both coastal and rural – as wellas leading luxury ski resorts.
THE KNIGHT FRANK WEALTH SIZING MODEL: The model,
created by our data engineering team, measures the sizeof HNWI, UHNWI and billionaire cohorts in more than 200
countries and territories.

MARKETING

Sally Ingram
PUBLIC RELATIONS

Astrid Recaldin

This year’s cover provides a stark illustration ofa critical change in the private client investment
story. The shift to higher interest rates in 2023
represented a massive break with the pattern of
ever-lower debt costs that shaped the previous
two decades. While rates are likely to be cut
through 2024, they will remain substantiallyabove their recent ultra-low levels. This,
together with a global election boom, an evermore tangled geopolitical web and a perfectstorm of disruption for real estate, means theold rulebook no longer applies. For investors,
it’s time to turn to the Next Chapter.

SUB-EDITING

Sunny Creative
DESIGN & DIRECTION

Quiddity MediaFRONT COVER

Court Three

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ALL KNIGHT FRANKCONTACTS:

firstname.
familyname@knightfrank.com

ACCESSING OUR RESEARCH AND INSIGHTS
Attitudes
SurveyTHE ATTITUDES SURVEY: The 2024 instalment is basedon responses provided during December 2023 by morethan 600 private bankers, wealth advisors, intermediaries
and family offices who between them manage over
US$3 trillion of wealth for UHNWI clients.

Knight Frank Research provides arange of market-leading insights
through the year covering all
major global real estate sectors
and markets. To get the best of
Knight Frank straight to your inbox, visit
knightfrank.com/ResearchNewsletters

Important notice© 2024. All rights reserved.
This publication is produced for general outline information only, it is not definitive and it is not to be relied upon in any way. Although we believe that high standards have been used in the preparation of theinformation, analysis and views presented, no responsibility or liability whatsoever can be accepted by Knight Frank for any errors or loss or damage resultant from the use of or reference to the contents of thispublication. We make no express or implied warranty or guarantee of the accuracy of any of the contents. This publication does not necessarily reflect the view of Knight Frank in any respect. Information may havebeen provided by others without verification. Readers should not take or omit to take any action as a result of information in this publication.
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THE WEALTH REPORT

Welcome
This year’s report confirms a strong affinity
between private capital and real estate –and with lower interest rates on the horizon,
we anticipate a significant increase in activity
over the next 12 months

RORY PENNHEAD OF LONDON RESIDENTIAL SALES & CHAIR OF PRIVATE OFFICEI

am delighted to welcome you to
The Wealth Report 2024, the 18th editionof this market-leading report.
Last year’s report described theimpact of rising rates on wealth portfolios, withthe total wealth held by UHNWIs falling by 10%
in the face of energy, economic and geopoliticalshocks. Despite these pressures, we emphasised
our belief that investors should focus on theopportunities ahead.
Those who invested saw healthy returns. As
we report, wealth creation is back – fuelled by ashift in the outlook for interest rates and propelledby the robust performance of the US economy,
alongside a sharp recovery in equity markets.
This year, we confirm a rise in the numberof UHNWIs globally, led by growth in the US
and the Middle East, and continued demand
from these investors for real estate, with arounda fifth looking to purchase residential property
this year and the same proportion looking at
commercial opportunities.
As we note, this vote of confidence for realestate comes at a fortuitous time. Investment
markets have been shaken by higher debt costs,
with further structural disruption resulting fromthe need for greener, more sustainable stock,
together with shifts in working, shopping andliving patterns. Add in sizeable new requirementsfrom emerging sectors such as life sciences, andthe need for capital in the property sector has
never been higher. The opportunities for wellfinanced investors are enormous.
As always, we consider the global mobilityof wealth – where it is being created and where
it is moving to. We take an in-depth look atluxury residential markets, gauge the shifting
requirements being placed on global farmland,
and assess the latest ESG themes. Our objective
remains to provide the most rounded pictureof the impact of wealth on investment andthe world’s major real estate markets.
We are committed to providing you with theright advice to help you take advantage of theseopportunities. Our Private Office network is truly
global, with our London headquarters supported
by offices in New York, Dubai, Monaco, Singapore
and now Hong Kong, meaning we are well placed
to help you achieve your goals.
Please do get in touch. The Private Office
and wider Knight Frank network would love to
be of assistance.

“This year, we confirm a rise in thenumber of UHNWIs globally, led by
growth in the US and the Middle East,and continued demand from theseinvestors for real estate”

THE WEALTH REPORT

1

The Wealth Report’s unique data,expert insights, thought-provoking
interviews and future views
help shed light on the key issues
affecting how you live, work,
invest and give backOur contributors

2

LIAM BAILEY
The Wealth Report's
Editor outlines the big
issues facing real estate
investment (page 6), andlooks at the impact ofyounger investors (page 14)

FLORA HARLEY
Our sustainability expert
takes a deep diveinto the evolving worldof ESG (page 50)

ANDREW SHIRLEY
Our rural research
specialist assesses
the outlook for farmland(page 58) and tracks theups and downs of luxury
assets (page 62)

KATE EVERETT-ALLEN
Kate shares her insights into
the leading 100 global luxury
residential property markets
on page 32

ANTONIA HARALAMBOUS
Antonia distils the world's
key commercial real estate
investment themes into four
pages (page 42)

PATRICK GOWER
Patrick takes the temperatureof increasingly competitive
moves to attract global
wealth (page 18)

JAMES CULLEY
Knight Frank's head of data
science leads our workmeasuring global wealthcreation, as discussed
on page 10

CHRISTINE LI
Knight Frank’s Head of
Asia-Pacific Researchbrings her perspective tothe big issues facing theregion on page 72

IAN MCGUINNESSOur head of Research
Analytics discusses thepower of AI to both create
as well as disrupt, on
page 56

THE WEALTH REPORTINTRODUCTIONHOMEINVEST

04 Key findings
The Wealth Report Editor
Liam Bailey shares his top
takeaways from our 2024 edition

32	PIRI 100
The results of our Prime
International Residential Index

42 Navigating the recovery
The who, what and where ofcommercial real estate investment

34	Seeking value?
What US$1 million buys in a rangeof city and second-home markets

46 Insider knowledge
Knight Frank’s expert team share
their sectors to watch in 2024
50 Is ESG over?
Why ESG still matters – and how
UHNWIs can make a difference

06 T he world ahead
The five themes that will steer
real estate investment this year

53 Renewing real estate
How ESG can help build a moresustainable sector

WEALTH
10	Many happy returns
Despite challenging conditions,
global wealth is still on the rise

35 Red tape tracker
Policy shifts are moving
the goalposts for investors

56 Are you ready for AI?
Knowledge is power when it
comes to reaping the benefits of AI

13

36	The year ahead	The risks and opportunities facing
investors in an uncertain world

58 Green dirt
How the environmental agenda
is shaping farmland markets

38	The big five
From AI to wellness, what’s
driving markets in 2024

62 Gear change
The results of the Knight Frank
Luxury Investment Index

Join the clubWe look at what it takes
to be part of the 1%

14	The age of change
What shifts in wealth could
mean for investors68	Databank
The numbers behind
The Wealth Report18

Game of thrones
Could a new crop of challenger
cities upset the old world order?

THE WEALTH REPORT39	Ones to watch
Our pick of the properties
and places attracting wealthy buyers

72

Final word
The view from Asia-Pacific,
the world’s newest wealth hub

3Keyfindings
Liam Bailey, Knight Frank’s Global Head of
Research and Editor of The Wealth Report,
distils the findings from this year’s edition

P6 THE NEXT CHAPTER

This year will see the long-awaited downward
pivot in interest rates. While cuts are on thehorizon, rates will remain above their recent
ultra-low levels. This, together with increasingly
complex geopolitics, tech and climate disruptionmeans that for real estate investors, the oldrulebook no longer applies. As we explore
throughout this year’s report, it’s time to turnto the Next Chapter.

P10 WEALTH
CREATION RETURNED

That shift in outlook for interest rates, therobust performance of the US economy and a
sharp uptick in equity markets helped wealthcreation globally. At the end of 2023 there were
4.2% more UHNWIs than a year earlier, withnearly 70 very wealthy investors minted every
day, taking the global total to just over 626,600.
Growth was led by North America (up 7.2%) andthe Middle East (6.2%), with only Latin America
seeing its number of wealthy individuals fall.
While Europe lagged in terms of new wealthgeneration, the continent remains home to
the wealthiest 1% (page 13).

P12 WEALTH PROSPECTS

Despite slower global growth this year, therevival of wealth creation looks set to remain
with us. We confirm our expectation that the4number of wealthy individuals globally willrise by 28.1% during the five years to 2028. Ourmodel points to strong outperformance from
Asia, with high growth in India (50%) and theChinese mainland (47%) in particular.

P14 GENERATIONALSHIFTS IN WEALTHWith changing priorities towards investment
outcomes between generations, we take a lookat the implications for investment behaviour.
Attitudes to wealth creation among female Gen
Z-ers suggests the 38% rise in female UHNWIs
over the past decade is set to keep building.

P18 CITIES SLUG IT OUT

With wealthy individuals better connected
and more willing to move than ever before,
emerging wealth hubs are responding bydishing out incentives to challenge thesupremacy of established global gateways. We
report on Paris’s attempts to lure financiersfrom the City of London, London's own shift
to the left, Geneva’s search for something
more than stability, how Milan and Miami are
feeling the pressures of success, Hong Kong andSingapore’s respective plans to be the home ofAsia’s new elite and, finally, how developers
in New York and Los Angeles are betting on abranded future.

THE WEALTH REPORTP32 RESIDENTIAL PRICESON THE UP

P50 SUSTAINABLE
TRENDS IN FOCUS

P36 THE FUTURE
OF RESIDENTIAL

P56 AI IN REALITY

Despite the sharpest ever uptick in global interest
rates we confirm that, while sales volumes took
a hit in 2023, capital values continued to growby 3.1% across the world’s leading prime markets.
Asian markets led the charge, followed by thosein the Americas. Our analysis confirms wherebuyers will need to dig deepest (Monaco andAspen) and which prime markets are offeringvalue right now.

More than a fifth of global UHNWIs are planninga purchase in 2024. Helpfully, we provide ourhouse price forecast for 25 of the most in-demandmarkets, led by Auckland (+10%) and Mumbai(+5.5%). While the pace of rental growth willslow this year, our prime rent forecast points
to some notable outliers, with Sydney leadingat 12%. We round up the big themes impacting
global markets – with politics replacing inflation
as the leading market risk – and outline how AI,
wellness and climate concerns will shake up
the luxury development sector.

P42 A SLOWER 2023
FOR COMMERCIAL...

With a 27% chance that 2024 will see theaverage rise in global temperatures surpass
1.5°C compared with the pre-industrial era, andwith the richest 1% of the global population
responsible for more emissions than thepoorest 66%, it’s good to know that almost twothirds of UHNWIs are attempting to reduce
their carbon footprint. We assess the key
sustainability strategies being employed by theworld’s wealthy as they assess CRE investment.

The AI investment wave carried the reboundin equities markets last year: is it about to do
the same for real estate? We report how record
investment in AI-driven tech will impact on
demand for specific use types in very targeted
locations. Beyond the direct requirements fromthe technology, we consider how AI is being
harnessed to uncover market opportunities
at scale, highlighting a project that saw AI
identify previously overlooked land capable ofaccommodating more than 100,000 homes.

P58 FARMLAND

It was a challenging 2023 for global commercial
real estate (CRE), with investment volumes
falling by 46% as investors grappled with elevatedinterest rates and higher debt costs. Despite atougher environment, private investors remained
the most active global buyers for the third
consecutive year, taking a record 49% share of thisUS$698 billion market, with the living sectors,
industrial and logistics, and offices their top picks.

With farmland forming the biggest investablereal estate sector, at least by size, comprising
5 billion hectares, or more than 40% of the
globe’s landmass, investors are asking it todeliver ever more. While food production
unsurprisingly leads investor objectives,
latent environmental benefits are rising inimportance, with US$30 billion earmarked
by investment funds for climate-related
outcomes. Our investigation reveals a sector
grappling to place a value on radical new uses.

P44 ...SETS THE SCENEFOR A RECOVERY

P62 LUXURY COLLECTIBLES
ON PAUSE

With almost a fifth of UHNWIs planning to invest
in CRE this year, we examine where the money
is likely to come from (Middle Eastern and Asianinvestors have the strongest appetite) and where
it is likely to be directed, with the living sectors
and healthcare leading. To aid investor decisionmaking, our sector outlook covers English
vineyards, much needed lab space, secondary
offices in the best locations, and those sectors
benefiting from structural tailwinds including“beds, sheds, eds and meds”. Finally, with rates
on their way down, we see debt returning to form
part of investor strategies.

THE WEALTH REPORT

Despite record-breaking individual sales
in 2023, a surge in financial market returns
contributed to a shift in allocations impacting
on luxury asset value. The Knight Frank
Luxury Investment Index fell 1% over theyear, pulled down by falling values in rarewhisky (-9%), classic cars (-6%), handbags(-4%) and furniture (-2%). While art (+11%),jewellery (+8%) and watches (+5%) helped
offset some of these falls, our assessment
reveals a need for an ever more discerning
approach from investors, with significant
volatility by sub-market.

5The world ahead
Liam Bailey
explores thefive big themes
shaping real estate
investing this year

“With record funds totalling
US$483 billion waiting
to be invested, 2024 will
mark the turning point forinvestment volumes”
6

1.

2. Rates will fall,

The global economy has defied
recession fears with robust growthover the past 12 months, mostnotably in the US. Despite apparent
stability in developed economies,
growth will slow over the coming
year. Global GDP will likely expandby around 2.9% in 2024, down from
3.1% a year earlier. The American
economy’s unexpected resilience ispartly down to increased consumer
spending, fuelled by savings
accumulated during the Covid-19
pandemic. Once these savings
diminish, higher interest rates
will constrain spending, dragging
on growth. The world’s economic
stability is also underpinned bysubstantial but unsustainable
government spending, resulting
in historically high levels ofgovernment debt. Higher debt costs
mean a reckoning is coming forgovernments this year.
Relations between the US andChina showed some signs of thawing
following a November meeting
between presidents Joe Biden and
Xi Jinping, but their economic
rivalry will continue to escalate,adding to a fractious outlook forgeopolitics. The fragmentation in
relations initiated during the Trumpadministration, and expanded
under Biden’s leadership, will likely
lead to increased investment instrategic sectors such as technology,energy and defence.

While the inflation surge issubsiding, the extent and paceof rate cuts remains uncertain.
Investors are convinced that we’ll
see a sustained fall in rates over thecourse of the year, but how low
they will go remains subject toconflicting long-term trends.
Some factors will weigh on debt
costs, notably the world’s ageing
population. This demographic shift
towards higher savings will leadbanks to cut lending rates as they
aim to align higher deposits withincreased borrowing. That will becounterbalanced by the greeningof the global economy and theongoing decoupling of the Westfrom China’s supply chains. Bothtransformations require huge public
and private investment. In thelong run, the global economy will
acquire additional energy sources
and increased productive capacity,
but achieving these goals will
exert significant upward pressure
on the prices of raw materials,
infrastructure and labour.

Global growth willslow, but geopolitics will
support critical sectors

just not as much as
investors hope

THE WEALTH REPORT

3. Liquidity will

4. AI investment

Global property markets sufferedvalue corrections in 2023. While mostresidential markets got off lightly,commercial markets felt the bruntof the downturn. New lending will
be issued below the cost of debt thatprevailed in late 2023, but still above
the levels at which existing deals werestruck. Even as central banks cut rates
this year, it will still feel for many as
though monetary policy is tightening.
This process, while painful for
some, is the key to a real estate market
recovery in 2024. Lower values, lower
interest rates and some forced selling
will allow for a much anticipatedimprovement in investment volumes.
With more than US$2 trillion in loans
set to mature through to 2027 in the US
alone according to MSCI, opportunities
for well-capitalised investors willappear with increasing regularity as
the year progresses.
Real estate is hitting a perfectstorm of disruption. Hybrid working,the green agenda, the retail reinvention
and a critical under-supply of housing
are big themes with a long way to run.
Despite the repricing of property, thevolume of apparently stranded assets
will rise as use requirements shift,environmental policy requirements
bite and refurbishment costs rise. But
with record funds totalling more than
US$483 billion (Preqin) waiting to beinvested, 2024 will mark the turning
point for investment volumes.

By 2025, approximately 40% ofcorporate IT expenditure is anticipatedto be directed towards AI-related
projects, with IDC projecting anastonishing annual investment of
US$500 billion in AI products by 2027.
This substantial investment will be
felt acutely in the real estate sector,
driving a surge in demand for specificproperty categories.
There will be a sizeable increasein demand for data centres, especiallyas proximity to cost-effective energy
sources becomes increasingly
critical. Expect a heightened need forspecialised office spaces tailored toaccommodate collaborative researchand laboratory requirements. The
rising demand for research facilities,
pivotal to the development of
AI-related hardware and software,
will likely favour industrial realestate located near universities or
established technology hubs.
Moreover, the integration of
AI-driven building management
systems will elevate service standards
in energy efficiency, climate control
and security. This enhancement willfurther distinguish top-tier officebuildings from others in the market,
enhancing their appeal to tenants
and investors.

improve in 2024

THE WEALTH REPORT

will drive real estate
requirements

5.

Climate change
will impact property
values, but alsopresents new prospects
There is a 27% chance that 2024 will
see the average rise in global
temperatures surpass 1.5°C comparedwith the pre-industrial era, according
to the UK’s Met Office. The direct
repercussions of this warming trend are
already evident, influencing various
aspects of the property market. The
effects include altered crop yields inagricultural regions, shifts in tourism
patterns, physical harm to buildings
in vulnerable zones and disruptionsin infrastructure.
In the short term, more
properties are expected to faceindirect consequences, such as
rising insurance premiums and thepossibility of expanding uninsurable
areas. Data from MSCI in the US
reveals a significant increase ininsurance costs as a percentage
of income receivable, more thandoubling from 1.0% to 2.3% over five
years to September 2023. Coupled withregulatory alterations, this signifies anotable rise in risks for investors who
opt to disregard environmental factors
in their investments this year.
Conversely, new opportunities are
emerging. Demand is rising from bothtenants and investors for properties
situated in low-risk areas, as well as forenergy-efficient buildings. As the tollof climate-related damage increases,
there will be heightened demand
for technology that assists property
owners in preparing for, adapting toand recovering from climate-related
hazards and subsequent damage.

7

WealthEnter the new world of wealthas regional and generational
shifts redraw the map

10

MANY HAPPY RETURNS
Following the gloom of 2022, an uptickin economic growth is boosting wealth creation

13

JOIN THE CLUBWe look at what it takes to enter the worldof the 1%

14

THE AGE OF CHANGE
A generational shift is bringing about seismicchanges in how wealth is put to use

18

GAME OF THRONES
With growing UHNWI mobility, a new crop ofcities is rising up to challenge the old world order

Peak performer – Asia is emerging as the world’s fastest growing wealth hub

8

WEALTHTHE WEALTH REPORT

THE WEALTH REPORTWEALTH9

Many
happy returns

Against a challenging backdrop, the past
12 months saw an uptick in wealth creation,
driven by the robust performance of the US
economy, a recovery in equity markets and a shift
in outlook for interest rates. Liam Bailey reports

The Knight Frank
Wealth Sizing Model

25.7%

7.2%

235,998 | 253,066 | 318,220
North AmericaM

ost major economies
managed to steer clear ofdownturns in 2023. In fact,global GDP expanded by ahealthy 3.1%.
Emerging economies andAsia led the recovery, with India anotable example. Europe struggled
to gain traction, but the US was thestandout developed economy witha strong performance supported bygovernment stimulus.
Following a disastrous investment
environment in 2022, marked by thebreakdown of the 60/40 equity/bondmodel and a staggering US$10 trillion
loss in UHNWI portfolios, 2023 saw aturnaround in returns.
The number of UHNWIs globallyrose 4.2% to 626,619, from 601,300 ayear earlier. That more than reverses
the 2022 decline. At a regional level
wealth creation was led by North
America (7.2%) and the Middle East
(6.2%), with Latin America the only
region to see its population of wealthy
individuals decline. In terms of key
country performance, Turkey leads
our rankings with a 10% expansion
in UHNWI numbers, followed by
the US at 8%.
The rise in wealth creation was
supported by global economic growth
and the improved fortunes of key
investment sectors. In the first half of2023, despite ongoing rate tightening

10

WEALTHand rising bond yields, equities surged
on the back of enthusiasm surrounding
AI. Even as this trend waned in thesecond half of the year, declining
inflation and the anticipation ofearlier and more substantial rate cuts
provided renewed momentum toequity markets. The S&P Global 100
delivered a 25.4% annual increase in2023, albeit this was hugely flatteredby the outstanding performance of the“magnificent seven” US tech stocks.

ON THE UPSIDE

Bond markets experienced improved
performance in the final quarter ofthe year, as investors factored in likely
rate cuts.
While some sectors grappledwith the lingering impact of elevateddebt costs, particularly commercial
real estate and private equity,
residential property values surprisedon the upside.
Residential capital values grewby 3.1% across the world’s leading
prime markets through 2023. For
investors, residential returns were
supported by prime global rents risingat an average three times theirlong-run trend.
Other sectors delivered positive
returns during the year, with gold up
15% and Bitcoin up 155%, reversing
a large part of the losses sustainedby this volatile asset in 2022.

GLOBAL AVERAGE

601,300 | 626,619 | 802,891

28.1%

4.2%

THE WEALTH REPORT

% CHANGE 2023 VS 2022

22.3%

1.8%

152,459 | 155,232 | 189,882
Europe% CHANGE 2028 VS 2023

UHNWI POPULATION (US$30M+): 2022 | 2023 | 2028

28.3%

38.3%

6.2%

2.6%

17,689 | 18,790 | 24,102
Middle East

161,177 | 165,442 | 228,849
Asia

13,654 | 13,159 | 15,556

2,886 | 2,996 | 3,506

17,437 | 17,934 | 22,776

-3.6%

3.8%

2.9%

18.2%

17.0%

Latin America

THE WEALTH REPORT

AfricaAustralasia

27.0%

WEALTH11

“The pandemic disrupted
the delivery of new homes,
especially in the luxury
segment in markets such as
London. There is a real windowof opportunity for developers
over the short to medium term”

wealth increasing all the time, a key
question is whether future growth
remains within these and otherhigh-growth markets, or whether
there is a leakage of talent to Europe,
Australasia or North America. Outside
Asia, strong growth is focused on the
Middle East, Australasia and North
America, with Europe lagging andAfrica and Latin America likely to be
the weakest regions.

CHALLENGES ANDOPPORTUNITIESBRIGHT PROSPECTS

We expect the number of wealthy
individuals globally to rise by 28.1%
during the five years to 2028. While
positive, our forecast points to a rateof expansion noticeably slower than
the 44% increase experienced in thefive-year period to 2023.
As we note on page 6, the global
economy will likely be impacted
by higher inflation in the medium
term, leading to a lower growth
outcome compared with the recent
historic trend.
Our model points to strong
outperformance from Asia, with highgrowth in India (50%), the Chinese
mainland (47%), Malaysia (35%) andIndonesia (34%). With the mobility of

Expectations for
wealth growth in 2024

Despite the slower rate of forecast
growth in UHNWI populations overthe coming five years, this expansion
is still much faster than underlying
population growth – likely to bearound 5% over the same period.
This expanding cohort of wealthy
individuals looks favourably on realestate. Almost a fifth of UHNWIs plan
to invest in commercial real estatethis year, while more than a fifth areplanning to buy residential. Growthover the forecast period provides
various opportunities for investors,
particularly developers able to deliver
property that suits the shifting tastesof the newly minted.
In the residential market, theCovid-19 pandemic disrupted thedelivery of new homes, especially inthe luxury segment in markets suchas London. There is a real window ofopportunity for developers over the
short to medium term.
While the challenges are different
in commercial markets, there arearguably larger opportunities. The
market disruption impacting offices
in particular, but affecting othersectors as well, considered alongside
the requirement for investment to“green” existing property assets,
points to a need for very deep poolsof equity to come into the sector. We
note on page 42 the activity of private
capital in real estate investment,
which points to a readiness to engage
with this challenge. With so much
wealth due to be created in the
coming years, there will be plenty ofopportunities for those with the rightskills and insights.

“Almost a fifth of UHNWIs plan
to invest in commercial realestate this year, while morethan a fifth are planningto buy residential”

How optimistic are you that your clients’ wealth will increase in 2024?
On a scale of 1 to 5, 5 being the maximum (for full results see Databank, page 68)
Middle East

4.41
Attitudes
SurveyOur Attitudes Survey results validate
the broad takeaway from our WealthSizing Model – that wealth creationis set to be positive in the near term.
Respondents from all world regions
confirmed that on average theirclients expected to see their wealthportfolios grow in 2024. The mostconfident region was the Middle East,with a strong showing from Asianand Australasian respondents. Whilestill optimistic, African and European
clients were the most modest in their
expectations of the year ahead.

Asia

4.15
Globalaverage

3.86

Australasia

4.04

North
America

3.76

Latin
America

3.75

Europe3.69

Africa3.53

Source: The Wealth Report Attitudes Survey

12

WEALTHTHE WEALTH REPORTJoin
the club

The Wealth Reportconfirms what it takes tobe part of the global 1%

While the wealthy may be happy toreflect on their financial success,openly admitting to being partof the 1% may be a step too far
for many. Our numbers reveal, though, that
exclusive as it may sound, it’s actually easier tobecome a member of this particular club than
it is to gain UHNWI status.
In all the markets we have assessed for thisyear’s report, the 1% threshold starts far below
the US$30 million entry point for becoming
a UHNWI. European hubs top the list, led by
Monaco, where US$12.9 million is the thresholdto join the 1% club. Following behind are
Luxembourg at US$10.8 million and Switzerland
at US$8.5 million. Perhaps surprisingly, bearing
in mind its dominance in terms of overall
wealth creation, the US comes in fourth, at
US$5.8 million. Across the Asia-Pacific region,
Singapore leads the pack with a requirementof US$5.2 million.
Our findings confirm the substantial
differences in wealth distribution between
countries, with smaller hubs demonstrating
a bias towards higher thresholds. As Westerncountries in particular grapple with government
deficits and the need to raise tax revenue, expect
greater policy focus on where wealth is located,
how it is distributed across economies and how
governments can both tax it and encourage its
growth: not an easy mix of outcomes to secure.

THE WEALTH REPORTThe 1% club

Individual net wealth needed to join the top 1% in
selected countries and territories, Q4 2023
MonacoUS$12,883,000

Luxembourg

US$10,832,000

Switzerland

US$8,509,000

US

US$5,813,000

Singapore

US$5,227,000

Sweden

US$4,761,000

Australia

US$4,673,000

New Zealand

US$4,574,000

Ireland

US$4,321,000

Germany

US$3,430,000

France

US$3,273,000

Hong Kong SAR

US$3,094,000

UK

US$3,070,000

Italy

US$2,548,000

Spain

US$2,468,000

Japan

US$1,971,000

Chinese mainland

US$1,074,000

Source: Knight Frank Research

WEALTH

13

The ageof change
While the distribution of wealth may be shifting between world
regions, change is also happening between generations. Liam Bailey
assesses the investment implications

1. WEALTH SHIFTS WILL SUPERCHARGE EXISTING TRENDS
Over the next 20 years, a transfer
of wealth and assets will occur as
the silent generation and baby
boomers hand over the reins to toyounger generations.* The transfer
is happening amid seismic changes
in how wealth is put to use. The
difference in outlook between younger
and older generations will result in a
substantial reappraisal of marketingstrategies for anyone wanting to sell
products or services to this newly
wealthy group.

2. WEALTH IS BECOMING
MORE DIVERSE
It may be starting from a low base,but the trend is undeniable. Recent
survey findings from Altrata suggest
women make up around 11% of global
UHNWIs. While still not a large share,
this represents rapid growth from just
8% less than a decade ago. Given theattitudes of female Gen Z-ers we note
below, this looks likely to remain
the direction of travel. Businesses
looking to attract wealthy investors
will need to adapt their strategies to“Where 22% of UHWNIs are
expected to invest in a homepurchase this year, only 19%
of HNWIs are expected totake the same route”

14

WEALTH

Going up?

% of respondents who expect their wealth to increase in 2024
GLOBAL HNWISBOOMERGEN X

MILLENNIAL

GEN Z

ALL

65%

52%

56%

69%

75%

FEMALE

63%

50%

56%

64%

81%

MALE

68%

53%

56%

75%

69%

Source: Knight Frank Next Gen Survey

ensure they are relevant to this new,broader market.

with a remarkable 81% of women inthis group expecting growth. Half
expect “significant growth”.

3. GEN Z ARE MOST CONFIDENT IN
THEIR ABILITY TO CREATE WEALTHAs our Attitudes Survey reveals (seepage 68), 71% of UHNWIs globally
anticipate growth in their wealththis year. For HNWIs, our Next Gen
Survey reveals a more conservative
figure of 65% (see chart above). A
clear pattern emerges when data isanalysed by age: younger affluent
groups are more confident about theeconomic outlook compared witholder groups. Only 52% of HNWI
boomers anticipate growing theirwealth in the next 12 months, incontrast to 75% of Gen Z-ers, with
43% expecting “significant growth”.
Male HNWIs express greater
confidence than women. This isparticularly pronounced among malemillennials, with 75% expecting theirwealth to grow, compared with 64%
of women. However, for Gen Z, these
expectations are entirely reversed,

THE NEXTGEN SURVEY
As part of our Attitudes Survey work
this year, we conducted a survey of
600 global HNWIs (individuals with
US$1 million+ in assets or US$200k+
annual income). Our focus was twofold:to examine the difference in attitudes
between this mass affluent group andthe UHNWIs covered by our main survey;
and to understand the differences inviews among HNWIs based on age
and gender. Full results from thissurvey will be published in April. Sign
up for The Wealth Report Newsletter toreceive the full analysis.

THE WEALTH REPORTTreading lightly% of respondents who say they are trying to reduce their carbon footprint
Female HNWIs

All
female76%

Male HNWIs

75%
all HNWIs

Boomer67%

Gen X

Millennial Gen Z

75%

79%

72%

All male74%

Boomer

59%

Gen X

68%

Millennial Gen Z

80%

75%

65% all UHNWIs

Source: Knight Frank Next Gen Survey

Homing instinct% of respondents considering buying a home in 2024
Female HNWIs

Male HNWIs

All

21%

17%

Boomer

8%

7%

Gen X

20%

9%

Millennial

23%

21%

Gen Z

20%

20%

19%
all HNWIs

22% all UHNWIs

Source: Knight Frank Next Gen Survey

4. ENVIRONMENTAL CONCERNSWILL INFLUENCE INVESTMENTDECISIONS
Climate change is an area where
our results show clear generational
differences in priorities. Looking
at the top line question on carbon
emissions from our main Attitudes
Survey (see page 50), millennials
appear to have got the message whenit comes to cutting consumption– 80% of male and 79% of female
respondents say they are trying toshrink their carbon footprints.
Male boomers take a different view
with just 59% trying to reduce theirimpact, well below their female
peers (67%). Recent work undertaken
by The Future Laboratory confirms

THE WEALTH REPORTa shift in attitudes around wealth,with younger groups looking at theopportunity it provides to act as aforce for change.

5. PROPERTY REMAINS KEY FOR
ALL WEALTHY GROUPS
Where 22% of UHNWIs are expected
to invest in a home purchase thisyear, only 19% of HNWIs are expected
to take the same route. Boomers
appear most reticent (8% and 7% forfemales and males respectively) whilemillennials are most active, withscores approaching UHNWI levels(23% for females, 21% for males).
When it comes to commercial
property, 19% of UHNWIs are
considering investing this year. Given

the larger financial commitment
required, it is probably unsurprisingthat a much smaller percentage of
HNWIs are considering a similar move:
only 7% overall, with male millennials
the most committed (9%) and maleboomers the least (3%).

*A January 2022 study by Cerulli Associates indicateda transfer of approximately US$84.4 trillion in theUS, from older generations to younger generations
and charities, over a two-decade period. Taking into
account asset price movements up to December, thisfigure could equate to close to US$90 trillion.

WEALTH

15

The Wealth Report asks
two experts for theirperspective on the shift
in generational wealth
MIKE PICKETT
Director, Cazenove Capital
How is the financial sector
preparing for the coming
generational wealth transfer?
The wealth management industry
is probably one of the last sectors to
be disrupted in terms of how we think
about the next generation. We’retalking about a cohort that is seeking
a wealth manager who is on theirwavelength, if indeed they want todeal with a human at all. Younger
clients have new views and ambitions
and I think the opportunity forbusinesses, if they get this right, areenormous. Technology – including
providing digital services, and being
open to new fields such as AI andblockchain technology – is a big partof it. Impact is important, too.
Why is this change so big?
Next gen wealth owners share somekey characteristics – from their
expectations and mindset to their
desires and what they are willing to
pay for – which vary markedly fromthose of previous generations. But
it goes beyond a simple shift ofexisting wealth. I think the diversityof opportunity to create wealth has
also grown – for example, there are
YouTubers worth tens of millions.

“There is also evidence thatthe youth of today blame thegenerations before them forthe challenges that they andthe planet face today. Allof this has implications for
how wealth management isapproached in the future”
16

WEALTHFirst generation wealth creationis on the rise, as is the array ofentrepreneurial routes to create it.
There is also evidence that theyouth of today blame the generations
before them for the challenges thatthey and the planet face today. All of
this has implications for how wealthmanagement is approachedin the future.
How are these changes expressed
in investment strategies?
The transition to the next
generation will impact not just how
we deliver investment services, butalso the kinds of investments wemake. Sustainability and impact
investing are clear examples. The
growth seen in both areas hasn’t
been driven solely by younger
investors – but there is growing
awareness that investment
portfolios can actually have apositive impact on people and theplanet and many younger clientswant us to help them achieve this.
Private markets are anotherarea of focus. Over the past two
decades, we’ve seen some incredible
businesses enjoy huge successwhile remaining privately held –think Facebook, Uber or Airbnb.
The next generation has come ofage seeing private markets as anincredibly exciting opportunity.
As the infrastructure continues tomature, these kinds of investments
are becoming more accessible toa wider range of investors, and on
more attractive terms.
That brings me to my final point:
transparency and cost. One of thegreat benefits of technology is thatit makes price comparison so mucheasier. This in turn means managers
are becoming even more focused on
the costs associated with investment

strategies – and on running theirbusinesses as efficiently as possible.
We talk about values-driven
investment for the next generation –is that fair?
Without a doubt there is a hunger
from younger wealthy clients to “dothe right thing”. Gen Z in particular
are looking for ways to invest inalignment with their values. It’s
not just about financial returns, it’s
about building cultural capital. That
encompasses brand and identity, as
well as a sense of community thatallows for collaboration, purpose-led
investing, enriching experiences andmore. Appealing as stewards of bothfinancial and cultural capital willbe crucial to engaging the next gen
audience in the future.
That said, I think there is a needfor pragmatism. Not to say that asustainable investment strategy
won’t deliver financial returns overthe long term; but the path from A to
B may differ from a more traditional
investment strategy. Overall, though,there is a sense of the next generation
wanting to be involved and engaged
in the process of how their wealth ismanaged – for a firm to invest theirmoney with them instead of for them.
Does property feature in younger
clients’ investment plans?
I don’t think younger generations
see residential property as a route to
wealth creation in the same way as
boomers or Gen X. In particular, thelow interest rate environment andimpressive growth in house pricesof the past 15 years is unlikely to berepeated in the next 15. I also think
there is some evidence that Gen Z
may be happier to rent property orlease assets such as cars, and to adopt
subscription-led lifestyles.
In any overall wealth strategy,
diversification is important.
Ensuring you have sufficient assets
to meet your needs in each bucket– “liquidity” (e.g. cash reserves),“lifestyle” (liquid investment
portfolio) and “legacy/illiquid”(property or private markets) – canbe a good way to think about it. How
wealth or property firms deliver these“lifestyle” and “legacy” offerings
will, in my view, be key to creating
and maintaining active and longstanding connections with the next
generation of wealthy individuals.

THE WEALTH REPORT

“Anyone looking at engaging
the rising generation willneed to think hard about
how they remain relevant forthis audience”

BEN WHATTAM
Co-founder, Modern
Affluence Exchange
How big a change does the great
wealth transfer represent?
It’s a seismic change. We’rewitnessing the historic convergenceof two powerful forces: growing
private capital, and growing socialand environmental consciousness.
There is a huge dichotomy at play:
71% of the world lives in a country
where inequality is growing, while
record numbers of next gen family
members recognise they have a
responsibility to counter inequality
with impact investing or fighting
climate change.

“Since World War Two, Western
economies have been driven
by an overt focus on economic
prosperity. This has come at
the expense of environmental
prosperity and has arguably
imposed social costs”
THE WEALTH REPORTThe next generation, holding
major investment power, is likely to
direct significant amounts of capitalto causes beyond solely maximising
economic growth.
Their consumer spending will also
be guided by a different set of values
and perspectives.
Why does this transfer matter?
Since World War Two, Western
economies have been driven by an
overt focus on economic prosperity.
This has come at the expense ofenvironmental prosperity and has
arguably imposed social costs.
All the research we havecommissioned confirms that thenext generation value societal andenvironmental wellbeing alongsideeconomic gain and are unlikely tocontinue the relentless pursuit ofgrowth at all costs. If you’re selling
services to the wealthy and yourprimary message and underlying
proposition is based on economic
prosperity, it’s unlikely to resonate inisolation. Anyone looking at engaging
the rising generation of wealth willneed to think hard about how theyremain relevant for this audience.

Are differences in attitudes between
generations that significant?
Our conclusion after running theModern Affluence programme forfive years is a very confident “yes”.
Bloomberg opened our 2023 summit
with a unique piece of research
confirming significant differencesin attitudes to wealth acrossgenerations. Take the fact that 66%
of millennials focus on investingwith purpose, compared with 49% for
Gen X. Climate change is the number
one concern for Gen Z and whether
they’re rich or just affluent, they see
it as their generational responsibility
to fix what has been broken by theirelders. This issue is fundamentallychanging consumer behaviours,
particularly for those with wealth.
How should a real estate businessposition itself to capitalise on
these trends?
Demonstrating meaningful awarenessand willingness to change are thetwo corporate behaviours that any
business in any sector will need. The
willingness of Gen Z and millennials
to associate with brands that canshow they are aware of the impact
their business has on the world, andmeaningfully demonstrate how they
are working to make that impact a
positive one, is notable.
Real estate offers a significant andrelevant opportunity for meaningful
dialogue with the rising generation,
covering both cultural capital in
the form of social inequality andenvironmental impact and financial
capital such as investing, debt
and wealth creation. A real estatecompany that seeks to unlock its
current and future customers’cultural and financial capital will
be a market leader and, importantly,
a market shaper.

WEALTH17

Gameof thrones
A new crop of emerging wealth hubs
is challenging the old world order.
Patrick Gower reports

In October 2022, a reporter
tweeted that a major international
investment bank was “on thebrink”. It was enough to prompt
many wealthy clients to begin pulling
their funds out of Credit Suisse. The
Zurich-based investment bank would
collapse just five months later.
Two themes repeatedly cropped
up during our investigation into thelong-term prospects for the world’s
wealth hubs: this generation of HNWIs
is both better connected, and moremobile, than ever.
Both themes are encapsulatedby the Credit Suisse saga. In thatparticular case, wealthy individuals
were primarily moving money, but the
principle applies equally to physicalmovement, too.
From Miami to Milan, relative
upstarts among the world’s wealthhubs are challenging the supremacy
of incumbents such as New York andLondon. An increasingly nomadic
group of HNWIs appears happy
to respond to incentives to move,whether these span tax, safety or
simply a change of lifestyle.

18

WEALTHThis is a story of carrots and sticks.
In London, a combination of taxationand political rhetoric have prompted
some investors to wonder whether
they are still welcome. Equally,
perceptions of a fall in living standards
in major US cities, particularly whenit comes to safety, have increased theallure of alternatives.
The challengers have problemsof their own, of course. Milan suffersfrom a dearth of prime homes. New
Yorkers might fancy a slice of Miami
but are reluctant to move amid ascarcity of places in schools that cancharge as much as US$50,000 a term.
Singapore has seen great success inbuilding its ultra-wealthy population
but is realising that coaxing themto invest locally presents anotherchallenge altogether.
Credit Suisse is just one bank, but
Swiss regulators are now questioning
whether the banking system’s relianceon wealthy – and flighty – individuals
poses as many risks as opportunities.
It must be careful how it addresses the
problem: for the world’s 1%, leaving
has never been easier.

THE WEALTH REPORT

THE WEALTH REPORTWEALTH

19

Paris. Raceto the top
A package of reforms
aims to make Paris thenumber one choice for theinternational banking eliteT

en days before Christmas,
French Finance Minister Bruno
Le Maire flew to New York to
try to establish how he might
coax more bankers and hedge fundmanagers to move to Paris.
Le Maire wanted to “take thepulse” of senior leaders at Wall Street
giants including Goldman Sachs,
Morgan Stanley, BlackRock and Global
Infrastructure Partners, a government
official told the website Politico at thetime. Those meetings will inform a
new package of legislative andregulatory reforms, due in 2024, aimed
at building on post-Brexit relocations
to the French capital.
Le Maire’s government has
been locked in a race – alongside
the administrations of Ireland andGermany – to topple London asEurope’s dominant financial hub since
Britain voted to leave the European
Union in 2016. They are being assistedby the European Central Bank (ECB),
which insists that banks must move
more senior staff to within its remit ifthey are to manage risks appropriately.
Neither Paris, Dublin nor Frankfurt has
managed to strike a notable blow so far,but Paris has the best momentum.

A BIGGER BUZZ“Global finance institutions are bringing
top level management in [to Paris] todemonstrate to the regulators thatthey are taking this seriously,” says
Florence Carr, a Paris-based partner in
EY’s Financial Services Office. “It’s thebuild up of lots of little things that are
attractive to the high-end executive thathas given Paris a bigger buzz than otherplaces, like the fantastic international
schools or the fact you can hop on a
train and be on the French Riviera inabout five hours.”
By some measures, Paris appears
to be in the ascendency. A series ofbusiness-friendly reforms has enabled

20

WEALTHFrance to attract more foreign direct
investment than any European nation
for the past four years, driven largely byindustry and innovation but supportedby the flourishing Parisian financial
sector, according to EY. Regional
unemployment is close to a 15-year low.
The 2023 Rugby World Cup wasa success, bringing an estimated€1 billion into the French economy.
The Olympics will arrive in July, andlarge swathes of the city are being
regenerated, including a 52-hectaresite 7km north of the centre that isbeing developed into 2,800 new homes.
Meanwhile, the Grand Paris Project,
Europe’s largest urban infrastructure
scheme, will deliver 68 new stations
and four new rail lines when it iscompleted in 2030.
The financial sector is swelling. As
of 2022, Paris had lured 2,800 financial
services jobs from London, comparedwith 1,800 that had left for Frankfurt
and 1,200 that moved to Dublin,
according to EY. The number of Frenchbankers earning at least €1 million
surged 63% between 2020 and 2021,
according to the latest available figuresfrom the European Banking Authority.

A FLOURISHING INDUSTRY
While those figures leave little doubtthat the industry is flourishing, itremains true that relocations havebeen far rarer than initial estimatessuggested: a 2017 report by PwC forthe lobby group TheCityUK warned
that Brexit had put as many as 75,000
UK financial sector jobs at risk, forexample. Certainly, the UK government
has not been resting on its laurels. In
December, Chancellor Jeremy Huntsigned a financial services deal with
Switzerland – made possible by Brexit –that should make it easier for financial
firms and wealthy individuals to dobusiness. Indeed, many investors saythey are sanguine about the long-termrisks to London, which has a deeply
embedded financial services ecosystemthat makes leaving more trouble thanit’s worth.
“There are enough workarounds
to be able to have staff in London andoperations in the EU,” says Jérôme
Legras, Managing Partner and Headof Research at Paris-based Axiom
Alternative Investments. “It’s more
complicated and there have been
a lot of administrative headaches,but ultimately the impact has been
managed. We’ve seen more people
going to Frankfurt and Paris but it’s
not massive.”
That could change if the ECB andthe French government get their way.
The reforms being considered by
Le Maire could be inspired by a
December report by Charles Rodwell,

THE WEALTH REPORTa lawmaker from Macron’s party, thatsuggested it should be easier andcheaper to fire high-income employees,
according to Politico. Measures could
include tweaks to labour laws or moves
to facilitate easier stock market listingsof small and medium-sized enterprises,
according to a December report byBloomberg. Any incentives are likely
to fit with Le Maire’s plan to attract
institutions beyond the global banks,
such as hedge funds and sovereign
wealth funds.

THE KINGMAKER
While those reforms would be attractive
to investors, the ECB is the real
kingmaker. A desk mapping review
conducted by its officials in 2020 foundthat many of the post-Brexit European
hubs opened by financial institutions
were in fact “empty shells” still reliant
on London-based services.
“A lot of the business was being
booked in the EU but sent throughfinancial means outside of the EU andparticularly to London,” Carr says.
Officials have “been pushing andpushing and the pressure is mounting
almost every day on this.”More than a fifth of the 264 trading
desks initially reviewed “warranted
targeted supervisory action,” Andrea
Enria, head of the ECB’s supervisoryboard said in 2022. Further reviews arelikely to be expanded to cover services
beyond the scope of the initial review,
including mergers and acquisitions andstock and bond issuance, the ECB saidin December. The reviews are likely toform the core of a strategy to draw more
capital to the bloc, which in turn must
be overseen by increasing numbers ofsenior executives.
The banks “are getting their reports
from the ECB that are very much saying‘if you want to trade here, you needto have the capital to back up yourbusiness here’,” Carr says. “That means
if you trade, you need the capital toprotect that trade, and when you movecapital you have to move people. Thisis definitely happening.”

London.
Shift tothe leftA change of government
in the UK could havesignificant implications
for London’s future as a
wealth hub

Tony Blair had been prime
minister for about ayear when his Trade andIndustry Secretary Peter
Mandelson said the Labour Party
was “intensely relaxed about people
getting filthy rich.”
It was 1998, and Blair was at the
beginning of a decade-long rule thatwould be era-defining in its approachto economic liberalisation. But while
real incomes surged, so did wealthinequality. The party’s attitudes to
wealth have become increasingly
varied ever since. Neither billionaires

nor poverty would exist in a fairsociety, party leader Jeremy Corbyn
said in 2019.
The UK is again on the cusp of aLabour government and, if some polls
are to be believed, it’s only the size ofthe majority that is yet to be decided.
As is customary at this stage in theelection cycle, current leader Sir Keir
Starmer has been reluctant to reveal
too much, but experts tell The WealthReport that he’s likely to preside overthe most radical Labour government
in decades.
What that looks like in practicewill be crucial for London. Following
a period of post-Brexit uncertainty,
the capital’s reputation as Europe’s
dominant hub for wealth and financeis looking more secure. Labour risks
upsetting that progress if it is tooheavy-handed in its attempts to raise
taxes on the wealthy, says Paddy
Dring, Global Head of Prime Sales
at Knight Frank.
“People are concerned about the
government and in particular about
any changes that might make big
overseas investors feel unwelcome,”
he says. “Feeling welcome isimportant. Clients use those words
and I think it’s important that a new
government conveys that Britain stillvalues international investment.”“As of 2022, Paris had lured
2,800 financial services jobs
from London, compared with
1,800 that had left for Frankfurt
and 1,200 that moved to Dublin,
according to EY”
THE WEALTH REPORTWEALTH21

“From North America to New
Zealand, left-wing politicalparties in advanced economies
are beginning to reckon withflaws in the typical ‘tax andspend’ economic model”

COMPARISONS WITH BLAIRITES
Starmer and his shadow chancellor
Rachel Reeves have so far courted
business and ruled out many of themore radical policies favoured by leftleaning sections of the party. These
include introducing rent controls,
imposing a mansion tax on higherpriced properties, raising capitalgains tax and increasing the top rateof income tax. While Reeves does
want to reform the UK’s non-dom tax
regime, which allows UK residents
with a permanent home overseas
to avoid paying UK tax on foreign
income, anything substantial risks“shooting themselves in the foot forpolitical gain with very little in theform of economic benefit,” says James
McBride, a veteran of the Labour
Party Policy Unit that worked on boththe 2016 Brexit referendum and 2017
general election campaigns.
Despite the moderate rhetoric,
comparisons with Blairites would
be wide of the mark. “They aren’t
Corbynites either, but they are much
more centre left in their proposition
than either the Financial Times or
the liberal consensus would have us
believe,” says McBride, now managing
director at political consultancy
ForeFront Partners. “If that's correct,
then we’re headed for a Labour
government that will be more leftwing and more radical than any we’ve
had since the 1970s.”
For a glimpse of what that mightlook like, turn overseas. From North
America to New Zealand, leftwing political parties in advanced
economies are beginning to reckon
with flaws in the typical “tax andspend” economic model. A key pillar
in US president Joe Biden’s fiscal
policy is known as “modern supplyside economics”, an overhauledversion of the credo made famousby former president Ronald Reagan
and his British counterpart Margaret

22

WEALTHThatcher. Both sought growth via tax
cutting and deregulation.
Modern supply-side economics,
by contrast, incentivises labour
force participation, research anddevelopment, infrastructure andclimate change mitigation, with an eye
on longer-term structural problems
such as inequality, US Treasury
Secretary Janet Yellen said in the 2022
speech in which she coined the term.
Progressive governments inother advanced economies would
like to follow suit, including Labour,according to McBride. While theirplans “aren’t yet codified”, he says,
their application of modern supply-side
economics could mean anything froma universal offer for childcare to drive
up labour market participation at theless contentious end of the spectrum,
right up to something as ambitious as
Biden’s Inflation Reduction Act.
“It would represent a much more
activist, interventionist industrial
strategy,” he says. “This is bread andbutter European socialism, but itwould be a break with the neoliberalconsensus that we’ve had.”

LEVELLING UP
Their ambition will be limited bywhat’s popular and what’s possible
when it comes to public finances.
Tackling wealth inequality will remaina priority, but Labour’s methods arelikely to focus more on curtailing
runaway asset prices by increasing
housing supply, for example, rather
than raising taxes on the wealthy.
Curtailing the dominance of London
by levelling up the rest of the country
will retain cross-party support, andMcBride suggests we will see greaterlevels of devolution, though this is amulti-generational project.
So are Starmer and Reeves also
“intensely relaxed about people
getting filthy rich”? Probably not, but
the pair are realists and have a good
grasp of what’s possible, according
to McBride.
“In an ideal world they would
want to tax more, particularly therich, but they’re smart enough toknow that would cost them theelection, and despite the instinctive
politics, the world is a complicatedplace,” he concludes. “The UK is ina pretty tough position for lots ofreasons, and it would be too risky both
politically and economically to go
down that route.”

Geneva.
Back tobasicsThe Swiss banking industry,so long a byword for security
and stability, must work
to regain momentum andrestore its reputationOn Saturday October 1 2022, an
ABC news reporter tweetedthat a major international
investment bank was “onthe brink”.
It was the beginning of the end for
Zurich-based Credit Suisse. Buffeted byrepeated scandals, shares in the bankwere already down 60% over the courseof the year. By Monday lunchtime there
had been more than 6,400 retweets and28,000 likes, according to the AustralianFinancial Review. Customers beganpulling their funds.
Six months later and almost
6,000 miles away, chat groups packed
with well-connected venture capitalists
began speculating that Silicon Valley
Bank, headquartered in Santa Clara,
California, might be insolvent. The
subsequent contagion reverberated
back to Zurich, where Credit Suisse
depositors had already pulled
SFr67 billion during the first threemonths of the year. Both institutions
would collapse within the month.

MONEY ON THE MOVE
“In both cases, we realised how quickly
people can decide to move their money,”says Angela Gallo, a senior lecturer infinance at Bayes Business School. “A
critical factor in the failure of Credit
Suisse was the fact that a lot of theirdeposits were with very wealthy clients,
and wealthy clients tend to be quite
dynamic, so they leave very quickly.”
This poses a challenge for key
wealth hubs such as Geneva andZurich, which rely disproportionately
on highly mobile wealthy individuals.
Switzerland commands more thana fifth of the world’s cross-borderwealth management, making it a larger
overseas wealth hub than Singapore or

THE WEALTH REPORT

Hong Kong. Switzerland’s deep poolof financial talent, its proximity to therest of Europe and the diversification
provided by the Swiss franc have long
been a draw for investors. However,those factors are dwarfed by areputation for secrecy, security andstability that has been centuries in
the making.
“People come from all over theworld to put down roots in a place
perceived as safe and stable froman economic, political and personal
perspective,” says Alex Koch deGooreynd, Knight Frank’s Head of
Residential Sales in Switzerland. “Ifyou’re from a place where life is a little
less secure and the rule of law is lessof a factor for political leaders, theSwiss offer is hugely attractive.”

SLOWING GROWTH
That reputation has already been
shaken by scandals and a steadyerosion of secrecy rules as both US and
EU authorities seek to clamp down on
tax evasion and money laundering.
The Swiss wealth management industry
has grown at a slower rate than rival
Asian centres for several years, andHong Kong is likely to overtake
Switzerland as the leading centre ofcross-border wealth management in

THE WEALTH REPORT

2027, according to a 2023 forecast by
Boston Consulting Group (BCG).
Granted, this is partly a consequenceof economic pressures impacting thewealth management industry acrosswestern Europe and the rapid growthof private wealth in Asia. But Swiss
regulators know they must repair
reputational damage and prevent
further bank runs if the industry is toregain momentum.
The subsequent takeover of Credit
Suisse by UBS in March “changed
the perception of the Swiss banking
industry,” says Gallo, who believes thereliance on wealthy depositors, once
considered among its greatest strengths,
is now seen by regulators as a weakness.
“We would normally think thatbanks’ deposit base is made up of retailinvestors like you and me, but it’s nottrue anymore,” she says. “For many,super-rich individuals or corporations
with big accounts play a much bigger
role. The growing importance of wealthmanagement has real implications forbank stability.”

SAFETY IN THE LONG RUN
The Swiss National Bank and the Swiss
Finance Ministry are now conducting areview of the country’s banking rules,
part of which will seek to address theflighty nature of wealthy investors whoplayed a role in the demise of Credit
Suisse. Measures being discussed
include an option to stagger a greater
portion of withdrawals over longer
periods of time, imposing fees on exits,
or rewarding clients who tie up theirsavings for longer with higher interest
rates, Reuters reported in November.
A report is due out in spring 2024.
By paying SFr3 billion for Credit
Suisse and assuming up to US$5.4 billion
in losses, UBS CEO Ralph Hamers told
reporters that his bank was “defending
the reputation” of the Swiss banking
industry. Initially, investors gave thetakeover a lukewarm reception for
creating what was perceived as “aweaker giant”, Gallo says, but if thedeal manages to assuage fears among
overseas investors about the safety of
their funds in the long run, it is likely
to be regarded as a major success.
“Overseas clients with funds in
Switzerland must fall back on thehistory of the banking industry andthe fact that it’s dominated by verylarge players, because that gives
them the reputation they need,”
Gallo says. “With secrecy comes someuncertainty about what will happen
to your funds, so the reputation of thebanks is everything.”

WEALTH23

Milan.
Filling
the gap
A new tax regime is drawing
UHNWIs to Italy: now its
main wealth hub needs
the prime housing stock
to keep them thereFor decades, the world’s
billionaires have snapped up
mansions overlooking Lake
Como and secluded Tuscan
farmhouses to use as getaways fromtheir lives in London, Geneva and
New York.
But while most are used to
packing weekend bags, increasing
numbers of UHNWIs are purchasing
handsome Milanese penthouses touse as primary residences, lured bygenerous tax incentives.
A tax regime allowing nondomiciled Italian residents to pay anannual flat tax of €100,000 on foreign
income lies at the core of the surge.
Family members can take part for an
additional annual €25,000 fee. Just 98
people took advantage of the scheme
when it was introduced in 2017, a figurethat rose steadily to 549 by 2020 before
more than doubling to 1,339 in 2021,
according to official figures analysed by
The Guardian.
The system “has been a great
success and it’s still very much in its
growth phase,” says Roberta Crivellaro,partner and head of the Italian practiceat law firm Withersworldwide. “Moreand more clients are asking about Milan
because they’ve seen that this measurehas been kept in place since 2017, so theinitial scepticism has now passed away.”

PUBLIC SUPPORT
Indeed, the scheme has survived fiveprime ministers and enjoys broad
public support in a country reliant on
tourism, Crivellaro says. That stands incontrast to so-called non-dom schemes
elsewhere, most notably in London,
which have attracted the ire of residents
fed up with public displays of wealth

24

WEALTHinequality. The UK’s Labour Party
has pledged to reform that scheme if
it wins power in an election likely totake place this year (see page 21).
Italian prime minister Giorgia
Meloni views the scheme as part ofa broader plan to cut taxes in order toboost investment. In October, Meloni
announced €24 billion in tax cutsand pledged to raise public sector
pay throughout 2024 despite risingpressure on public finances. State
interest payments have ballooned as
rates have risen.
Italy has long had the culture andweather to attract the world’s wealthy.
Milan is the country’s main wealth hub,connected by two airports and withineasy reach of the Alps, Lake Comoand the beaches of the Ligurian coast.
High taxes were once viewed as a key
barrier preventing overseas investors
settling over the long term, but as thescheme has grown more successful a
new challenge has emerged: a lack ofsuitable prime housing.
“Milan just doesn’t have the assetsthat these clients are looking for,”
Crivellaro says. “Milan would be theirfirst destination if they could findhouses like those you might see in
London, but they can’t, so they go
to Como or Florence.”

PRESSURE ON HOUSING
Milan’s population has climbed
10% during the past decade, puttingpressure on both ends of the housing“There are certain industries,
such as fashion, furniture andfinance, where being in Milan
really makes sense, but it has
got some way to go before it canoffer the lifestyle of other hubs”

ladder. Average house prices haveclimbed from €3,883 per sq m five
years ago to a November 2023 highof €5,345. In central Milan, prices
can typically run as high as €10,466
per sq m.
“The vast majority of prime
properties lie in existing structures,
so unlike a lot of markets in the world
Milan’s property market isn’t driven
by new build,” says Bill Thomson,
Italian Network Chairman at KnightFrank. “Supply comes through via theredevelopment of existing buildings,
and those that do come available areoften purchased by local developers
who have spent tens of millions buying
apartments for the rental market.”Without the stock, billionaire
purchasers tend to opt for anapartment in Milan and a trophy
property to live in within easy reach

THE WEALTH REPORT

of the city, Thomson and Crivellaro
agree. That will limit Milan’s
potential as a regional wealth hub
as property purchasers spend timein more secluded locations rather
than splashing out in the city as thegovernment would like.
“Sometimes these billionaires do
not live the idea of communities,”
Mayor Giuseppe Sala said in aninterview with Bloomberg TV in
October. “They are happy here. They
live in a very vibrant city and in aneasy city because it’s not so big. But
we would like to have a sort of giveback from them.”
Some of these issues will be solvedin time. The supply of prime homes ispicking up, though they are still notof a calibre to compete with the great
wealth hubs of Europe, Crivellaro says.
Upmarket restaurants and private
members’ clubs are also proliferating.
A branch of restaurant SUSHISAMBA
will open during 2024 as part of theredevelopment of the historic Torre
Velasca by Hines, for example.
“There are certain industries, suchas fashion, furniture and finance,
where being in Milan really makes
sense, but it has got some way to go
before it can offer the lifestyle of otherhubs, and particularly other parts of
Italy,” says Thomson. “People want toenjoy their lives as well as save money,
and for that, the rest of Italy has thebest the world has to offer.”

THE WEALTH REPORT

Hong
Kong andSingapore.
Rich
pickings
Over the five years to 2028,
Asia’s wealthy population is
set to grow faster than any
other region in the worldT

he rate of growth – equivalent
to around 35 new UHNWIs
each day – will bring the total
to about 230,000, almost 40%
larger than it was in 2023. At that point,
only North America will boast a larger
community of ultra-wealthy people, but
at current rates of growth, it won’t belong before Asia takes the crown.
Competition to host Asia’s newly
minted wealthy is hotting up, with
Hong Kong and Singapore leading
the charge. Singapore has utilised tax

incentives and a business-friendly
regulatory regime to encourage
1,100 family offices managing morethan US$4 trillion to move to the citystate, up from about 100 less than adecade ago.

DOMINANT PLAYER
Hong Kong has long been the region’s
dominant wealth hub. The city’s
wealth management industry posted
the fastest growth in assets undermanagement in the five years to 2022
until “the winds changed” and some
wealthy individuals began moving
funds to Singapore, BCG said in a 2023
report. The authorities responded with aset of incentives aimed at family offices
and residency for people investing atleast HK$30 million into the city.
“Hong Kong is very good at
reinventing itself, and it has obviously
seen what it perceives as the successof Singapore’s family office regime,”says Jeffrey Lee, partner and headof the Singapore office at law firm
Charles Russell Speechlys.
Though family office numbers
have risen in Singapore, the link todirect spending and investing is notclear cut. Last summer, the Monetary
Authority of Singapore (MAS) tweaked
the incentives on offer to encourage
family offices to invest in the country’s
equity markets, including those aimed
at encouraging investment in local
climate-related projects, for example.

WEALTH25

“Singapore is seeing success inattracting emerging wealth fromIndonesia, Thailand, Malaysia
and Vietnam, while Hong Kong
will always be the dominant hub
for wealth created in the
Chinese mainland”

Family office arrivals have had little
impact on the residential property
market either, according to MAS
officials. The challenge for the city is toencourage these private institutions to
put down deeper roots – which should
lead to more widespread investment.
Despite these challenges, the wealthmanagement industry is likely to swell
rapidly. Financial wealth booked in
Singapore is expected to grow at a rateof 9% through to 2027, according to BCG.
That will place it in the top three wealthmanagement hubs globally, behindHong Kong and Switzerland.
Hong Kong’s family officecommunity is about 400-strong,
and the city has ambitious plans for
growth, with targets for a further
200 by 2025. In October last year, a
policy announcement confirmed aninvestment migration programme thatwill encourage wealthy individuals toinvest at least HK$30 million in local
stocks or other assets. The Capital
Investment Entrant Scheme is likely
to be open from the middle of thisyear onwards, and will have a central
role in bolstering Hong Kong’s wealthmanagement industry.
Experts are generally bullish on
Hong Kong’s prospects. Indeed, the26

WEALTHrate of regional wealth creation isso significant that Hong Kong andSingapore are each strengthened by
the success of the other, according
to Charles Russell Speechlys’ Lee.
Singapore is seeing success inattracting emerging wealth fromIndonesia, Thailand, Malaysia andVietnam, while Hong Kong will always
be the dominant hub for wealthcreated in the Chinese mainland.

INVITING INVESTMENT
Indeed, the success of Hong Kong asa wealth management hub hinges
less on the performance of Singapore
than it does on the expansion of theChinese economy and its ability to
attract wealthy individuals from themainland. China’s economic growthis likely to slow to 4.5% in 2025, downfrom 8.4% in 2020, according to WorldBank forecasts. Those growth rates arestill likely to be enough to help propel
Hong Kong to becoming the world’s
dominant wealth management hub
by 2027, taking Switzerland’s crown,
according to BCG.
The key question for both
Singapore and Hong Kong will be thedegree to which either manages toimplement a regulatory structure thatencourages real investment in the local
economy, according to Lee.
“Most governments would wantthese sorts of regimes to be createdwith one key focus in mind, which is
to invite investment into the country,”
he says. “Will either be able to attractthe ‘real’ family offices as we know
it – families that need some sort ofinfrastructure around their wealth? I
think the jury is still out on that.”

Miami.
Going up –and upEven billionaires struggle
to get a slice of the South
Florida waterfrontFresh from selling his fashion
brand to Estée Lauder for
US$2.8 billion, Tom Ford spent
US$51 million for a Palm Beachestate in December 2022, a record for aso-called “dry” property on the island.
The South Florida property market“was already on an upward trajectoryin 2020, but the pandemic took us toouter space,” says Bill Hernandez, areal estate agent at Douglas Elliman in
Miami. “If people have to spend thatkind of money to not be on the ocean,then good gracious, what does that tell
you about where we’re headed?”
Wealthy individuals have longflocked to Florida for its weather,lifestyle and political and economic
stability. Miami is known as the“capital of Latin America” and isarguably the region’s most dominantfinancial hub, despite not being part ofit. Seven in ten residents identify as
Hispanic or Latino, according to the
US Census Bureau.

ON THE MOVE
A new dynamic has emerged since theCovid-19 pandemic. Large companies
and wealthy individuals who wereonce tethered to dominant US
economic centres such as New York or
Los Angeles have moved to Florida inincreasing numbers, citing attractive
tax rates, perceptions of higher crimein their former bases and the successof remote working.
In South Florida, foreign driver
licence exchanges increased 78%
in the first nine months of 2023
compared with the same period in
2022. Of the out-of-state applicantsarriving in south-east Florida during
the first half of the year, 24% werefrom New York, 10% from New Jersey
and 8% from California, according to

THE WEALTH REPORTthe Miami Association of Realtors.
Feeder states such as Texas, Georgia,
Virginia, Maryland and Ohio are also
increasing their market share.
Financial institutions such as
Citadel, Elliott Management andPoint72 Asset Management have alleither moved their headquarters to or
expanded in Florida. Citadel founder
Ken Griffin cited Chicago’s crime rate
as key to its move, suggesting safety
risks had made it difficult to recruit
into the firm’s Windy City office. In
2023, Amazon founder Jeff Bezos
purchased a US$79 million sevenbedroom mansion along with theneighbouring US$68 million plot of
land in Miami’s Indian Creek, an island
known as the “Billionaire Bunker”.
“Miami has come on strong as acorporate destination and the culture
has become dramatically moresophisticated, which is attracting
decision-makers from all over theworld,” says Peter Bazeli, Principal
and Managing Director at real estate
consultancy Weitzman. “It still has along way to go if it’s ever going to truly
compete with the likes of New York,because of the sheer numbers. You
still don’t have that critical mass of
employment – but it has momentum.”

GETTING REAL
Annual house price growth in Miami
has cooled from a peak of 37.2% in May
2022 to 6.5% in the year to December,according to the Knight Frank Prime
International Residential Index (seepage 32). The market calmed as buyers
began to resist the lofty demandsof sellers, says Douglas Elliman’s
Hernandez. “Some sellers were still at
crazy elevated prices, but these buyers
can respond by staying in New York or
Beverly Hills,” he says. “Now sellers arestarting to get real and we saw somereally big sales occur through 2023.”
Elevated house prices aren’t the
only headwind. Florida, like many
emerging wealth hubs including
Milan, have enjoyed rapid growthsince the onset of the pandemic.
However, their success is puttingstrain on resources and infrastructure,whether it’s a lack of available land,
or a shortage of schools that perform
at levels that wealthy families expect
if they are to move from cities such as
London or New York.
Gulliver Preparatory School in
Miami has seen record applications foreach of the past four years, the school

THE WEALTH REPORT“In South Florida, foreign driver
licence exchanges increased
78% in the first nine months of2023 compared with the same
period a year ago”

in Miami Beach, even up all the way
to Bal Harbour, you can underwrite
residential projects at as high as
US$5,000 or more per sq ft,” he adds.
“It just depends on the scale and themassing of what you can build.”

told Forbes last year. Pine Crest School
said a surge in interest began in March
2020, which it put down to “the rise incorporate remote work arrangements,
and the attractive cost of living andquality of life in South Florida.”
Avenues, one of New York City’s mostelite schools, is set to open in Miami
from 2025. Places are likely to cost
US$50,000 a term.
“Some people hesitate to transition
down here because we simply can’t
match the level of education on offer
in New York,” Hernandez says. “Whenthey do make the move, there’s a big
competitive market to get their kids
in to the handful of private schoolsthat we have.”
Competition for land is almost
as fierce, particularly on the waterfront,
according to Bazeli. That’s impacting
the feasibility of new residential
projects. “Anywhere on the ocean

TRADING UP
Tom Ford has traded up since his
December 2022 purchase. Last year, thedesigner upsized by swapping houses
with Brian Kosoy, CEO of private equity
real estate firm Sterling Organization,
the Palm Beach Daily News reported at
the time. Ford now resides in a 17,424
sq ft, five-bedroom mansion at 195 Via
Del Mar in Palm Beach – a two-minute
walk to the water.
Demand may have cooled in the
broader market, but billionaires suchas Ford will continue to fight forthe best spots because many of thetrends that have supported Florida’s
post-pandemic growth are firmly
entrenched, Hernandez says. “I thinkby the end of 2025 and through 2026,
South Florida real estate from Palm
Beach all the way down to Coconut
Grove will be one of, if not the mostexpensive real estate market inNorth America,” he concludes.
“I’m convinced of it.”WEALTH

27

New York
City andLos Angeles.
On brand
From the east coast to thewest, long-held perceptionsof luxury are being
challenged by a new breedof branded developmentsFrom “The Fresh Prince of
Bel Air” to “MTV Cribs” and“Selling Sunset”, the film
and TV industry has longpromoted the Los Angeles mansion asa global symbol of American wealth.

But for a small and growing
number of wealthy residents moving
to the city in search of the California
dream, these opulent homes, at times
reaching in excess of 100,000 sq ft,
are no longer the only option. Indeed,across major US cities including
New York and Miami, an increasing
focus on security and convenience isbringing full-service buildings andbranded residences to the fore. In Los
Angeles, city authorities are seeking
to promote higher-density, mixed-use
developments to lock in what it seesas more sustainable growth.
“Los Angeles has always been
about the mansion, but the city has somuch potential precisely because of
the fact that it’s still really very muchin the early stages of higher-density,
mixed-use types of development,”
says Peter Bazeli, Principal andManaging Director at Weitzman.
“I think that there are some reallyexciting things to come from an urban
planning perspective if the city does
begin to diversify away from themansion housing stock that makes
up the luxury market there.”

The prime housing market isrecovering from a downturn sparked
by the sharp increase in borrowing
costs and the implementation of theso-called “mansion tax” in 2023.
The 4% levy on property sales above
US$5 million rises to 5.5% for US$10
million-plus sales. While authorities
expect almost 40% of revenue to comefrom sales of single-family homes,
the levy also applies to apartments
and commercial buildings. Prime
residential values in Los Angeles
climbed 2.5% in 2023, according to ourPrime International Residential Index(page 32). Knight Frank expects growth
to cool to 1% over the course of 2024with rising supply as lower mortgage
rates encourage owners to sell.

SAFETY FIRSTA set of Aman Branded Residencesin Beverly Hills, due to open in
2026, provides a glimpse of thecompetition. The homes will sit
alongside an Aman hotel and club,within eight acres of botanicalgardens on the 17.5-acre One Beverly
Hills development, less than a milefrom Rodeo Drive.
The Aman residences are part ofa rapidly expanding global marketof branded residences that caterto wealthy individuals seeking thebenefits of ownership while wanting
the services of five- and six-star
hotels. There are now 186 operational
schemes globally and another 138
are in the pipeline, according toKnight Frank Research. North
America accounts for nearly 40% of
total projects and 60% of the pipeline.
Meals cooked by Michelin-starredchefs are a big part of the appeal,
but safety is now among the primarydraws, brokers say. Though official
statistics show incidents of violent
crime are at or close to historic lows inboth New York City and Los Angeles,“L os Angeles has always been
about the mansion, but thecity has so much potential
precisely because of the factthat it’s still really very muchin the early stages of higherdensity, mixed-use typesof development”
28

WEALTHTHE WEALTH REPORT

“The challenge for developers
with schemes in the pipeline
will be to ensure what’s onoffer matches local definitionsof luxury and provides astrong enough connection
between the brand and thephysical space to justify theprices charged”

perceptions don’t always match
reality. Three-quarters of New Yorkers
said crime was a “very serious”
problem in a February Quinnipiac
University poll, for example, thehighest number since researchers
first asked the question in 1999.
Experts put the disconnect down
to social media and high-profile
campaigns on crime from politicalleaders. Wealthy buyers – including
those coming from overseas – arewell-connected enough to pick up
on the concerns.
“Safety and property taxes are
generally among the first questions
from purchasers, but both tend
to be outstripped by the degree to

THE WEALTH REPORT

which people want to come here, dobusiness and enjoy everything elsethat New York has to offer,” says
Hugh Dixon, Head of the US Private
Office at Knight Frank.

GROWING PAINS
Nevertheless, there appears to bea swelling group of wealthy buyers– particularly the newly minted
younger generation – who want to
be in downtown locations while
enjoying the best services andsecurity available.
“The trend in Los Angeles is intofull-service buildings,” says Cory
Weiss, a broker at Douglas Elliman’s
Los Angeles office. “I’m seeingbuildings that used to predominantly
have older people in, and a lot of theyounger people are moving in forthe safety and convenience. I’ve had
two clients buy second homes here
in the past year and they bought infull-service buildings because of thesafety and security. I’m just seeing
more activity from people considering
these building that generally wouldn’t
have in the past.”
To be sure, some experts say
luxury multi-family homes andbranded residences pose little threat

to the dominance of the mansion,
whether in Los Angeles or elsewhere.
The branded residences market
is tiny by comparison, and there
will always be a large slice of the
expanding wealthy community thatfavours the space and seclusion
offered by single-family properties
on the outskirts of cities.
Indeed, the branded residence
market has experienced growing
pains. The premiums are so
attractive to developers that poorly
conceived schemes have been
introduced, resulting in sluggish
sales, says Bazeli, whose firm
consults on about 80 branded
residence developments each year.
The challenge for developers with
schemes in the pipeline will be toensure what’s on offer matches local
definitions of luxury and provides astrong enough connection between
the brand and the physical space tojustify the prices charged.
“As the sector evolves, buyers
will become even more demanding
and better educated, and they willneed clear answers as to what eachdevelopment is really offering toback up the premium prices being
marketed,” he concludes.

WEALTH29

Home

Delve into the trends driving
prime global residential property
performance now and in the future

32

PIRI 100
Manila tops the list in this year’s PIRI, with prime
property across the board defying expectations

34

SEEKING VALUE?
What US$1 million will buy in cities andsecond-home markets around the world

35

RED TAPE TRACKER
As the world heads for the polls, brace for ayear of shifting policy and regulation

36

THE YEAR AHEAD
The economic outlook may be brighter, but
the forecast remains unsettled for investors

38

THE BIG FIVE
From AI to wellness, the key themes shaping
the future of prime property markets

39

ONES TO WATCH
Knight Frank’s global experts on the properties
and locations catching their eye in 2024

High life – The Greenwich by Rafael Viñoly embraces light and air from every
floor, with its glass façade and rounded corners offering expansive panoramic
views of downtown Manhattan and beyond

30

HOME

THE WEALTH REPORT

THE WEALTH REPORT

HOME

31

PRIME INTERNATIONAL RESIDENTIAL INDEXPIRI 100

Luxury residential markets proved resilient in the face of
successive interest rate hikes in 2023. Kate Everett-Allen
explores our unique Prime International Residential
Index, which tracks the performance of 100 city, sunand ski locations globally

1
2
3
=4
=4
=6
=6
8
9
=10
=10
12
13
14
15
16
17
=18
=18
=20
=20
=22
=22
=24
=24
=24
27
28
=29
=29
=29
=29
=29
=29
35

26.3%
15.9%
15.0%
12.3%
12.3%
12.0%
12.0%
10.0%
8.6%
8.0%
8.0%
7.4%
7.2%
7.0%
6.7%
6.5%
6.4%
6.2%
6.2%
6.0%
6.0%
5.6%
5.6%
5.5%
5.5%
5.5%
5.4%
5.2%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
4.7%

MANILADUBAI
BAHAMAS
ALGARVE
CAPE TOWNATHENSIBIZAMUMBAISHANGHAIMUSTIQUE
ST BARTSCYPRUSMARBELLA
MALLORCAVANCOUVERMIAMIMADRID
LAKE COMOSEOULMEXICO CITY
VAL D'ISÈRE
BOSTONJERSEYAUCKLAND
COURCHEVELFLORENCE
SHENZHENPERTHCAYMAN ISLANDSCHAMONIX
ORANGE COUNTYPORTOPROVENCE
ST MORITZ
SÃO PAULO

36
37
=38
=38
=40
=40
42
43
44
=45
=45
47
48
=49
=49
51
=52
=52
=52
=52
=52
=52
58
59
60
61
62
=63
=63
65
66
=67
=67
=67
=67

4.5%
4.2%
4.1%
4.1%
4.0%
4.0%
3.5%
3.4%
3.3%
3.0%
3.0%
2.9%
2.8%
2.7%
2.7%
2.6%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.3%
2.2%
2.2%
2.0%
1.6%
1.4%
1.4%
1.3%
1.2%
1.1%
1.1%
1.1%
1.1%

ROME
DELHI
GOLD COAST
STOCKHOLM
HAWAIIOSLO
MILAN
HOUSTON
BEIJINGBARBADOSBRITISH VIRGIN ISLANDSSINGAPORERIYADHBARCELONASYDNEYTAIPEILOS ANGELESMEGÈVEMÉRIBELNAIROBIPARIS
VENICEBRISBANEBENGALURU
LISBONLUCCA
GUANGZHOUMELBOURNE
RIO DE JANEIROVERBIER
BRUSSELSASPEN
PHUKETST TROPEZWELLINGTON

71
72
=73
=73
=73
=73
77
78
=79
=79
81
82
=83
=83
85
85
87
88
=89
=89
91
92
93
=94
=94

1.0%
0.8%
0.6%
0.6%
0.6%
0.6%
0.5%
0.2%
0.0%
0.0%
-0.2%
-0.5%
-1.0%
-1.0%
-1.3%
-1.3%
-1.8%
-2.0%
-2.1%
-2.1%
-2.4%
-2.7%
-3.2%
-3.9%
-3.9%

GSTAADLAUSANNE
BUCHARESTDUBLINJAKARTAMONACOSAN FRANCISCOKUALA LUMPUR
SARDINIAVIENNA
MARRAKESHTOKYOBERLINTORONTOGENEVAJEDDAHBANGKOKNEW YORKHONG KONGLONDONZURICHTHE HAMPTONSEDINBURGH
BUENOS AIRESFRANKFURT

97
98
99
100

-5.3%
-5.6%
-7.0%
-8.4%

PRAGUEAMSTERDAM
CANNESOXFORD96-5.0% SAINT-JEAN-CAP-FERRAT

Sources: All data comes from Knight Frank's global network with the exception of Boston, Miami, San Francisco (S&P CoreLogic Case-Shiller); Frankfurt (Ziegert Research & ImmobilienScout 24); Jersey (States ofJersey); Mexico (Sociedad Hipotecaria Federal); Oslo (Advokat Ek, Oslo); São Paulo and Rio de Janeiro (Fundação Instituto de Pesquisas Econômicas); Stockholm (Svensk Mäklarstatistik AB); Toronto (Toronto Real
Estate Board); Vancouver (Vancouver Real Estate Board); Tokyo (Ken Corporation)

Notes: Price changes are measured in local currency and correspond to the period 31 December 2022 to 31 December 2023 unless otherwise stated. Amsterdam, Barcelona, Brussels, Buenos Aires, Cyprus, Dubai,
Edinburgh, Geneva, Jeddah, Jersey, Marrakesh, Mexico City, Riyadh, The Hamptons, Zurich to Q3 2023. Boston, Miami and San Francisco to October 2023. Aspen and Vancouver to November 2023. Tokyo - relates toall properties above ¥100m

32

HOME

THE WEALTH REPORTThe results

THE YEAR IN REVIEWThe Prime International Residential
Index (PIRI 100) surprised on theupside in 2023. Of the 100 markets
tracked, 80 recorded flat or positive
annual price growth.
Yet at the start of 2023, economists
were expecting a much weaker outcome.
Stock markets were headed for more
pain, inflation was veering out ofcontrol and the pandemic-fuelledproperty boom was set to end in tears
as borrowing costs hit 15-year highs insome markets. Right? Wrong.
The “soft landing” adage applied
as much to luxury property markets as
to monetary policy, with the index
posting a solid 3.1% gain overall. Manila(26%) leads but last year’s frontrunner,
Dubai (16%), slipped only one spot. AsiaPacific (3.8%) pipped the Americas (3.6%)
to the title of strongest-performing
world region, with Europe, the Middle
East and Africa trailing (2.6%).
As predicted last year, sun locations
continued to outperform, up 4.7% on
average with ski resorts close behind(3.3%) and cities on 2.7%.

As markets adjusted to the higher
cost of debt, sales took a bigger hit
than prices. In London, New York,
Dubai, Singapore, Hong Kong andSydney, luxury sales declined on
average by 37% year-on-year.
Some markets corrected afterstrong falls due to rapid rate hikes(Auckland, Seoul), while others
moved up the rankings in partdue to supply shortages (Sydney,
Singapore). Some were influenced
by policy and tax shifts, easing(Hong Kong) or tightening (LosAngeles), and some markets
benefited from significant wealthinflows (Dubai, Miami).
Prices in both New York andLondon dipped around 2% in 2023
and sit 8% and 17% below their mostrecent market peaks respectively,
presenting a strong opportunity forprospective buyers. Iberia proved ahotspot, occupying five of the top 20
rankings with the Algarve and Ibiza(both 12%) leading the pack.

2023 in perspective

1. Luxury prices climbed 3.1%
on average in 2023.
2. Sales volumes, not prices,were the main casualty ofhigher interest rates.
3.	Manila leads, with Dubai
in second place.
4.	Asia-Pacific was thestrongest-performing
world region.
5.	London and New York
remain closely aligned.

MEA CULPA

Average annual % change across the PIRI 100 markets

In the interest of full disclosure,
we look back at what we got right– and wrong – in 2023, comparing
our 25-city forecast with the actual
results in this year’s PIRI 100.

10.0%
8.0%
6.0%
4.0%
2.0%

GOLD STAR

0.0%
-2.0%

5.2%

3. 1 %

2022

2023

2. 1 %
2 0 178.4%

1.4%
2 0 162 0 211.8%
2 0 151.9%

2.2%
2 0 142020

2.8%
2 0 131.8%

0.3%
2 0 122 0 190. 1 %
2011

2 0 18 1.3%

1.0%
2 0 102009 -5.5%

2008 -0.2%

-4.0%
-6.0%

KEY FINDINGSAVERAGE ANNUAL CHANGE BY WORLD REGIONAMERICAS

3.6%

TOP 5
BAHAMASMUSTIQUE
ST BARTSVANCOUVER
MIAMI

EMEA

2.6%

ASIA-PACIFICTOP 5
ALGARVE
CAPE TOWNATHENSIBIZACYPRUSTOP 5
MANILA
MUMBAISHANGHAISEOULAUCKLANDAVERAGE ANNUAL CHANGE BY ECONOMY TYPEADVANCED

2.9%

THE WEALTH REPORTEMERGING

3.2%

3.8%

For 18 of the 25 cities tracked, ourresearch teams demonstrated
remarkable accuracy, staying
within a 2% margin. Not bad given
the tumultuous economic andgeopolitical backdrop.

COULD DO BETTER

Seoul, Vancouver, Sydney and Madrid
wrongfooted us, outperforming our
expectations. Domestic buyers
dominated, and in most cases a lackof stock gave prices an extra boost.
Three cities posted weaker growththan predicted: Dublin, Edinburgh and
Los Angeles. Higher mortgage costs
resulting in weaker sales volumes
and a mansion tax in Los Angeles
influenced buyer sentiment morethan anticipated.

HOME

33

Seeking value?

Our PIRI pricing graphics provide anannual guide to how much space yourmoney will buy you when it comes toprime residential property
There is significant variation in prime prices across luxury
residential markets, which often surprises buyers. Primeprices in Dubai may sit 134% higher than at the start of thepandemic but they are still noticeably lower than in moreestablished markets. Here, US$1 million buys 91 sq m, fourtimes the equivalent in Hong Kong.
It’s a similar story for second homes, as shown in our
new chart focusing on rural, coastal and alpine markets. In
Barbados, for example, US$1 million will garner 143 sq m,more than four times as much luxury space as in St Tropez.

Sources: Knight Frank Research, Douglas Elliman, Ken Corporation
Note: Currency calculation as at 29 December 2023

How many square metres of prime property US$1m buys in selected markets
100 SQ M

34

HOME

100 SQ M

CITY LOCATIONSQ M/US$1M

SECOND HOME
LOCATION
SQ M/US$1M

MONACO 16

ASPEN 20HONG KONG 22

VERBIER 28

SINGAPORE 32

ST TROPEZ 32

LONDON 33

IBIZA 50

GENEVA 34

BAHAMAS 62

NEW YORK 34

CHAMONIX 63

LOS ANGELES 38

QUINTA DO LAGO 67

PARIS 40

LAKE COMO 91

SHANGHAI 42

MARBELLA 101

SYDNEY 43

BARCELONA 110

MIAMI 60

GOLD COAST 112

TOKYO 64PROVENCE 129

DUBAI 91

BARBADOS 143

MADRID 96

CAPE TOWN 196

MUMBAI 103

PHUKET 213

THE WEALTH REPORTRed tape tracker
Buckle up for a year of shifting rules and regulations.
As almost 70 countries go to the polls in 2024, theimplications for wealth flows and property markets could
be significant. Here’s our round-up of the latest changes
CANADAA two-year foreign
buyer ban due to end
on January 1 2025
has been extended
to 2027. Permanent
residents and some
temporary workers
are exempt, alongwith some rural and“recreational” property.

NEW YORKIn September 2023,
a de facto ban on
short-term lets cameinto effect. Partial
home stays of lessthan 30 days remain
permissible, if theproperty is registeredwith the Mayor’s
Office and the hostpresent throughout.

UK
A Labour Party
victory in the UK
general election is
expected to end thenon-dom tax regime,increase stamp duty
for overseas buyers
and potentiallylead to changes toinheritance tax rules.

FRANCE
From 2025, properties
rated G for energy
efficiency can nolonger be let. Since
August 2022, rents
for F- and G-rated
properties cannot
be increased. The
rules do not apply tofurnished holiday lets.

HONG KONG SAR
Since 28 February
2024, nonpermanent residents
pay the same stamp
duty as resident
buyers, up to 4.25%.
Sellers can dispose
their assets anytime
without paying an
extra 10% stamp duty.

PORTUGALThe Non-Habitual
Residency initiative,
with lower tax rates
for non-residents, wasdue to end in 2023 but
has been extended
for applicants who
can prove their move
was planned prior to
December 2023.

UAE
UAE has reintroduced
the three-month or
90-day visit visa, which
can be extended
within the country foran additional cost.

CHINESE MAINLAND
New housing policies
across first-tier cities
include lowering
the down payment
ratio for first-timeand second-homepurchasers andextending the
maximum mortgage
term to 30 years.

AUSTRALIA
Fees for foreigners
allowed to buy
existing houses
will be tripled, andtaxes for foreigners
who leave dwellings
vacant doubled.
Plus, January saw
the country's “goldenvisa” scheme halted.

NEW ZEALAND
Mortgage interest
can once again
be deducted fromrental income fortax purposes andinvestors now needto hold a property for
two years rather than
10 to avoid paying
capital gains tax.

THE WEALTH REPORT

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35

The year ahead
While markets have rallied, geopolitical uncertainty
ensures the road ahead remains bumpy for investors

M

arket conditions are betternow than they were a year
ago. Inflation appears to belargely under control andthe question is when, not if, interest
rates will be cut. Labour markets
are solid, forced sellers are largely
absent, constrained housebuilding
has cushioned prices and pandemic
savings have yet to run dry in someadvanced economies.
But the geopolitical landscape isprecarious. The lights are “absolutely
flashing red,” in the words of the UK
Foreign Secretary, with a spike inenergy prices due to the escalation of
conflicts a real possibility. In addition,
GDP growth is likely to slow from thelevels seen in 2023.
Add to this the biggest election
year in history, China’s subpar
growth, further trade fragmentationand the looming spectre of climatechange-induced disasters, and investors
will need to work harder than ever tomake informed and timely decisions.
WHERE’S HOT, WHERE’S NOT?
Auckland leads our prime priceforecast, while Sydney is thefrontrunner in our rental forecast
for 2024. Prime price growth acrossthe 25 cities tracked is forecast toreach 2.5%, up from 1.7% in 2023 with
Mumbai, Dubai, Madrid and Sydney
joining Auckland to complete the top
five. Prime rents are moderating fromtheir post-pandemic highs but a lackof stock in key cities will keep annual
growth in positive figures for mostadvanced economies.
Canada and New Zealand’s
restrictions on foreign buyers will pushdemand towards the rental sector, whilehigh mortgage costs, taxes for landlords
and red tape will keep supply in check.

2024 OUTLOOK
1.	Politics will usurp economics
as the major downside riskfor property markets in 2024.
2.	Auckland leads our prime
price forecast, while Sydneyleads for rents.
3.	Stock levels will be the key
determinant of price andrental performance, with
rate cuts, taxes and red tapeinfluencing factors.

22%

Prime price forecast
AUCKLAND 10.0

Annual % change, 2024

EDINBURGH -2.0

SINGAPORE -0.5

VIENNA 0.0

HONG KONG 0.5

GENEVA 0.5

DUBLIN 0.5

LOS ANGELES 1.0

LONDON 1.0

VANCOUVER 2.0

TOKYO 2.0

SHANGHAI 2.0

PARIS 2.0

NEW YORK 2.0

ZURICH 2.5

SEOUL 2.5

LISBON 2.5

MONACO 3.0

MELBOURNE 3.0

MIAMI 4.0

STOCKHOLM 4.5

SYDNEY 5.0

MADRID 5.0

DUBAI 5.0

MUMBAI 5.5

of UHNWIs plan to buy a home in 2024

Sources: Knight Frank Research, Douglas Elliman, Ken Corporation

36

HOME

THE WEALTH REPORTTOP THREE RISKS

Our global research teams
share their insights on the key
risks and opportunities facing
their prime markets

1

2

3

Electionresultingin policy
change/higher taxes

Climaterisk

Undersupplyof luxury
homes

TOP THREE OPPORTUNITIES

1

2

3

Relaxationof tax andproperty
regulations

Property’s
appeal asa means todiversify/
spread risk

Safe havencapital flight

Source: Knight Frank Research

Prime rent forecast

Attitudes
SurveyAnnual % change, 2024
SYDNEY 12.0

If planning to purchase a
new home, which location
will it most likely be in?

Sources: Knight Frank Research, Douglas Elliman, Ken Corporation

THE WEALTH REPORTTOKYO 1.5

GENEVA 2.0

SINGAPORE 4.0

MONACO 4.0

HONG KONG 4.0

NEW YORK 5.0

LONDON 5.5

TORONTO 6.0

AUCKLAND 6.0

%

1. UK
2. US
3. FRANCE
4. AUSTRALIA
5. UAE
6. SWITZERLAND
7. SPAIN
8. ITALY
9. PORTUGAL
10. INDIA

17.7%
9.8%
7.2%

5.6%

5.4%
5.4%

4.5%

4.0%

3.8%
3.5%

Other: 33%

Source: The Attitudes Survey

HOME

37

The big five
Kate Everett-Allen
identifies the key
themes set to influence
prime property
markets in theyears ahead

Currency

Is the dollar past its peak? The world’s
reserve currency hit a two-decadehigh in late 2022 against every othermajor currency and has since drifted
downwards, eroding some of thecurrency advantage enjoyed by US
dollar and dollar-pegged buyers whenpurchasing overseas in recent years.
The consensus is that the dollar
will remain overvalued given thelack of any viable global alternative– but it may weaken. High levels ofgovernment debt, along with interest
rate differentials as central banks start
to pivot, could offer those investors
considering a foothold in the US, orin dollar-pegged economies such as
Dubai, Hong Kong, Barbados and the
Bahamas, a potential chink of light.

38

HOME

PolicyAI

ClimateWellness

Cited as both the biggest risk andopportunity for UHNWIs by our
research teams this year, changing
policy can dictate the fortunes of amarket. From planning regulations
to taxes, from restrictions on holiday
rentals and foreign buyers to newvisas and the quest for greatertransparency, the global landscapeis made up of multiple moving parts
which influence the flow of wealth,and ultimately, market performance.
As public debt escalates andhousing affordability diminishes
across advanced economies,
policymakers are poised to scrutinise
wealth and property even more,injecting another dimension into
strategic considerations for UHNWIs.

Rising sea levels and extreme weather
events such as heatwaves, droughts andwildfires are leading some UHNWIs
to consider where they buy. Despite
the escalating vulnerability of ourenvironment, the luxury residential
sector has been slow to embracesustainable living and integrate green
technologies en masse.
However, impending energy
compliance regulations in advanced
economies are poised to catalysechange. Landlords, facing bans or rent
caps unless they significantly improve
poorly rated properties, will see rental
stock decline and sales inventories
increase, unless institutional investors
see an opportunity in acquiring thisolder stock.

The buzz around artificial intelligence(AI) in real estate now transcends
basic chatbots, and looks set to usher
in a transformative era of structuralchange. Currently, the spotlightis on improving productivity inknowledge-centric roles – for example,
streamlining mortgage assessments
and valuations, and identifying sites
for development.
But for the luxury residential
sector, dominated as it is byheightened demand for personalised
experiences, AI looks set to offer
sophistication, customisation andefficiency, providing insights intoclient behaviour, preferred locations,favoured architects and developers,
and lifestyle preferences.

Wellness is becoming big business.
Supercharged by the Covid-19 pandemic,
the industry is now worth an estimated
US$5.65 trillion – a trend which has
not escaped the attention of luxury
developers. By way of example, The Well,a new luxury residence in Miami, notonly features a state-of-the-art fitness
and wellness centre but has a team ofholistic experts on hand for residents.
Moreover, yoga and meditation
retreats are now ubiquitous in the top
ski resorts, and off-grid locations in
the Caribbean, Nordics and Asia are
increasingly in demand.
The race to provide ever more
enticing amenities to meet the physicaland spiritual needs of wealthy residents
is well and truly on.

THE WEALTH REPORTOnes to watch
We asked our global network for their pick of the property types
and locations set to attract wealthy buyers in 2024

Head online toknightfrank.com/wealthreport
to view the full 12 markets

HIGH-END APARTMENTS
IN FLORENCE

CLASSIC PARISIAN APARTMENTS IN
THE 7TH & 8TH ARRONDISSEMENTS

WATERSIDE APARTMENTS INÖSTERMALM, STOCKHOLM

There is appetite for super-luxury
homes due to growing demand fromthe global wealthy relocating here
to take advantage of Italy’s flat tax
regime. There isn’t enough stock of theright quality, so our tip for developers
and investors is to target areas along
the River Arno such as Lungarno
Vespucci to the north or San Fredianoto the west.

In 2024, architecturally-inspired
residences with bespoke furnishings,
yet classic in style, featuring views
across the River Seine or the Eiffel
Tower will be in high demand. This
heightened interest will primarily be
driven by our Chinese and US clients,
as Paris takes centre stage ahead of the2024 Olympic Games.

A leading contender in most quality-oflife rankings, the exclusive Östermalm
district has seen prices dip 11% since
their February 2022 peak. With interest
rate cuts on the horizon, and theSwedish krona comparatively weak,further discounts are on offer foroverseas buyers. The absence of any
wealth tax or inheritance tax in Sweden
further adds to its appeal.

BILL THOMSON, CHAIR OF THE ITALIAN NETWORKALISON ASHBY, DIRECTOR, JUNOT FINE PROPERTIESJASON MANSFIELD, KNIGHT FRANK INTERNATIONAL

THE TOTAL PACKAGE,NEW YORK CITY

INLAND COMMUNITIESIN DUBAIWILDERNESS RETREATS IN
TASMANIA, AUSTRALIA

In a city at the forefront of luxury
living, global buyers want it all. Projects
that meet their exacting standards
will outperform, but it’s not all aboutlocation. There is a long tick list: a
starchitect-designed home; a globally
recognised brand; the full amenity
offering; celebrity chefs in on-siterestaurants; and a commitment tosustainability, all turn-key ready.

With Dubai’s 65km coastline mostly
built out, global UHNWIs are
increasingly focused on securinghomes with access to green space,paving the way for the creation ofinland communities. Locations suchas Al Barari, Tilal Al Ghaf, JumeirahIslands and Jumeirah Golf Estates are
already on our watchlist to be upgradedto prime status.

Prime values along Hobart’s Derwent
River are up 142% over the past
decade, although the city still offers
great value, with prestige homes
starting from A$1.2 million. Thoseseeking a better work/life balance
and less exposure to climate risk are
attracted by the opportunity to designa modern, sustainable home.

HUGH DIXON, KNIGHT FRANK PRIVATE OFFICEFAISAL DURRANI, HEAD OF RESEARCH, MENA

THE WEALTH REPORTMICHELLE CIESIELSKI, HEAD OF RESIDENTIALRESEARCH, AUSTRALIA

HOME

39

InvestExplore the trends and influences
driving global investment andproperty markets

42

NAVIGATING THE RECOVERY
As commercial real estate rallies, private investors
remain firmly in the driving seat46

INSIDER KNOWLEDGE
Want to know where to put your money?
Knight Frank’s experts have the answers

50

IS ESG OVER?
As the spotlight falls on the wealth carbon
footprint gap, it’s time to get ESG back on track

53

RENEWING REAL ESTATE
Our five REs set out a framework for deliveringa more sustainable real estate sector

56

ARE YOU READY FOR AI?
For the clued-up investor, new technology offers
unprecedented opportunities for wealth creation

58

GREEN DIRT
Could investing in farmland help tackle some of theworld’s hottest issues – including climate change?

62

GEAR CHANGE
The ups and downs of luxury asset classes,
as captured in our unique index

Crowning glory – A gold and diamond crown ring once owned by
Tupac Shakur sold at Sotheby’s Hip Hop auction in July for US$1 million– three times the estimate. Image courtesy of Sotheby’s

40

INVEST

THE WEALTH REPORT

THE WEALTH REPORTINVEST

41

Navigating
the recovery

Against a backdrop of global economic and geopolitical tensions,2023 was a year of softer trading conditions for commercial
real estate investment – but investors are positioning themselves
for a recovery, argues Antonia Haralambous

G

lobal commercial real estate(CRE) investment fell by 46%
in 2023 to US$698 billion
as investors grappled withelevated interest rates and higher
debt costs. Much of the contraction in
investment was due to a retrenchment
among US investors. Outbound
US investment declined by 52%
year-on-year in 2023, as investors
tried to reconcile elevated domestic
debt and navigate the perceptionthat conditions in the US CRE market
reflected global real estate trends.
While global investment was
relatively soft, private investors
remained the most active global CRE
buyers for the third consecutive year.
Private capital invested US$338 billion
globally in 2023, equating to a 49%
share of total investment, slightly
up on 48% in 2022 and the highest
share on record.
Although private investment in
2023 nearly halved on 2022 volumes,
this was a smaller contraction thaninstitutional and public investment,
both falling by 53%. Meanwhile,
investment from HNWIs in global
CRE saw the smallest year-on-year
decline at 19%.
The fact that private buyers,
including HNWIs, were the mostactive in 2023 is perhaps unsurprising.
This group is relatively well
positioned to transact in a higher
interest rate environment, as private

capital is typically less reliant on debt
than other investors.

SECTORS IN DEMAND

Industrial and logistics was themost invested CRE sector for the
first time on record, taking a quarterof all global investment at US$174
billion. While industrial and logistics,
retail, hotel and seniors housing andcare all increased their share of total
investment in 2023, the office market
fell from 25% in 2022 to 22%, and theliving sector share contracted from
30% to 24%. All sectors recorded anannual decline in total investment in
2023, with seniors housing and care(-28%) seeing the smallest decline.
However, the story was slightly
different for private buyers in 2023.
Living sectors were the most targeted byprivate capital, followed by industrial
and logistics, and offices. For HNWIs,
offices reclaimed its place as the top
sector for investment having trailed
living sector investment in 2022. Here,it is likely that HNWIs capitalised on
reduced competition, potentially seeking
trophy assets in a sector with a less timeintensive operational model.

The who…

Total global CRE investment in 2023 (US$bn)
Private337.9

Institutional
221.4

Public73.1

User/other
65.2% CHANGE VS 2022

Definitions

PRIVATE: Companies whose control is in private
hands and whose business is primarily geared
towards operating, developing or investing incommercial real estate.
HIGH NET WORTH (HNW): Private family wealthinvested directly into commercial real estate.

42

INVEST

-48%

-53%

-53%

-2%

-63%

18%

% CHANGE VS 10-YEAR LONG-TERM AVERAGE

-24%

-52%

Sources: RCA, Knight Frank Research

THE WEALTH REPORTThe what…

Global CRE investment by sector in 2023 (US$bn)
ALL INVESTORSPRIVATE INVESTORS

Industrial& logistics

Living

174.3

100.0

Living167.2

Office152.7

Industrial& logistics

Retail

129.7

70.7

Office66.6

Retail

59.1

Hotel

Hotel

55.2

30.9

Seniors
housing& careSeniors
housing& care18.4% CHANGE VS 2022

-40%

% CHANGE VS 2022

-57%

-53%

-32%

-34%

-28%

% CHANGE VS 10-YEAR LONG-TERM AVERAGE

-9%

10.6

-37%

-58%

-59%

-36%

-46%

-44%

-35%

-22%

-12%

5%

% CHANGE VS 10-YEAR LONG-TERM AVERAGE

-32%

-29%

-30%

-31%

-41%

12%

-23%

To where…

Top cross-border CRE investment flows (US$bn)
ALL INVESTORS
CanadaGermany

9.7

US

Chinesemainland

UK

29.6

20.3

6.0

Japan

9.6
Australia

5.7

8.7
FranceSpain

5.7

Singapore

5.3

5.1

% CHANGE VS 2022

US

-16%

UK

-51%

49%

Canada-60%

Germany

-28%

Japan

PRIVATE INVESTORS-39%

Chinesemainland

-58%

-45%

Australia

Singapore

1.5

US

Germany

5.5

UK

3.0

Netherlands

2.8

-60%

Spain

1.1

-12%

FranceSingapore

Chinesemainland

Spain

1.3

1.1

Japan

Ireland

0.9

Italy

0.7

0.7

% CHANGE VS 2022

-35%

US

-22%

Germany

Sources: RCA, Knight Frank Research

THE WEALTH REPORT

UK

-52%

-25%

Singapore

-46%

Spain

266%

Chinesemainland-23%

Netherlands

26%

Japan

-16%

Ireland

-58%

Italy

INVEST

43

From where…

Top cross-border sources of CRE investment (US$bn)
ALL INVESTORSUSSingapore

CanadaHong Kong
SAR

Japan

FranceGermany

UK

Switzerland

UAE

32.2

26.3

11.0

8.7

8.0

7.0

6.5

5.2

4.7

4.4

% CHANGE VS 2022

-52%

-8%

-62%

-18%

156%

-33%

-64%

-73%

-42%

349%

PRIVATE INVESTORSFrance3.1

Hong Kong
SAR

2.1

Spain

1.8

Chinesemainland

1.5

Singapore

1.3

US

Israel

1.3

1.3

Japan

1.2

Switzerland

1.0

Germany

0.9% CHANGE VS 2022

-31%

57%

-43%

38%

-5%

-72%

-34%

13%

67%

-50%

Sources: RCA, Knight Frank Research“For the first time in four years,
a new sector has topped theinvestor wish list. The living
sectors are the most in demandin 2024, with 14% of Attitudes
Survey respondents looking
to target the asset class”

WHO’S BEEN ACTIVE?

Investors from the US, Canada andSingapore accounted for just under
half of all cross-border global CRE
investment in 2023. However, of the
top 10 global cross-border capitalsources, the only investors to increase
investment in 2023 were from UAE(+349%) and Japan (+156%). For
Japanese capital, 2023 was a record
year for cross-border investment
at US$8 billion, with buyers taking

44

INVESTadvantage of a significantly lower
cost of domestic debt, a slower speedof transactions and a reduced global
competition pool. In fact, Japanese
investors were the fifth largest sourceof cross-border capital in 2023, theirfirst ever appearance in the top 10.
Investors from France were thelargest source of private cross-border
capital in 2023, with US$3.1 billion
invested. Private French capital
mainly targeted European assets in
2024, particularly in Germany, Spain,
Italy and the UK. Investors from the
US dropped from pole position in
2022 to sixth in the top 10 sourcesof private cross-border capital in
2023, with investment moderating-72% year on year to US$1.3 billion.
Meanwhile, cross-border capital from
Spain was the largest source of HNWI
investment in 2023, targeting CRE
in the US, Ireland, the Netherlands
and the UK.
London was the top city
destination for total cross-borderinvestment in 2023, with US$7.6
billion invested. However, New Yorkwas at the top of the list for overseas
private capital, surpassing London
for the first time since 2016. For
HNWIs, the 2023 target list lookedslightly different, with Singapore,
Berlin and Dublin the most invested
urban centres.

LOOKING TO THE FUTURE

With interest rates expected toremain elevated globally into thesecond half of 2024, we anticipate
private capital to remain active.
Indeed, during previous times of
dislocation, private capital has
typically rotated back into CRE.
Following the global financial crisis,
the private buyer share of global CRE
investment grew from 30% to 38%
and in 2021, following the first yearof Covid-19, its share grew to 45%
from 39% pre-pandemic. We expect
this trend to continue in 2024: 19% of
respondents in our Attitudes Survey

THE WEALTH REPORTALL INVESTORSPRIVATE INVESTORS

7.6

1.8

1.6
1.5

5.1

5.0

1.2

4.8
4.1

3.0

0.7
0.6 0.6 0.6
2.1

Shanghai

Los Angeles

Tokyo

Guangzhou

Amsterdam

DublinBerlinSingapore

London0.5 0.5

New York

Sydney2.2

Melbourne

2.3

Los Angeles

Tokyo

BerlinParis

New York

2.5

TorontoFor the first time in four years, a new
sector has topped the investor wish
list. The living sectors are the most in
demand in 2024, with 14% of Attitudes
Survey respondents looking to target
the asset class. Interest is strongest
in Europe, the Middle East, North
America and Asia. Healthcare is not
far behind, with 13% of respondents
interested in the asset class.
However, intentions do notnecessarily equate to transactions,due to factors including availabilityof stock, market size and competition.
For HNWIs, the traditional sectors,
including offices, retail and hotels,
have usually been the most transacted
over the past 10 years. More specialist
sectors such as healthcare and student
housing are often high on investors’
wish lists due to their strong rental
growth prospects and counter-cyclicalnature. However, in practice, someinvestors may hesitate to transact
due to the specialised management
and operational expertise required
for these assets, alongside strict
regulatory and compliance challenges.

Leading hubs for cross-border CRE investment flows in 2023 (US$bn)

Singapore

WHAT WILL THEY BE TARGETING?

Top cities

Londonwere looking to invest directly in
CRE in 2024, with investors from theMiddle East (23%) and Asia (21%) likely
to be the most active.

Sources: RCA, Knight Frank Research

Sectors in demand

If your clients are investing in commercial property in 2024, which sectors will they target?
(% share of all responses by sector)

Attitudes
SurveyLIVING SECTOR SPLIT...

Living sectors

14%

Healthcare

13%

Residential private
rented sector

8%

Education

11%

Seniors housing

3%

Development land

10%

Student housing

3%

Data centres

9%

Industrial & logistics

8%

Hotels & leisure

7%

Farmland

6%

Life sciences

5%

Offices

5%

Forestry

4%

Real estate debt

4%

Retail3%

Source: The Wealth Report Attitudes Survey

THE WEALTH REPORTINVEST

45

Insiderknowledge“From equities to art, theoutlook for asset values isbrighter. We expect investors
to grow increasingly confident
that they can secure returns
that beat the cost of any
mortgage debt they take on”

How would Knight Frank experts invest
in 2024? The Wealth Report finds out

JAMES FARRELL

Head of Rural Consultancy
The opportunity to do well by doing
good has never been clearer.
News coverage of climate change,
habitat degradation and violent
weather events provides an almost daily
reminder of how the world is changing
around us. Roughly 55% of global GDP,an estimated US$58 trillion, ismoderately or highly dependent on
nature, according to a 2023 study by
PwC and the World Economic Forum.
With that in mind, the best
investment anyone can make in 2024
is in nature, the ecosystem and theeconomic prosperity that it underpins.

ED MANSEL LEWISHead of Viticulture

The value of bare land suitable forvines in the south east of England has
risen from £11,000 per acre to £20,000
per acre in eight years. This is stillsome way off prices in Champagne,
where land often trades for more than€400,000 per acre. Perhaps this is
why French wine producers including
Taittinger and Pommery have bought
land in the UK – in the expectationthat land values will continue to climb.
I would agree with them.

“The best investment anyone
can make in 2024 is in nature,
the ecosystem and theeconomic prosperity
that it underpins”
46

INVEST

KATE EVERETT-ALLEN

Head of International andCountry Research
Acquiring private rented stock inmarkets introducing new energy
efficiency rules for landlords suchas Paris and Amsterdam would be
my pick for 2024. Tenant demand
continues to outweigh supply in mostdeveloped markets due to affordability
constraints and demographics.
Some landlords with multiple
properties will relinquish their assets
due to the cost of retrofitting multiple
homes to meet the new energy
efficiency rules. Properties thataren’t upgraded will face a rental ban
although in most cases the rules do
not apply to furnished holiday lets.
Similar policies could start to emerge
across Asia-Pacific and perhaps
the US, depending how high up thepolitical agenda ESG matters sit in
the next administration.

ANNA WARD

Associate, Residential Research
I’d invest into building new London
lab space. The capital’s property
market is struggling to provide biotech
and life sciences entrepreneurs
with the research space they need.
Knight Frank data shows that demand
for lab space in the capital stands at
974,500 sq ft, while availability is just
179,295 sq ft – less than a quarter ofcurrent requirements.
The surge in demand comes
after life sciences firms in London
secured £1.8 billion of venture capital
investment last year. That helped
spur a 60% rise in new company
incorporations year-on-year.

WILLIAM MATTHEWS

Head of Commercial Research
It might seem a strange time toadvocate for offices, but well-trodden
arguments over occupancy andcorporate demand are, at the very
least, nuanced by geography anda host of local factors.
In a recent survey for our(Y)our Space research report, 56%
of global corporates felt a hybrid
workstyle was the future with only
a tiny share taking a “remote first”
approach. Meanwhile, rents forthe best buildings are rising, partly
because build cost inflation has
severely curtailed new supply, and thesomewhat indiscriminate move awayfrom offices has left yields looking
attractive on an historic basis. The
sector is now a fertile hunting groundfor mispriced assets – none more sothan those comparatively rare poorquality buildings in good locations,which can be efficiently redeveloped
to modern standards.

CHRISTINE LI

Head of Research, Asia-PacificIn the next decade, trillions of dollars
are expected to shift to the next
generation in Asia, reshaping theinvestment and wealth management
landscape. Around 70,000 HNWIs
from Asia are poised to pass on
approximately US$2.5 trillion in
the next 10 years, surpassing the
combined GDPs of South Korea andTaiwan, according to Euromoney
People Intelligence.
This shift is already transforming
the investing landscape, fuelled bya growing emphasis on sustainable

THE WEALTH REPORTinvesting and ESG considerations.
Traditional investments like art,
wine or jewellery may give way toa preference for those with a morepositive impact on society, suchas contributing to food security,
mitigating climate risk and healthcare.

FLORA HARLEY

Head of ESG Research
Refurbishing office stock in central
global cities like London, Paris, NewYork and Singapore is my pick for2024. There is increasing demand
for net zero-enabled buildings that
support occupier wellbeing, yet supply
doesn’t match up. Half of the world's
2,000 biggest listed companies haveset a target to get to net zero emissions
by 2050. There is also a huge need torepurpose offices across smaller towns
and cities. This presents a fantastic
opportunity to alleviate some of theworst aspects of the housing crisis,
albeit to a limited degree.

THE WEALTH REPORTWILL MCKINTOSHRegional Head of Residential, MENA
Dubai is a good bet. The population
is growing rapidly and there is a very
limited supply of land and new projects.
Combine that with the fact that thecity is now regarded as a truly global
destination, and I think investors
have a raft of opportunities for 2024
and beyond. While we will see normal
market cycles, the “boom and bust”
that we have seen previously presents
less of a risk. Residential would be mypick, but there is also a lack of supply in
office space and investment grade assets– hotel occupancy also remains verybuoyant, for example.

ANDREW SHIRLEY

Head of Rural Research
Echoing James Farrell, I would be
looking very carefully at farmland orforestry opportunities that can offer
ultra-high-integrity and reputably

certified nature-based solutions thatare able to withstand the scrutiny ofeven the most forensic “greenwashing”
tests. Ideally, they would also provide acommercial income in addition to any
carbon or biodiversity credits.

SIMON GAMMONManaging Partner,
Knight Frank Finance
Inflation has turned a corner anddebt costs will fall as the year
progresses. We will reach a point at
which debt becomes a viable part ofany investment strategy once again.
From equities to art, the outlook for
asset values is brighter. We expect
investors to grow increasingly
confident that they can secure returns
that beat the cost of any mortgage
debt they take on. For 2024, I would
seek to utilise finance to free up
liquid capital, positioning myself tocapitalise on new opportunities themoment they emerge.

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47

“Despite various headwinds,
Europe is predicted to remain
the largest destination for global
cross-border capital in 2024,with industrial and residential
expected to be the mostinvested sectors”

for rental accommodation while
specifically targeting the 25–34 age
bracket. Vacancy rates are close to 1%
nationally and younger renters in the
major cities are seeking new options
besides the more established student
housing and build-to-rent markets,
which target younger and older age
groups respectively.

STEPHEN SPRINGHAM

Partner, Head of UK Markets

BEN BURSTON

Chief Economist, Australia
Investors are seeking greater
diversification and the living
sectors are at the front of the queue.
While institutional investors are
predominantly focused on largescale investment in build-to-rent,
private investors have an opportunity
to gain exposure to living sectors
through the development of co-living
assets. That should allow them totap into surging underlying demand

Supermarkets are my pick for 2024,
but only those that meet certain
criteria spanning turnover, salesdensity, local population density
and the level of competition fromother operators.
The right supermarket investments
will deliver stable, low-risk, longterm income comfortably above allcommercial real estate averages.
Annual total returns are greater than
7% and annual income returns arenorth of 5%. Supermarkets are invogue with investors, but there isconsiderable merit in straying fromthe herd and going against the grainof common investment criteria.

JUDITH FISCHER

Associate, European Research
Despite various headwinds, Europe
is predicted to remain the largest
destination for global cross-border
capital in 2024, with industrial
and residential expected to be themost invested sectors. There will
likely be some significant pocketsof resilience. In Spain, for example,
we expect the hotel sector to see
inbound investment, supported
by above-average economic
growth. In the office sector, pricing
opportunities across Europe fromshifting yields are increasing. Prime
office yields in cities such as Munich,Dublin, Berlin and Frankfurt have
expanded by more than 100 basis
points from their recent lows.

HUGH DIXON

Partner, Head of Private Office
New York
I would recommend spreading theinvestment across different property
types and geographic locations tominimise risk. Explore emerging
markets with potential for growthand development, while ensuring
you have a foothold in stable andestablished markets with a historyof steady appreciation.
We are seeing real value incommercial markets across multiple
locations, specifically New York andLondon. Residential properties,
including apartments or single-family
homes, can provide a steady income
stream through rent. Our UHNWI
clients are seeking unique assets inthis space which are hard to replicate.
I would favour areas with agrowing technology sector, which
often experience increased demand
for real estate. This is the case in
Miami, with Amazon and other big
tech companies looking at Florida.
Additionally, the Middle East is
driving tech-related investment
associated with large projects such
as NEOM in Saudi Arabia.

ERIN VAN TUIL

Partner, Head of Residential,
Australia
The success of Crown Residences
at One Barangaroo, Australia’s first
fully integrated hospitality branded
residences, made it clear that48

INVEST

THE WEALTH REPORT

service provision is still an aspect ofapartment living that is yet to be fully
harnessed by Australian developers.
I see a strong opportunity forforward-thinking developers andluxury hoteliers to expand into this
sector to deliver more hospitalitybranded residences.
Crown Residences at One
Barangaroo is the only truly superprime building in Sydney, if not
Australia. When you consider thatalongside the considerable growth inAustralian UHNWIs we’re likely to see
over the coming years, super-prime
developments that offer exceptional
design, location and service, albeit
perhaps not linked to a hotel brand,
would also be a sector I expect will
perform strongly.

VICTORIA ORMOND

Partner, Capital Markets Research
Thinner competition is creating
opportunities for investors acrossthe risk spectrum, especially for
those not reliant on debt. This ranges
from opportunities in sectors withstructural tailwinds, including“beds, sheds, eds and meds”. Other
opportunities are likely to arise
from some sectors being over-sold,including – selectively for the rightbuilding in the right location –offices. This creates opportunity forcontrarian investors. There are likely
to be liquid, trophy assets coming to
the market, as some investors lookto raise capital. At the other end of
the spectrum, selective secondary
and tertiary assets with goodbones and the right location, but
undergoing significant repricing, will
create opportunities for repurposing
and refurbishment.

DAVID GOATMAN

Global Head of Energy
and Sustainability
As we move towards greater
electrification in all areas of ourlives, property projects and landwith substantial grid connectivity,
both import and export, will become
increasingly valuable. I would seek todevelop light industrial and logistics
with co-located renewables and asuper-charging hub for fleet andtrucks. Demand for this co-locatedapproach will grow substantiallyover the next few years.

THE WEALTH REPORTJOSEPHINE JONES

Partner, Knight Frank
Capital Advisory
Interest rates are predicted to fall
swiftly and the forward curve pricing
three- and five-year debt is now morethan 100 basis points lower than only
a few months ago. However, with
inflation still sticky and projected
CAGRs topping 4% over the same
period, there is once more a narrowwindow of negative real rates.
This will provide a compelling
opportunity for those nimble enoughto find assets that directly benefit
from inflation-linked rental growth.
As forced sellers continue to provide
mis-priced opportunities, it’s amarket that requires high conviction
underwriting – those who can accessthese opportunities with attractive
supply/demand fundamentals andapply requisite ESG future-proofing
will generate outperformance.

ALASDAIR PRITCHARD

Partner, Private Office

We’re seeing increasing numbers ofpeople opt for another base in European
gateway cities. A lack of suitable producthas weighed on activity in several
markets, but developers have responded
and choice is now improving.
For anybody looking to put money
into an apartment to rent out, or visit
with family, that is likely to benefit
from strong growth in capital values,
I would invest in Italy. The tax regime
allowing non-domiciled Italianresidents to pay an annual flat tax of€100,000 on foreign income has beenhugely popular. Milan gives you theinternational airport. Lake Como gives
you the lifestyle with the connectivity.
Florence is a year-round city, both froma business and cultural perspective.
Venice, too, gives you waterfront living,and it’s a quick nip into Cortina for some
fresh mountain air.

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49

Is ESG over?

Once the corporate buzz word, ESG has slippedout of focus of late. Flora Harley makes the casefor bringing it back into the spotlight – and setsout a new framework for actionE

verything Everywhere All at Once is boththe title of the winner of the 2023 Oscar
for Best Movie, and a neat summary of
the current state of ESG. Writing in
The Wealth Report last year, Liam Bailey cited
Hester Peirce, Commissioner on the US Securities
and Exchange Commission, who in a speech as
far back as 2020 described ESG as “broad enoughto mean just about anything to anyone.”
The term, first coined in 2005 by the UN, wasinitially intended as a framework for measuring
processes and outputs to drive transparency
and accountability, ultimately ensuring that weachieve equitable sustainability. But somewhere
along the line it’s got lost in translation.
In a year which saw the impacts of climatechange writ large as we entered what one
research report described as “uncharted climate
territory”,1 the implications of this lack offocus have never been clearer. Amid growing
politicisation and ever more negative coverage,
how can we get ESG back on track, and convince
UHNWIs – whose actions have disproportionate
impact, and are also subject to most scrutiny– that they can make a difference while still
pursuing their wealth goals?
Defining some broad focus areas – the REs to
REimagine ESG, if you will – may help crystallise
thinking and counter scepticism with a dose of
tangible action. Here are five to get us started:
REduce energy consumption, create more
REnewable energy, REuse what we have, REstore
nature and REengage stakeholders (see page 53
for more on what these might mean in practice).
1“A report by
Oxfam andthe Stockholm
Environment
Institute statesthat the richest
1% of the global
population is
responsible formore emissions
than thepoorest 66%”

It’s important too to remember this is not about
striving to tackle everything, everywhere all at
once. As Voltaire said, “The perfect is the enemyof the good”. Action, however incremental,
is always better than inaction and, when
compounded, stands to make a real difference.

MIND THE GAPReducing emissions is the thread that runs
through the five REs of ESG. As the impact
of climate change intensifies, so does the
spotlight on the wealth carbon footprint gap,
whereby more prosperous nations, and indeed
individuals, play an outsized role in emissions
while developing countries bear the bruntof climate change.
A report by Oxfam and the Stockholm
Environment Institute states that the richest 1%of the global population is responsible for more
emissions than the poorest 66%. This gap isexacerbated as individuals create vast emissions,
yet can shelter from climate change’s mostdamaging effects due to mobility and ability to pay.

65%

of UHNWIs are actively trying to reduce
their personal carbon footprint

https://academic.oup.com/bioscience/article/73/12/841/7319571

50

INVEST

THE WEALTH REPORT1 in 5CHANGING LIFESTYLESUHNWIs are attempting to measurecarbon emissions

Aside from their philanthropic endeavours, isthere any evidence that wealthy individuals areendeavouring to change their habits and close
the gap? In short, yes. According to our Attitudes
Survey, almost two-thirds of UHNWIs areattempting to reduce their carbon footprint,
while a fifth are trying to measure it.
“Wealthy families and UHNWIs have an
increasing commitment to environmental
responsibility,” notes Maryann Bell of Wingspan,a business designed to maximise family unity,
business success and societal impact. She sees
them “shifting lifestyles” but points out that this“actively requires intentionality”. Europeans
are the most active, with three-quarters seeking
to reduce their emissions, while those based in
the Middle East are the least engaged, with 58%
seeking cuts.

THE WEALTH REPORT“The IEA predicts
a yearly growthrate of 36% for
EVs and this rapid
adoption willaffect property
owners andinvestors as
charging facilities
are increasingly
sought in homes,
offices andretail locations”

So what actions are UNHWIs actually taking?
Let’s start with transport, where some 40% of
UHNWIs are switching to electric vehicles (EVs).
The International Energy Agency (IEA) predicts ayearly growth rate of 36% for EVs, and this rapid
adoption will affect property owners and investors
as charging facilities are increasingly sought inhomes, offices and retail locations.
But not all transport is made equal: just 10%of UHNWIs plan to reduce air travel, while 14%
intend to cut down on private jet use. “This is
the hardest change as it has an efficiency andtime element,” notes Bell. “But we are seeing
a lot more conversations about offsetting thattravel.” Change at an industry level is also making
headway, with the first commercial transatlantic
flight using reportedly sustainable aviation fueltaking off in November 2023.
Investment decisions and business operations
are increasingly seen as tools for reducing
emissions, with around a quarter of UHNWIs
screening potential investments against ESG
criteria. Wider adoption of ESG screening could
mean more capital being directed to sustainable
activities – and greater scrutiny over how
businesses impact the planet. Reflecting this,INVEST

51

Attitudes
SurveyTaking strides

Shifting priorities

Proportion of UHNWIs taking the following
actions to reduce their carbon emissions

Switching to electric vehicles

Improving the energy efficiencyof their investment property
Improving the energy
efficiency of their homes

Reducing the carbon footprintof business operations

ESG screening of investments

Investing in nature-based solutions

Owning fewer homes
Reducing private jet travel(for those who fly private)

Reducing air travel

Reducing personal vehicle ownership

The most popular changes to lower emissions,ranked by % of UHNWIs doing each
AFRICAASIA

AUSTRALASIAEUROPELATIN
AMERICAMIDDLEEASTNORTHAMERICA

7

1

3

3

2

3

1

4

3

2

2

3

1

2

1

2

1

1

1

2

4

8

4

4

4

4

4

3

24%

6

5

5

5

5

5

6

21%

2

7

6

6

6

7

5

14%

3

6

8

8

7

8

7

14%

10

8

7

7

8

6

8

10%

5

10

9

9

10

9

9

10%

9

9

10

10

9

10

10

40%

34%

34%

30%

Source: The Wealth Report Attitudes Survey

30% of UHNWIs are reducing the carbon footprintof their business operations. While family-run
businesses often do not require outside capital andtherefore have limited accountability mandates,
ESG can still be business-critical. “Familybusinesses encapsulate and share family values,”
says Bell. “Environmental and social responsibility
is at the forefront of minds and being recognisedand communicated as part of those values.”
Two of the top three actions for reducing
emissions were improving the energy efficiencyof homes and investment property. Looking
ahead, we can expect more attention to be paid
to lifestyle externalities and the carbon wealthgap. In a more transparent digital world, Bell52

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points out, “there is no hiding”. Action – or lack ofit – becomes more visible, and accountability more
broad-based. We could also see governmental action:
in January, Switzerland’s Young Socialists collectedsignatures for a national vote on a new tax on thewealthy to cover climate change costs.
Wealthy individuals will need to identify
their sustainability goals, which are being
driven particularly by the younger generations(see page 14 for more on this), and implement
adjustments across all aspects of their lives todeliver these. As Bell muses, “it’s being elevatedin the conversation, and whilst they may not be as
good as they can be, they are trying and making
active choices.”
THE WEALTH REPORTRenewing real estate
Real estate is pivotal to the delivery of our
five REs to REimagine ESG. Flora Harleylooks at how UHNWIs view ESG in property– and the key considerations for the futureR

eal estate is a critical lever for UHNWIs
in pursuing their sustainability goals.
With the built environment responsiblefor 40% of global emissions, a herculean
effort will be required to reach net zero. While realestate is linked to all five of our REs of ESG, here
we focus on three, exploring how UHNWIs are
seizing opportunities in these spaces.

RE 1: REDUCING ENERGY CONSUMPTION
What’s it all about?

THE WEALTH REPORT

Proportion of UHNWIs following each ESG strategy
when investing in commercial real estate
21%

20%

19%

Invest in carbon sequestration
opportunities through land acquisition

23%

Acquire and reposition (change ofuse) assets with weak ESG credentials

27%

Acquire and upgrade assets
with weak ESG credentials

29%

Sell poor ESG-performing assets

While improving energy efficiency in their homes
and investment property is a top priority, UHNWIs
may lack urgency compared with other investment
actors. Our 2023 survey of 45 pan-European
property investors found that more than threequarters were looking to improve their existing
assets compared with just over a third of UHNWIs.
However, the spectre of more stringent energy
efficiency minimums and demand from occupiersmeans that UHNWIs too will have to bringbuildings in line in the near term.
There is a broader trend of retrofitting andrefurbishment. Just over a fifth of UHNWIs wantto acquire and upgrade assets with weaker ESG
credentials to upgrade or reposition, while almost
60% of the pan-European property investors
surveyed are actively seeking poor-performing
assets to improve/upgrade. However, retrofit is notfor everyone. The predominant ESG investment
strategy for UHNWIs has the potential to carry alower risk profile, with 29% opting to invest in themost sustainable/prime assets.

Shaping an ESG strategy

Invest in renewable energy projects

How engaged are UHNWIs?

Attitudes
SurveyOnly invest in the mostsustainable/prime assets

Not only will measures to reduce consumption andincrease efficiency cut energy costs and emissions,
reduced demand is vital to enabling greater
electrification of heating, adoption of EVs andsupport for future infrastructure. There may also
be additional rewards for investors. Our previous
research has identified a sales premium for greenrated buildings of up to 18% and a rental premiumof up to 12% due to the unwavering demand for“best in class” assets, dependent on location,
which still outstrips supply.

Source: The Wealth Report Attitudes Survey
Note: Respondents could choose multiple options

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53

What should be the focus?

Energy efficiency ratings (such as Energy
Performance Certificates or EPCs) are theclearest signal for UHNWIs, with 60% assessing
property acquisitions against them. For thebroader property investor market, somethree-quarters of investors have a minimum
certification requirement when acquiring newinvestment properties.
Interest in green/sustainable certifications
such as BREEAM, LEED, NABERS and GreenMark is growing, with 46% citing this as aconsideration, up from 25% last year. Whenundertaking improvements, investors must
consider the requirements of occupiers andfuture investors, including the need for data
to show how buildings are actually being used.
Thanks to the inexorable rise of the EV, 39%
now look for EV charging when assessing abuilding for acquisition, up from 25% last year.
Furthermore, a quarter are assessing provisionof amenities, compared with the 9% seeking
cycle facilities in our 2023 report. Social andwellbeing aspects will come to the fore as more
actors come to grips with the E side – indeed,
the more forward-thinking are already making
these areas a priority.

“Interest in green/sustainable
certifications is
growing, with46% citing this asa consideration,
up from 25%
last year”

RE 2: RENEWABLE ENERGY CAPACITY
What’s it all about?

Governments globally are offering investment
incentives and tax breaks. According to the IEA,
some US$310 billion has been committed to lowcarbon electricity, with more than US$2.2 trillion
for all energy spending. For leased investment
properties, the provision of stabilised, zero-carbon
power could be a draw, providing more predictableenergy costs and a way for occupiers to reach theirown net zero goals.

How engaged are UHNWIs?

More than a quarter of UHNWIs are planning toinvest in renewable energy projects. The greatest
appetite is among Europeans with 28%, followedby Asian UHNWIs with just over 27%. Others
are not far behind, with 26% of North American
UHNWIs pursuing this strategy.

What should be the focus?

Rooftop solar solutions can reduce or eliminate
energy costs, lower emissions, potentially provide
ancillary income and, particularly for investment
property, increase capital value. Electricity
grids globally need upgrades; on-site power

Efficiency is key

Attitudes
SurveyProportion of UHNWIs using ESG-related criteria to assess property acquisitions
Energy Efficiency
Rating (e.g. EPC)

61%

Renewable
power source(e.g. solar
panels)48%

Green/
sustainable
certifications (e.g.
BREEAM, LEED,DGNB, Green
Mark, NABERS)

46%

EV charging
points39%

Impact on
nature andbiodiversity(e.g. green
roofs/space)

32%

Impact on wider
community(e.g. community
facilities, open
space/cafés)

26%

Amenity-richassets (e.g.
cycle facilities,
wellbeing space)25%

Source: The Wealth Report Attitudes Survey

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THE WEALTH REPORTWhat should be the focus?

Almost a third of UHNWIs assess a building’s
impact on nature and biodiversity before
acquisition. This trend is likely to build: in theUK, for example, new developments now requirea minimum of 10% net biodiversity gain. The
burgeoning market for “nature credits” presents
an opportunity for private investors – albeit
there is a need for rigorous attention to verifiable
benefits to avoid any risk of “greenwashing”.

WHERE TECH MEETS REAL ESTATE

Miguel Nigorra, partner and Headof Europe at Fifth Wall, on emerging
trends in the growing arena of property
technology (proptech)

generation and storage offer security of supply.
For landowners, there are broader opportunities
for ground-mounted solar and battery projects.
“We have seen a number of UHNWIs seeking waysof using their land for renewable opportunities
to diversify income as well as for sustainability
objectives,” says David Goatman, Global Head ofEnergy and Sustainability at Knight Frank. “In
addition, the market has witnessed sizeable rental
growth of 10–20% per annum in recent years.”

RE 3: RESTORING NATURE
What’s it all about?

Nature is in the spotlight following the Global
Biodiversity Framework agreement in December
2022 and the release of the Taskforce for Naturerelated Financial Disclosures (TNFD) Frameworkin September 2023. Half of global GDP depends
on nature in some way, but the benefits extend toinclude health, food production and emissions
reduction, for example through carbon capture.

How engaged are UHNWIs?

Wealthy individuals are seeking opportunities tolower their emissions and secure returns, with
21% investing in nature-based solutions and 19%
in carbon sequestration opportunities throughland acquisition. Previous editions of The WealthReport have looked at how UHNWIs are rewilding
or protecting marine habitats. With the markets
for nature evolving, be that biodiversity credits orcarbon credits, the appetite for such projects
looks likely to increase.
THE WEALTH REPORT“The market[for renewableprojects] has
witnessed
sizeable rental
growth of 10–20%
per annum inrecent years”

Within the three macro trends where we see
opportunities in the built world – companies
aiming to increase ancillary revenue, deliveringsolutions to reduce operations expenditure,and future-proofing assets – we divide theenergy retrofitting space into five verticals:
data collection, retrofit assessment, financing,
installation and reporting.
Plenty is happening across all five, but the mostimpactful today are the second and the third, withcapital expenditure (capex) increasingly importantto generate additional returns. While a significant
amount of energy consumption data is being
harvested, it is not being acted upon. There isreal innovation in taking that data, benchmarking
portfolios and delivering retrofit plans. Software
solutions can provide accurate payback
periods and return on investment for different
interventions. Already evident in the US andincreasingly in Europe is the shortage of labour
to perform capex retrofits, pointing to a need forlabour optimisation, retraining and upskilling, andthe development of platforms to facilitate this.
When it comes to financing the green
retrofitting challenge, there is a massive gap
and an opportunity. Companies have solutions
for channelling capital towards retrofit andgarnering better returns, but this will vary bystage of investment and the parties involved. For
example, heat pump installers do not necessarily
require venture capital funding, but debt facilities
to front-load equipment purchases. The average
household might not have the cash or may
need a push to make decisions once incentives
get eliminated, and there are multiple models
emerging – from zero upfront capex solutions toleasing or saving agreements – to address theissue of how retail investors will finance asset
transformations in the space.
Fifth WallWith around US$3 billion under management, Fifth Wall is theworld’s largest asset manager focused on future-proofing anddecarbonising the built world.

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55

Are you readyfor AI?
Artificial intelligence may deliver more than webargained for, argues Ian McGuinness, Knight Frank’s
Head of Research Analytics. So how can investors
position themselves to reap the rewards?

P

ick any successful real estatedeveloper from a previous
generation and try to put
your finger on what madethem successful.
Whoever you’re thinking about,their success was almost certainly
heavily skewed towards who theyknew, which in turn dictated how theyfound the best sites and accessed thefinance to build them out.
Success in this industry has always
been about insider knowledge. That’s
why it’s so exciting that we are at the
beginning of a revolution in artificial
intelligence (AI) – one that will enable
us to make sense of quantities of
information that would have seemed
impossible only a few years ago.
Indeed, our expanding AI-driven
data processing capabilities will
result in the largest improvement toproductivity since the arrival of theinternet, saving the average worker
more than 100 hours a year, according
to Google. In the UK alone, thecompany estimates that AI-powered
innovation is expected to create£400bnestimated boost to economic value
from AI-powered innovation in
the UK by 2030

56

more than £400 billion in economic
value by 2030. GDP is expected to be
more than 10% higher over the same
period than it otherwise would havebeen, according to PwC.

EARLY ADOPTERS

Those investors who engage with
AI early stand to command thelargest slice of those gains. In theproperty sector in particular, rapidly
improving technology offers aonce-in-a-generation opportunity
to make money.
But first, some terminology.
The explosion in popularity of large
language models such as Open AI’s
ChatGPT can make it appear as
though AI only arrived in 2023, but
the natural language processing(NLP) technology that underpins
these chatbots has been with us forseveral years. The beauty of ChatGPT
was its simple interface that enabled
hundreds of millions of people toget their first taste of what AI
might offer.
NLP enables us to extract value
from huge amounts of unstructured
text. Some readers of The WealthReport might have experienced thefrustration of manually moving datafrom a PDF into a spreadsheet so it
can be manipulated and mined for
insights. AI automates that process
on an enormous scale. These models
can put words into context and draw
inferences in a manner that the worldis only just beginning to understand.

“Investors who engage with
AI early stand to command
the largest slice of thosegains. In the property sector,
rapidly improving technology
offers a once-in-a-generation
opportunity to make money”

VISION OF THE FUTURE

We began experimenting with NLP
four years ago by turning it loose onplanning databases. It immediately
became apparent that there weretroves of information in the thickets
of commentary added by planners
that would be impossible to compile
manually. We were able to track how
businesses across the country wereadapting to the Covid-19 pandemic
by changing the use of properties,
for example.
It was immediately clear that NLP
could be used most profitably to findsites, particularly when paired withother techniques. The Knight Frank
Research Analytics Team has deep
expertise across data manipulation,
analysis and visualisation. We view AI
as a chain of processes that includes
language processing but also spans
machine vision, classification andlearning techniques that enable us toaddress data gaps and make cleareyed predictions.
If you could take a walk with me
through prime central London rightnow, for example, I could show you
every available development site andexplain their positioning relative tolifestyle elements such as the highest
performing schools, fine dining
establishments and private members’
clubs. I could also point out how many
wealthy individuals live nearby, theirproperty preferences, plus how muchthey have to spend. With AI we can doit all over coffee at Knight Frank’s HQ.

LOCAL INTELLIGENCE

These technologies get moreinteresting when they are applied tomore complex problems, particularly
during periods of elevated borrowing
costs. The financial viability ofretrofitting commercial buildings

THE WEALTH REPORTto achieve higher BREEAM or
EPC ratings varies depending onunderlying values or rents. By feeding
our models with the relevant data, we
can produce accurate contour lines
over a vast area that display exactly
where investing is most likely togenerate the best returns.
Seniors housing is another sector
for which development viability
turns on dozens of factors. People
over 60 tend to purchase property
only within three miles of where they
live, so any feasible development
site must have the depth of market
nearby. Our models account for the
20% equity release that most movers
in that demographic seek to lock in.
Developers come to us for highly
localised answers as to where it isfeasible to start digging, but at thetouch of a button we can apply ourcriteria to the entire country, at times
providing hundreds of suitable sites.
One of the many examples ofscalability was our study of car park
land for officials at the Department
for Levelling Up, Housing andCommunities who wanted to findout whether any public sector-owned

THE WEALTH REPORT

car parks could be put to morevaluable uses, such as retail orresidential. We studied more than
30,000 car parks and found that,while they were well served by public
transport, almost 70% didn’t appear
to support a retail centre. Considering
land values and redevelopment
potential, we identified enoughland to support more than 100,000
new homes, all while maintaining
car parking services that are vital in
supporting our high streets.

“We view AI as a chain ofprocesses that includes
language processing but
also spans machine vision,classification and learningtechniques that enable us toaddress data gaps and makeclear-eyed predictions”

NEW HEIGHTS

Data is rapidly proliferating, andhow real estate investors manage somuch of it is now among their biggest
challenges. AI will help capture“lightning in a bottle” opportunities,
because only its computational
power can fully resolve and scale
the myriad physical, socioeconomicand environmental conditions
underpinning success
NLP, computer vision and machinelearning techniques will all playincreasingly prominent roles, butthey are still best combined with therelationship-building and foresightthat have been utilised by successful
developers for decades.
The abundance of information
fuels the potential for a generationof property investors to achieve
new heights – if they can bringfresh perspectives and discern thesignals within the noise. Returns will
increasingly correlate with the qualityof the data and interpretation you
have access to. Success is still about“insider knowledge”; but that term
no longer means what it used to.

57

Green dirt
How is the burgeoning interest in nature-based
solutions affecting farmland markets aroundthe world? With the help of Knight Frank’s
global network of agricultural experts,
Andrew Shirley, our Head of Rural Research,does some digging

Feeding the world is still the number one
reason to invest in farmland, according
to this year’s Attitudes Survey; butsaving the environment is the second
most popular driver.
Almost half of respondents picked foodproduction as a good rationale for acquiring
agricultural property, while just over 40% feltthat environmental benefits meant farmland
warranted some kind of portfolio allocation.
Interestingly, though, the results reveal
mixed feelings about how those environmental
benefits might be delivered. Given the current
focus of governments and NGOs on the abilityof woodland and forests to mitigate climatechange, it is surprising that only a quarterof our respondents logged planting trees asa reason to invest. Harvesting income fromcarbon credits, which are also grabbing headlines
at the moment, piqued the interest of just 30%.
These results are perhaps to be expected.
Even in terms of vanilla food production,
farmland is still often considered to be very muchan alternative class by most fund managers,
including those who specialise in real estate. This
despite it accounting for almost 5 billion hectares,
or around 40%, of global landmass.
However, with investment funds increasingly
preoccupied with the likes of ESG and net zero,
the ability of farmland to offer nature-based
solutions to some of the world’s hottest issues– including climate change – is beginning to
attract more attention.
There is plenty of scope for this to happen.
According to the International Panel of Climate
Change, agriculture, forestry and change of“The ability offarmland to offer
land use account for as much as 25% of humaninduced greenhouse gas emissions. In particular, nature-based
solutions to some
agriculture is one of the main sources of emittedof the world’s
methane and nitrous oxide.
hottest issues –“We are seeing a new range of investors
including climate
who’ve never looked at farmland before, butchange – iswhere somebody in the business has said
beginning to attract
they should be doing something aroundmore attention”
natural capital,” says Nick Tapp of Craigmore
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Sustainables, an investment manager
specialising in New Zealand farms and forestry.
According to analysis by Agri Investor, theamount of capital raising activity for straight
agri-food and forestry funds slumped to just
US$1.4 billion in the first half of 2023, the lowest
six-month allocation since 2011. Conversely, theamount earmarked for climate-related funds
had hit more than US$30 billion by Q3, says
climate economy tracker CTVC.
A good chunk of that could be targeted at
farmland-based schemes, such as tree planting,regenerative agriculture or carbon credit
schemes. As Tapp points out, though, larger
funds favour scale, simplicity and diversification,
which can be hard to deliver via relatively
complex assets such as farmland and natural
capital. “Some proposals are frankly bonkers and,
unless investors invent new markets for trading
the carbon or natural capital they’ve created, they
are very likely to fail,” he says, “and that would
be a shame for what should be a really importantcomponent of a traditional asset class.”
As one carbon credit giant discovered lastyear, greenwashing allegations are anotherpitfall. A press investigation claimed that 90% of“avoided rainforest deforestation” credits were
essentially worthless – claims which have beenstrongly refuted by the industry.

THE WEALTH REPORTPolluting businesses can buy credits derived
either from tree or soil carbon sequestration
to offset their own carbon emissions, but thisnascent voluntary market is often referred to asa wild west. First, there is a lack of regulationand transparency, with questions being asked
about the different methodologies used tomeasure carbon sequestration by trees and soil.
Second, the whole concept, even morality, ofoffsetting is coming under increasing scrutiny.
A new piece of EU legislation, for example,
means that businesses will essentially bebanned from labelling their products as “climate
neutral” or “carbon neutral” if they rely on
offsetting to balance their emissions. “Carbon
neutral claims are greenwashing, plain andsimple,” says Ursula Pachl, the deputy directorof EU consumer advocate body BEUC.
James Cairns, a regenerative agriculture
investment specialist at Lombard Odier
Investment Managers, agrees that farmland
and forestry funds need to look carefully at therationale behind their investments. “Rather thanrelying on something volatile like carbon credits
to help deliver a return, we think it can makemore sense to try to disrupt existing value
chains and price the provision of nature andclimate services directly into the value of thecrops you are growing.”

THE WEALTH REPORT

Rare breed –The 3,800-hectare
Rothbury Estate inNorthumberland is oneof the few largescale natural capital
opportunities to cometo the market in the
UK. It is priced at £35
million and is attracting
significant interest
from environmentally
focused buyers

Markets that are either non-voluntary, suchas the New Zealand Emission Trading Scheme
and England’s newly introduced biodiversity net
gain rules for property developers, or voluntary
but government regulated like the UK’s Woodland
Carbon and Peatland Codes, offer investors morecertainty, but they can still lack the scale and easeof management beloved by bigger funds.

VALUING NATURAL CAPITAL
Against this backdrop of eco enthusiasm, how havefarmland markets been performing? And is natural
capital being factored into valuations?
“There is still a lot of money looking at African
farmland, but tapping into natural capital markets
has not been a big topic of conversation,” says Susan
Turner, Managing Director of Knight Frank South
Africa and rural valuations expert. “Some funds
and owners of conservation properties are looking
into the potential of carbon credits and practices
to reduce agriculture’s environmental footprint.
Currently, I am not including it in my valuations –natural capital by its nature does not have a direct
market value and measuring its impact is complex.
But we will need to consider it in the future.”
But that’s not to say farming sustainably isn’t a
hot topic in South Africa. “It’s something farmers
are increasingly being told they must do to supply
large retailers and processers here,” Turner says.

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In the UK it’s a mixed picture. “There aredefinitely a lot of potential institutional andprivate buyers out there who are driven byvarious environmental concerns,” agrees KnightFrank’s Head of Farm and Estate Sales Will
Matthews. “But I wouldn’t say they are buying
a huge amount of farmland. Average values inEngland rose by 7% in 2023, but natural capital
certainly wasn’t the biggest influence.
“When we put a property up for sale now
we are definitely highlighting its natural capital
opportunities, whether that’s tree planting or
nature restoration, but it’s not something we are
currently adding a premium for. It’s just too hard
to value at the moment,” he explains.
But north of the border in Scotland, farms
expert Tom Stewart-Moore says there is evidence
that the carbon market has pushed up the value ofcertain land types. “A lot of poorer quality grazing
land in the uplands has been bought by investors
looking to plant trees and claim carbon credits
under the Woodland Carbon Code.”
According to Knight Frank’s Scottish Farmland
Index, this type of land has seen the strongest
price growth over the past two decades with values
rising by over 900%, compared with around 300%
for good arable soil. Prices, however, have started
to fall back, says Stewart-Moore. “The cost of land,planning issues, higher borrowing costs, a drop
in timber values and changes to the Woodland
Carbon Code have all made it more difficult tomake the numbers stack up.”
A lack of availability, coupled with the tax
planning benefits of farmland ownership, tends
to insulate the UK’s farmland market from someof the economic fundamentals such as lower
commodity prices, cost inflation and higher
interest rates that might overwise put pressure
on values. But elsewhere in the world values arestarting to slip or flatline.
“The market has been a lot more subdued
over the past 12 months,” says Nick Hawken,

Head of Rural Property at Knight Frank’s New
Zealand associate Bayleys. “It’s probably theslowest I’ve seen it since the global financial
crisis.” Much higher interest rates and a drop incommodity prices are to blame, he says. “Farmers
were fighting to break even this season, but there
remain good buying opportunities throughout
all our rural sectors.”
As in Scotland, large-scale forest creation,
abetted by the country’s emissions trading
scheme, had been driving up the value of somepastureland, but the government has now beenaccused by its own Climate Change Commissionof relying too heavily on tree-planting to hit its net
zero targets instead of actually cutting emissions.
There had also been hopes that the recent
election would lead to the relaxation of New
Zealand’s strict overseas investment rules, which
could open up the market to more environmental
investors, points out Hawken, but the politics ofcoalition government means this has not been apriority. “But if you are an expat Kiwi who wants
to come home and farm, or a farmer who wants toemigrate here for the quality of life, now is a greattime to buy,” he reckons.

“When we put aproperty up forsale now, weare definitely
highlighting its
natural capital
opportunities”

INFLECTION POINT
Across the Tasman Sea, farmland valuesin Australia also seem to have reached an
inflection point after a period of strong growth.
Average values across the country rose by just 0.1%
year-on-year in the first half of 2023, according to
Rural Bank’s Australian Farmland Values Report.
“Over the past few months, we have seen asoftening in enquiry numbers for campaigns in
Tasmania compared with 12 months ago.
However, property values continue to hold upvery well in the current market,” says Rob Dixonof Knight Frank Australia.
“We understand the market trajectory has
likely plateaued. But buyers are still appreciating
the key fundamentals of Tasmanian rural real

Hay day

Reasons to invest in farmland (global average*)

Food
production

49%

Environmental
benefits

41%

Safe-haveninvestment

38%

Lifestyleopportunities

37%

Tax
planning

35%

Income fromcarbon credits

30%

Planting trees

25%

Source: The Wealth Report Attitudes Survey*Respondents were asked to choose the options that best matched their sentiment towards farmland investment

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THE WEALTH REPORT

estate – water, climate and affordability. Morerecently, larger transactions undertaken by
Knight Frank Agri-Business suggest that HNWIs
and corporates are still active in our markets,”
adds Dixon. Renewable and carbon opportunities
are attracting buyers, such as sustainable forestry
business ActivAcre, but so far there is no solid
evidence that this has pushed up values, he says.
According to figures from the US Departmentof Agriculture, average farmland values in key
crop-producing states rose sharply in 2023, but
analysts are predicting that pressure on cash rents
will moderate growth in 2024. Politicians are also
calling for curbs on who can buy farmland as safe

Aussie opportunity –“Big Run” is one of threeproperties for sale nearMusselroe Bay in northeast Tasmania that offer a
combined 2,700 hectaresof agricultural, natural
capital, renewable andagri-tourism opportunities.
The total guide price isaround A$24.5 million

Can’t see the wood

20-year price change of Scottish farmland
707%

498%

338%

312%
216%

Good arable

AveragearableArable/grass

Source: The Knight Frank Scottish Farmland Index Q4 2023

THE WEALTH REPORT

Uplandpasturesuitable fortree planting

Hill land

haven-seeking local and overseas investors snap
up millions of acres.
There is no doubt that there is a significant
amount of cash available to be invested inproperty assets such as farmland and forestry,
which offer the potential to deliver naturebased solutions such as carbon sequestration
and boosting biodiversity.
But monetising a living and unpredictablelandscape to deliver those solutions at scale,and in a way that provides reliable investor
returns without attracting greenwashingaccusations, is not as easy as investing inbricks-and-mortar real estate with a regularrent roll.
This means that the vast majority of
the world’s farmland is still valued based on
more traditional attributes such as capacity
for food production. But, at the same time,
farmers are being expected to produce thatfood in more sustainable and nature-friendly
ways by their customers. That often incurs afinancial cost, a cost that doesn’t always attract
a premium price.
Extracting more equity out of the foodsupply chain to help them do their part to savethe world is arguably the biggest challenge
facing farmers and landowners today. Investors
who recognise that are best placed to benefit
from the focus on nature-based solutions.
Andrew Shirley co-ordinates Knight Frank’s global farmland
initiative. Please get in touch if you need help buying,selling or valuing agricultural land around the world.

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61

Gear change

A slew of record-breaking sales can’t hide the fact that luxury
investment markets weakened in 2023. Andrew Shirley investigatesT

he priciest bottle of Scottish whisky.
The most expensive Ferrari 250 GTO.
The costliest blue diamond. Even the
dearest sword. In 2023, the major auction
houses achieved a string of record-breaking sales.
It sounds like a bumper year for luxury
investments, but the latest results of theKnight Frank Luxury Investment Index (KFLII),
which tracks the performance of 10 popularinvestments of passion, reveal a less positive

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Pole position –This Ferrari 250 GTO was
the most expensive car
auctioned in 2023. Image
courtesy RM Sotheby's

picture. For only the second time, KFLII
edged into negative year-end territory, albeit
by a fraction of a percent, as several stalwart
members of the index dropped into the red or
showed minimal gains.
However, a peek behind the headlines
reveals it’s not all doom and gloom, with someof the losses simply down to the froth coming
off markets, according to the experts who
supply the data for KFLII.

THE WEALTH REPORT280%

Ups and downs

The Knight Frank Luxury Investment Index Q4 2023
PRICE CHANGE

10-year12-month

146%

138%

105%

100%
82%
67%
56%
40%

37%

11%

ART

8%

JEWELLERY

5%4%

WATCHES

COINS

8%
2%

1%

-1%

-2%

-4%

-6%

-9%

COLOURDIAMONDS

WINE

KFLII

FURNITURE

HANDBAGSCARSRARE WHISKYBOTTLES

Sources: Compiled by Knight Frank Research using data from Art Market Research (art, coins, furniture, handbags, jewellery and watches), Fancy Color Research Foundation (colour diamonds),
HAGI (cars), Rare Whisky 101 and Wine Owners
Notes: All data to Q4 2023. KFLII is a weighted average of individual asset performance. Contact andrew.shirley@knightfrank.com for full methodology

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63

Living in luxury

How many square metres of prime London
property the top luxury collectible sales*of 2023 will buy you

FURNITURE

US$2.8m
Louis XVI gilt walnutchair for boudoir ofMarie-Antoinette
Sotheby’s

91 sq mCAR

US$51.7m

1962 Ferrari 330 LM/250 GTO
RM Sotheby’s

1,692 sq m
WHISKYUS$
2.7m

The Macallan
Adami 1926

WATCH

US$8.5m

Sotheby’s

88 sq mPatek Philippe Ref
2523J gold two-crownworld time wristwatch
Christie’s

278 sq m

COIN

US$2.7m

1795 US$10 Capped
Bust Gold Eagle 9 Leaves
Acknowledgements:
Images courtesy of Sotheby’s, Christie’s and GreatCollections
Notes: *As far as can be ascertained sales represent the most expensive item sold at auction from each
asset class in the Knight Frank Luxury Investment Index. Where not sold in US$, price based on mid-market
exchange rate on day of auction. **Excluding the Bleu Royal64

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GreatCollections

89 sq mTHE WEALTH REPORTCOLOUR DIAMOND**

US$34.8m

The Eternal Pink (10.57 carat fancy
vivid purplish pink diamond)
Sotheby’s

1,139 sq m

HANDBAGUS$
0.36m
Himalaya Niloticus crocodile
diamond Birkin 25 with 18k
white gold and diamondhardware
Christie’s

12 sq mART

US$139.4m
Femme à la montre by
PicassoSotheby’s

4,561 sq m

JEWELLERY

US$43.8m

Bleu Royal (ring featuring 17.61 carat
fancy vivid blue diamond)
Christie’s

1,433 sq m

WINE

US$0.28m
Five magnums of Romanée-Conti
1999

Sotheby’s

9 sq mTHE WEALTH REPORTINVEST

65

KNOWLEDGE IS CRITICAL
Whisky, our worst annual performer, is a good
example, explains Andy Simpson. “To some degree,
2023 continued to be a challenging year with theKnight Frank Luxury Whisky Index dipping almost
9%. But while the worst performing 50 bottles
lost 26% of their combined value, the remaining
50 bottles gained 5%, with the 20 best performers
increasing by a respectable 20%.”
This is further proof that knowledge is evermore critical when it comes to selecting the rightbottles and distilleries, Andy points out. “In my
opinion some bottles that lost significant value
in 2023 will return through the next two years as
they are simply so scarce and, right now at least,
so undervalued.”Classic car guru Dietrich Hatlapa is also
sanguine. “The value of the HAGI Top Index was
up 22% in 2022, so a retreat of 6% isn’t all that bad,”he says, noting that the strong performance ofother investment classes such as equities may havedampened collectors’ appetites. “It’s a very small
market so it only takes a minor change in portfolio
allocations to have an effect, and there has also
probably also been a degree of profit taking.”
But it wasn’t all one-way traffic, he notes. Somemarques like BMW (+9%) and Lamborghini (+18%),
which appeal to a younger breed of collector,
bucked the trend in 2023.
CLASSICS ENDURE
Handbags, which topped KFLII just a few years
ago, were also notable fallers. Sebastian Duthyof AMR, which supplies data for a number of theasset classes we track, says bags are one of theinvestments of passion more influenced by theretail market.
“The secondary market for handbags follows
the retail market more closely than any othercollectible. A dip in the share price of the top
luxury brands last autumn appears to have
spooked collectors wanting top-of-the-range bags.
“Last autumn it was possible to pick up an
Hermès white Niloticus Himalaya Birkin in goodcondition for under £50,000. This is a far cry froma slightly better condition but refurbished bagthat sold for the equivalent of more than £130,000
18 months earlier in Hong Kong. The recent slidereflects a general correction at the upper end
that’s been under way for some time rather thanchanging attitudes to the harvesting of exotic skins.
Collectors are prepared to pay a premium if thebag has recently left the Hermès workshops and so
prices are also dependent on annual production.
“At lower price points, bags such as the Birkinin Togo leather in classic colourways such as goldand black remain very popular. Prices for these
versatile bags have increased slightly over the year,with one nearly new bag reaching £15,000. At timesof great economic stress, it is normal for people toreach for reliable fashion standards. The ongoingcost-of-living crisis appears to have encouraged
the same behaviour.

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Attitudes
SurveyFor the love of it

The reasons UHNWIs collect investments of passion

1. JOY OF OWNERSHIP
2. INVESTMENT
3. STATUS AMONG PEERS
4. TO BELONG TO A COMMUNITY
5. INTELLECTUAL INTEREST

20%
Tangible assets

The proportion of UHNWI portfolios allocatedto luxury collectibles
Source: The Wealth Report Attitudes Survey“It’s a very small
market so it
only takes aminor change
in portfolio
allocations tohave an effect”“Another example where prices have edged
up is the iconic Kelly in crocodile which Hermès
has produced since the 1960s. One exceptional
vintage example from 1962 sold for theequivalent of £14,500 at Sotheby’s in November.”
The market for fine wine – up just 1%
according to the Knight Frank Fine Wine Icons
Index (KFFWII) – is going through a period ofprice correction, asserts Nick Martin of Wine
Owners. “It’s been a hell of a long run, so I’m
not that surprised.” Some wines from very small
producers that had enjoyed the most exuberant
growth have seen the biggest drops, he says.
“It had got a bit silly, £50 bottles had shot up
to £200 or £300.” That KFFWII still just edged
into the black shows the value of a diversified
cellar, he adds. “The wider Burgundy market has
dropped by 12% since the autumn.”
Surprising to many market observers will be
the fact that watch prices, as tracked by KFLII,
rose by 5% to take third place in our luxury
rankings. AMR’s Duthy explains: “Sales ofwatches at the big three auction houses totalled£488 million in 2023, a very slight increase on
the previous year. This includes post-millennial
watches as well as true vintage pieces, which
typically attract separate collector bases.
Our index tracks prices of the latter; the biggest
slide in values recently has been for the
newer watches.

THE WEALTH REPORT

“In such an increasingly financialised climate,
it was no surprise to see collectors chase the most
iconic and truly rare timepieces. A Rolex John
Player Special broke the model record when it soldfor £2 million at Sotheby’s in May, double the pricefor a similar example sold at Phillips in 2021. Pricesof classic Cartier watches continued their journeynorthwards, with a number of asymmetric designs
coming to market.
“The top 10 of the most expensive watches tobe auctioned last year once again included a highproportion of independent watchmakers such as
Philippe Dufour, Roger Smith and Richard Mille,
as well as rare Patek Phillipe watches. Their total
value was £42 million, an increase of 40% overthe previous year.”Jewellery put in another strong performancewith annual growth of 8%. “The demand for colour
gemstones of exceptional quality, iconic signed
period jewels and single-owner collections, as wellas items with historic provenance stood out in
2023,” Duthy notes.
I’m often asked if younger collectors havedifferent attitudes to their parents. Duthy says theimpact of hip hop culture on the jewellery market isa good example and shouldn’t be underestimated,particularly as the trend for male music stars to add
jewellery to their look continues to grow.
“Sotheby’s Hip Hop auction in July offered
several possessions that belonged to the musiclegend Tupac Shakur, but none more personal
than a gold ruby and diamond crown ring.
The buyer was soon revealed to be the artist
Drake, another huge hip hop star, who used hispurchase to promote his new album on Instagram.
Drake paid US$1 million for the ring – three times
the estimate.”
Talking of shiny things, colour diamonds
continued to perform steadily, says Miri Chen,
CEO of the Fancy Color Research Foundation.
“In 2023, we observed a shift towards smaller
sizes and higher colour saturations, along witha slight decline in the prices of pinks and blues.
The overall trend indicates a steady increase in
prices for the whole segment. We are delighted
to witness the continued resilience of the fancy
colour market in comparison to other markets,
including colourless diamonds.”

NOTABLE SALES
Art, which leads KFLII, was the only one of our 10
index constituents to hit double-digit growth in2023, but all of the gains came in the first half ofthe year with values sliding significantly later on,
according to AMR’s All-Art Index.
“The auction year traditionally begins withsales of Old Masters, and last season started withsome notable sales, including a record for a workby Bronzino,” says Duthy. But the same could not
be said for other key sectors, he points out.
“It was telling that in May, Sotheby’s inserted
one of its top Old Master lots – a Rubens’ portrait– into a 20th Century Modern evening sale. But

THE WEALTH REPORT“2023 continued to
be a challenging
year with theKnight Frank
Luxury Whisky
Index dipping
almost 9%”by then, it was clear that the confidence among
sellers, set by the previous year’s record-busting
figures, was ebbing away. In the same month,modern and contemporary works from thecollection of the late financier Gerald Fineberg
sold well below pre-auction estimates. With all
but five lots selling, it was clear the market had
swung in favour of the buyer.”
There was even less appetite for the ultracontemporary or “red-chip” sector, which
experienced the biggest contraction in 2023, headds. “Works by a growing group of artists bornafter 1980 have been heavily promoted by mega
galleries and auction houses in recent years.
With freshly painted works in excess of £100,000
almost doubling in 2022, it was little surprise that
this sector was one of the biggest casualties lastyear. There is a risk there are now simply too many
fresh paint artists with none really standing out.”

For more detailed
KFLII insight, head online toknightfrank.com/wealthreport

BEST OF THE RESTHNWI collecting activity is of course not limited to theassets tracked by KFLII – their collections are increasingly
eclectic. Here are some of 2023’s other top sellers
Michael Jordan’s 1998 NBA Finals Game 2 Air Jordan
13s from the famous “The Last Dance” season –one of the most significant items from his renowned
career, and his final year with the Chicago Bulls – soldfor US$2.2 million with Sotheby’s, establishing a newworld record for a pair of sneakers sold at auction.
Bonham’s set a new record for a sword and Islamic
object when it auctioned Tipu Sultan’s fabled 18th
century gold koftgari-hilted steel bedchamber swordfor £14 million at its Islamic and Indian Art sale inMay. The Indian ruler’s sword had an estimate of£1.5 million to £2 million.
A Hebrew Bible more than 1,000 years old anddescribed as “one of the most important and singular
texts in human history” became the most valuable
manuscript ever sold at auction. The Codex Sassoon,
dating from the late 9th or early 10th century, sold for
US$38.1 million at Sotheby’s in New York in May.
Rapper Post Malone paid a reported US$2 million
for a unique Lord of the Rings “One Ring” card, partof the popular Magic the Gathering (MTG) table-top
and trading game. The card was not sold at auction,
but in true Willy Wonka-style was included in astandard retail pack of MTG cards.

INVEST

67

THE NUMBERS BEHIND THE WEALTH REPORT

Databank

See below for a selection of findings fromThe Wealth Report Attitudes Survey 2024
The Attitudes Survey is based on responses provided during December 2023 by more than
600 private bankers, wealth advisors, intermediaries and family offices who between them
manage over US$3 trillion of wealth for UHNWI clients.

Attitudes
SurveyWEALTHOn average, how do you expect your clients’ total wealth to change in 2024?
GLOBAL AVERAGE

AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICA

Decrease significantly (above 10%)

0.0%

1.1%

0.5%

0.3%

0.0%

0.0%

0.0%

0.4%

Decrease marginally (below 10%)

1.7%

6.0%

1.1%

6.7%

16.4%

0.0%

4.7%

5.6%

Remain the same

43.6%

11.9%

16.1%

29.1%

10.9%

6.3%

26.6%

22.5%

Increase marginally (below 10%)

54.7%

38.7%

58.1%

50.9%

54.5%

46.3%

56.8%

50.3%

Increase significantly (above 10%)

0.0%

42.3%

24.2%

13.0%

18.2%

47.4%

11.8%

21.1%

On average, how do you expect your clients’ total wealth to change in 2024? (overall score, 5 = maximum)
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

3.53

4.15

4.04

3.69

3.75

4.41

3.76

3.86

What % of your clients plan to apply for a second passport or obtain new citizenship in 2024?
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

38%

13%

4%

13%

43%

5%

26%

19%

How engaged are your clients in reducing their carbon emissions by...
Attempting to reduce their personalcarbon footprint?

AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

59%

62%

65%

72%

68%

58%

62%

65%
20%

Attempting to measure carbon usage?

18%

20%

20%

26%

25%

16%

15%

ESG screening of investments?

25%

24%

27%

29%

16%

25%

22%

24%

Improving the energy efficiency of
their homes?

35%

30%

38%

42%

44%

30%

30%

34%

Improving the energy efficiency of theirinvestment property?

29%

27%

33%

40%

17%

30%

37%

34%

Investing in nature-based solutions?

32%

21%

17%

19%

15%

13%

24%

21%

Owning fewer homes?

30%

24%

12%

13%

6%

7%

9%

14%

Reducing air travel?

26%

13%

9%

12%

1%

5%

8%

10%

Reducing personal vehicle ownership?

21%

17%

7%

11%

1%

4%

6%

10%

Reducing the carbon footprint ofbusiness operations?

23%

26%

27%

32%

16%

26%

32%

30%

Reducing private jet travel(where applicable)?

19%

19%

16%

17%

6%

14%

9%

14%

Switch to electric vehicles?

24%

35%

29%

37%

40%

29%

47%

40%

68

THE WEALTH REPORTINVESTMENT
What proportion of your clients invested directly in commercial property in 2023?
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

11%

19%

21%

18%

17%

24%

21%

20%

What proportion of your clients are planning to invest in commercial property in 2024?
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLO BA L AVERAGE

13%

21%

17%

17%

15%

23%

19%

19%

GLOBAL AVERAGE

Which of the following do you see as a good reason to invest in farmland? (Select all that apply)
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICA

Food production

46%

53%

53%

50%

51%

53%

45%

49%

Safe-haven investment

37%

35%

31%

39%

40%

39%

41%

38%

Income from carbon credits

43%

29%

33%

28%

29%

23%

31%

30%

Environmental benefits

35%

41%

36%

40%

37%

42%

44%

41%

Planting trees

30%

24%

18%

25%

26%

32%

26%

25%

Lifestyle opportunities

33%

38%

48%

38%

37%

33%

35%

37%

Tax planning

32%

35%

36%

37%

36%

33%

35%

35%

What % of your clients follow ESG strategies when investing in commercial properties?
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

Only invest in the most sustainable/
prime assets

28%

29%

29%

28%

28%

29%

29%

29%

Acquire and upgrade assets with weak
ESG credentials

23%

22%

23%

22%

21%

19%

20%

21%

Acquire and reposition (change of use)
assets with weak ESG credentials

19%

20%

22%

21%

22%

17%

19%

20%

Sell poor ESG-performing assets

24%

22%

22%

20%

21%

23%

26%

23%

Invest in renewable energy projects

26%

27%

26%

28%

26%

24%

26%

27%

Invest in carbon sequestration
opportunities through land acquisition

21%

21%

18%

19%

21%

17%

16%

19%

What ESG-related criteria do your clients use when assessing property acquisitions? (Select all that apply)
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

Energy efficiency rating (e.g. EPC)

43%

55%

57%

63%

62%

78%

62%

61%

Green/sustainable certifications(e.g. BREEAM, LEED, DGNB,Green Mark, NABERS)

48%

48%

55%

45%

37%

51%

45%

46%

Renewable power source(e.g. solar panels)

31%

49%

48%

51%

39%

47%

45%

48%

Impact on nature and biodiversity(e.g. green roofs/space)

42%

29%

25%

28%

39%

20%

37%

32%

EV charging points

35%

42%

34%

36%

26%

34%

41%

39%

Amenity-rich assets (e.g. cycle facilities,
wellbeing space)

39%

26%

30%

26%

38%

24%

23%

25%

Impact on wider community (e.g.
community facilities, open space/cafés)

39%

27%

29%

28%

37%

25%

24%

26%

THE WEALTH REPORT

69

Which investments of passion are becoming more popular among your clients? (Select all that apply)
AFRICAASIA

AUSTRALASIAEUROPE

Art

38%

Classic cars

28%

58%

59%

29%

45%

NORTH AMERICAGLOBAL AVERAGE

LATIN AMERICAMIDDLE EAST

53%

34%

58%

37%

48%

39%

30%

38%

43%

38%
35%

Wine

32%

38%

45%

39%

26%

36%

30%

Rare whisky

23%

24%

15%

23%

28%

13%

27%

26%

Jewellery

31%

32%

22%

25%

27%

25%

28%

28%

Watches

41%

47%

51%

40%

43%

67%

39%

42%

Coloured diamonds

15%

8%

10%

10%

21%

3%

21%

14%

Coins

23%

10%

6%

18%

27%

4%

17%

15%

Luxury handbags

24%

24%

19%

19%

28%

23%

22%

22%

Furniture

23%

10%

7%

13%

13%

13%

15%

13%

What are the key reasons your clients collect investments of passion? (1 = highest priority)
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

Investment

2

1

2

2

2

2

2

2

The joy of ownership

1

2

1

1

1

1

1

1

To belong to a community

4

4

5

5

4

4

4

4

Status among peers

3

3

4

3

3

3

3

3

Intellectual interest

5

5

3

4

5

5

5

5

What share of your clients’ investment portfolio is allocated to luxury investments?
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

17%

21%

18%

18%

23%

23%

20%

20%

HOME
Residential properties
AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

What share of your clients’ total
wealth is allocated to primary andsecondary homes?

26%

30%

37%

31%

30%

16%

26%

29%

What share of your clients’ residential
portfolios are located outside theircountry of residence?

26%

23%

10%

28%

25%

41%

24%

27%

How many homes do your clients own?

4.49

3.02

3.04

3.70

4.34

3.73

4.21

3.72

What % of your clients bought a homein 2023?

30%

16%

17%

22%

22%

16%

31%

24%

What % of your clients are planningto buy a home in 2024?

32%

18%

21%

23%

21%

23%

25%

22%

Do your clients rent out theirsecond homes?

49%

35%

32%

37%

40%

28%

30%

33%

What are the main motivations behind your clients’ future home purchases? (1 = top motivation)

Education

AFRICAASIA

AUSTRALASIAEUROPELATIN AMERICAMIDDLE EASTNORTH AMERICAGLOBAL AVERAGE

2

2

3

4

4

4

5

3

Investment

3

1

1

1

1

1

1

1

Job relocation

5

4

5

6

3

6

6

6

Lifestyle

1

3

2

2

2

3

1

2

Safe haven

4

5

6

5

5

2

4

5

Tax

6

6

4

3

5

5

3

4

70

THE WEALTH REPORT

THE KNIGHT FRANK WEALTH SIZING MODELUHNWI POP UL AT I ON ( US $30 M + )% CHANGEREGION/COUNTRY/TERRITORY

2022

2023

2028

2023 VS 2022

2028 VS 2023

World

601,300

626,619

802,891

4.2%

28.1%

Africa

2,886

2,996

3,506

3.8%

17.0%

Asia

161,177

165,442

228,849

2.6%

38.3%

Australasia

17,437

17,934

22,776

2.9%

27.0%

Europe152,459

155,232

189,882

1.8%

22.3%

Latin America

13,654

13,15915,556

-3.6%

18.2%

Middle East

17,68918,79024,102

6.2%

28.3%

North America

235,998

253,066

318,220

7.2%

25.7%

Australia

14,922

15,347

19,491

2.9%

27.0%

Austria

2,160

2,167

2,500

0.3%

15.4%

Canada27,37827,92835,516

2.0%

27.2%

Chinese mainland

95,43598,551

144,897

3.3%

47.0%

Finland

1,220

1,269

1,403

4.1%

10.5%

France24,87924,941

31,221

0.2%

25.2%

Germany

28,711

29,02135,134

1.1%

21.1%

Hong Kong SAR

5,812

5,957

7,290

2.5%

22.4%

India

12,495

13,263

19,908

6.1%

50.1%

Indonesia

1,420

1,479

1,984

4.2%

34.1%

Ireland

1,882

1,890

2,346

0.4%

24.1%

Italy

15,364

15,952

18,929

3.8%

18.7%

Japan

21,646

21,71024,502

0.3%

12.9%

Malaysia

723

754

1,015

4.3%

34.6%

Netherlands

8,372

8,390

10,428

0.2%

24.3%

New Zealand

2,515

2,587

3,285

2.9%

27.0%

Norway

2,251

2,276

2,837

1.1%

24.6%

Portugal

777

800

1,000

3.0%

25.0%

Singapore

4,601

4,783

5,535

4.0%

15.7%

South Africa

846

835

998

-1.3%

19.5%

South Korea

6,921

7,310

9,470

5.6%

29.5%

Spain

9,975

10,14911,914

1.7%

17.4%

Sweden

4,024

4,125

5,128

2.5%

24.3%

Switzerland

14,003

14,734

16,703

5.2%

13.4%

Taiwan

7,666

7,640

9,174

-0.3%

20.1%

Thailand

882

889

1,020

0.8%

14.7%

Turkey

1,761

1,932

2,760

9.7%

42.9%

United Kingdom

22,37923,072

28,734

3.1%

24.5%

United States

208,560

225,077

282,626

7.9%

25.6%

734

752

978

2.4%

30.0%

Vietnam

Note: Our model is dynamic, so these numbers are subject to change and may not be identical to those in the hard copy of the report or previous editions

THE WEALTH REPORT

71

Final word
The period to 2028 will see more wealth created in Asia-Pacific than in any
other region. Christine Li, Head of Research for Knight Frank Asia-Pacific,
assesses the outlook for two critical elements of the region’s investment
story: Chinese investors and Japanese real estateTo understand the future of private
investment across the Asia-Pacificregion, we have to understand China.
For years, property has been the favoured
asset class for wealth accumulation for the
Chinese, with many investing as much as 70%of their savings in real estate, both domesticallyand internationally.
Small apartments and condominiums inSouth-East Asia, for instance, were a popular
choice for the Chinese middle classes in thelate 2010s due to affordability and geographic
proximity. For the more affluent, top destinations
included Australia, the UK and the US.
But a protracted property crisis at home andslower growth mean many Chinese are taking amore conservative approach, curbing domestic
home purchases and overseas investments.
In 2023, total sales by China’s top 100
developers were down 17.3% from a year earlier,as property companies grappled with a liquidity
crisis. The slowdown has been a major blow to
consumer and investor confidence. Governmental
efforts to revive the market by reducing interest
rates and down payment requirements have had
a muted effect.
The key impact has been that Chinese buyers
have become much more selective. South-East
Asia, especially Thailand and Malaysia, havefallen out of favour. In contrast, Japan and
UAE have seen increased Chinese purchases,
while Australia maintains its position as the
top choice for overseas property purchases.
A substantial recovery hinges on a
resolution of the credit crisis, though we still
expect opportunities to emerge across therisk spectrum, particularly within private
credit and government-approved sectors suchas logistics and data centres. Any pick up ineconomic momentum could be swift, given
the government’s recent shift towards a more
accommodative stance and the rollout of policies
aimed at kickstarting growth.

JAPAN’S RISING SUN
In terms of markets in demand from regional
investors Japan is firmly in the spotlight, withreal estate investment here running above thelong-term average. Japan stands alone among

72“In terms of markets
in demand fromregional investors
Japan is firmly
in the spotlight,
with real estate
investment hererunning above thelong-term average”

the world’s major central banks in holding interest
rates low, and the country’s economic revival
suggests that Prime Minister Abe’s economic
strategy is bearing fruit. The total transaction
volume exceeded ¥5 trillion (US$34 billion) in
2023, down about 9% but still elevated comparedwith pre-pandemic levels.
Investors have been pricing in a normalisationof monetary policy in 2024. Structural reforms
focusing on improving governance andshareholder value have propelled the country’s
stock markets to a 30-year high.
Still, after three decades of deflationarypressures, we can expect authorities to stay
cautious. Any rise in policy rates will be gradual,
and the impact on funding costs will remain
manageable. With prime capitalisation rates inTokyo ranging from 3–4.4%, spreads continue toremain compelling. The weight of capital seeking
acquisitions should limit yield expansion.
Leasing fundamentals will remain key tosustaining cash flow and preserving value. The
strengthening of manufacturing supply chains has
enabled demand for logistics space to keep pace,despite an elevated pipeline of new supply. Multifamily assets also continue to attract the attentionof investors, particularly as rents are expected to
grow in line with wage increases.
Asian buyers, especially from Taiwan,
Hong Kong and Singapore, dominate the Japanesemarket, compensating for lower activity from
Western investors. The rise of private investment
is notable, with family offices increasingly moving
capital into Japan amid uncertainties in thewider region.
The stable investment climate and the depth of
its real estate market mean that Japan will remain
central for many regional investment strategies.
With the yen likely to appreciate, there is also awindow of opportunity for investors to lock invalue at current exchange rates.

CHRISTINE LI
HEAD OF KNIGHT FRANK
ASIA-PACIFIC RESEARCH

THE WEALTH REPORTOur global network
604 offices across 58 countries and territories supported
by more than 25,000 people

EUROPE
Austria, Belgium, Bulgaria, Czech Republic,
Denmark, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Netherlands,
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82

offices

228

offices

10,999people3,093

UK
England, Scotland,
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peopleTHE AMERICAS
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offices

1,091

LONDONpeopleBERLIN160

offices

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FRANCISCONEW YORKSHANGHAI
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23

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Knight Frank’s Private Office advises private clients, family
offices and their advisors on residential and commercial
property around the globe.
As specialists with a proven track record, through six dedicatedPrivate Office teams and our Ambassador network, we manage
UHNW private client relationships across the world, ensuring thatclient’s benefit from one point of contact, high-quality service anda long-term relationship that can span generations.
New York

SINGAPORE

offices285

peopleASIA-PACIFIC
Australia, Cambodia, Chinese
Mainland, Fiji, Hong Kong SAR,
India, Indonesia, Japan, Malaysia,
New Zealand, Philippines,
Singapore, South Korea, Taiwan,
Thailand, Vietnam
SYDNEY

THE MIDDLE EAST
Bahrain, Qatar,
Saudi Arabia, UAE

Residential sectors

MEET OUR GLOBAL PRIVATE OFFICE TEAM

London79,616

peopleCountry Houses
Equestrian Properties
Farms & Estates
Finance

New Homes
Private Rented Sector
Seniors housing
Waterfront & Riverside

Residential services
Affordable Housing
Agricultural Consultancy
Building Consultancy
Development Consultancy

Commercial sectors

Automotive
Data Centres
Energy & Sustainability Consultancy
Healthcare

Knight Frank Finance
Planning
Property Management
Sales & Leasing

Hotels
Logistics & Industrial
Offices
Retail & LeisureCommercial services

PADDY DRING

THOMAS VAN
STRAUBENZEESARAH
MAY-BROWN

HUGH DIXON

Hong Kong

Singapore

MonacoMiddle East

Building Consultancy
Capital Advisory
Capital Markets
Debt Advisory

Contacts

HO-PIN TUNGNICHOLAS
KEONG

THE WEALTH REPORTEDWARD DE
MALLET MORGANHENRY FAUN

For all property enquiries
please contact
Paddy Dring+44 20 7861 1061
paddy.dring@knightfrank.com

Development
EnergyOccupier Services
Sales & Leasing

For all research enquiries
please contact
Liam Bailey+44 20 7861 5133
liam.bailey@knightfrank.com

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