- Bar for becoming top one per center doubled
- Global reduction in ultra-high-net-worth-individuals (UHNWI)
- Australia's UHNWI population set to increase by 40.9% over next five years
Knight Frank’s freshly released The Wealth Report 2023 indicates that the money required for one to join the ranks of the top one per cent in Australia has doubled over the last two years, growing from US$2.8 million in 2021 to US$5.5 million in 2023.
This steep entry point places Australia at number three in terms of the amount of money needed to be in the top 1%, behind Switzerland’s US$6.6 million and Monaco’s US$12.4 million. Meanwhile, New Zealand is fourth with US$5.2 million, while the United States is fifth with US$5.1 million.
Wealth needed to join the top 1% in selected countries and territories (US$)
Though the wealth required to join the top one per cent may vary across regions, Knight Frank’s Head of Residential Research Australia, Michelle Ciesielski, notes that the requirements have experienced a general rise globally, signalling wealth portfolio growth.
Ciesielski states that the main factor behind the spike in Australia’s one per cent wealth is that prime residential property performance has been trending upwards, unabated by the rising cost in finance, as cash buyers account for half of this group.
Meet the top 1% of the top 1%
While an individual possessing a net wealth of US$5.5 million may rank well within the top one per cent of Australians, this falls short of the highest category of wealthy individuals, the ultra-high-net-worth individuals (UHNWI) possessing a net wealth over US$30 million.
In 2022, the total wealth of UHNWIs globally shrank by 10%, with the number of UHNWIs waning by 3.8%. The worldwide slump in UHNWIs was attributed to underperforming bond and equities markets which caused UHNWI wealth to shrink by 10% — a poor performance dampened by the 5.2% average price growth of 100 prime residential markets internationally and 16% increase in luxury investment assets.
Ciesielski predicts that “The recent dip in global UHNWIs is likely to prove short-lived as the world adapts to a new economic environment, so over the next five years, Knight Frank forecasts that the global UHNWI population will expand by 28.5% to almost 750,000 from 579,625 in 2022.”
Bucking the global decline, Australia’s UHNWI grew by 2.1% from 2021 to 2022, giving cause for optimism. The number of UHNWIs in Australia is projected to increase by 40.9% over the coming five years, from 17456 in 2022 to 24589 in 2027, eclipsing the 31.1% growth experienced over the previous five years by about 3000.
Ciesielski explains that the COVID-19 pandemic, which saw Australians grounded mainly due to restrictions on travel and lockdown mandates, gave Australians more time to re-examine portfolios and consider “how much time is spent in Australia going forward”.
Keeping it close to home
Believing Australia to be better sheltered from global economic turbulence, local investment increased as investors weighed the benefits of accumulating wealth in their country of residence.
On average, 32% of Australian UHNWI wealth is allotted to their primary and secondary homes. The impact of the ultra-wealthy’s spending habits on Australian real estate can be gleaned through the 12.3% prime residential growth recorded in 2021. In their 2022 Wealth Report, Knight Frank credits much of this growth to the trend of UHNWIs purchasing luxury homes post-pandemic, with up to 31% of this group having purchased a home that year.
However, Ciesielski cautions the rising interest in global wealth inequality could shine a spotlight on UHNWIs, making them a potential target for “greater taxation on assets to support government spending throughout the pandemic, and even emissions as countries seek to develop sustainable strategies for the environment and society.”
