Real estate is an investment priority for rich people around the world who, during 2023, have become even richer thanks to the good performance of the financial markets. Their main concern currently is to defend the real value of the assets accumulated over the years, in the face of inflation which, although falling compared to the last two years, continues to erode the savings held in deposits in an unproductive manner. These are some of the elements that emerge from reading the Wealth Report 2024, an annual analysis carried out by Knight Frank.
In particular, 22% of Uhnwis (holders of assets of no less than 30 million dollars) and 19% of Hnwis (no less than 5 million) declare that they intend to buy a house this year, with millennials (born between 1981 and 1995) who are the most affected. A clear sign of the fact that, despite the numerous changes that have occurred in recent years on the consumption front (just think of the priority now given to the use of many goods over ownership), brick and mortar remains at the top of the investment priorities. Not only for a question of perceived security that comes from having a roof over your head, but also because – unlike many other assets – the property tends not to depreciate over time, obviously provided that it is adequately maintained. Without forgetting that it is an investment class positively influenced by inflation, which has returned to the forefront of our lives after decades in which it had disappeared. Furthermore, in the face of a general decline in sales, the values of residential properties around the world have risen by more than 3%. For investors, the Knight Frank study highlights, housing sector returns have been supported by rising global luxury rents, which are on average three times higher than their long-term trend.
As for Italy, the Scrooges invest mainly in the penthouses of the big cities. In general, the attractiveness of prime solutions in our country is supported above all thanks to the flat tax, which allows residents in Italy to pay an annual flat rate tax of 100 thousand euros on foreign income. The tax regime can also be extended to family members, with an additional tax of 25 thousand euros. Milan is the favorite place for those who settle in the Peninsula and this has produced strong demand pressure on supply, with average house prices rising from 3,883 euros per square meter five years ago to a maximum of 5,345 euros in 2023. Even if for exclusive homes, as well as those located in the center of the Lombardy capital, the price goes well over 10 thousand euros per square meter.
In 2023 the number of Uhnwis around the world grew by 4.2% in an annual comparison (around 70 more ultra-rich per day), reaching 601,300. North America not only confirmed itself as the area with the largest number of rich people, but was also the one with the fastest growth (over 7%), trailing the Middle East by one point, with Europe and Latin America further behind. At a country level, however, the greatest progress in terms of Uhnwi was recorded in Turkey (+9.7% compared to 2022), ahead of the United States (+7.9%) and India (+6.1%) .
The greatest growth in terms of assets was the prerogative of those who invested in cutting-edge companies in terms of artificial intelligence, which is proving to be an extraordinary driver of economic growth. But other asset classes also performed well, from gold (+15% compared to 2022) to Bitcoin (+155%). The performance of fixed income was more measured, but in some cases double-digit percentage gains were achieved, with the securities in circulation having discounted in advance the cuts in interest rates expected for the current year. In this regard, it will be interesting to see how the situation will evolve, given that the ECB only recently started monetary easing, while at the end of 2023 it was estimated that it would do so at the beginning of spring. While the US Fed has remained firm so far and it is not excluded that it will hold this position throughout 2024.
Looking in perspective, the study then dedicates an in-depth analysis to the generational passage of wealth, in the awareness that this phase can prove to be critical on the one hand, to the extent that a meeting point cannot be found between the various components of the entrepreneurial families involved in the process , on the other hand it can allow wealth managers to come into contact with the new generations, with their languages and needs. Generation Z (those born between 1996 and 2010) is the most confident in their ability to create wealth in the medium term, with financial investments and the creation of startups indicated as levers for asset growth.
Climate change influences investment decisions, especially among new generations: among millennials, 80% of males and 79% of females say they want to reduce their carbon footprint, compared to 59% of boomers (born between 1946 and 1964) male and 67% female.
