Knight Frank Wealth Report 2023: This is how the super-rich think when it comes to investing

Source: The Knight Frank Wealth Report

Explanation: HNWI (High-Net-Worth-Individual)

Explanation: UNHWI (Ultra-High-Net-Worth-Individual)

From post-Covid upturn to inflation downturn

The years 2022 and 2023 could not be more controversial: In response to the abating pandemic, the end of global lockdowns and the associated backlog of consumption, there was an economic upturn in many countries at the beginning of 2022. But with Russia's attack on Ukraine and rising inflation, the tide has turned: This was followed by one of the biggest and fastest interest rate rises in history. As a result, real estate prices plummeted in some countries and financial assets fell. However, the authors of the Knight Frank Wealth Report expect that investor sentiment will brighten again when interest rates peak. But which topics could determine investor behavior this year and next?

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luxury real estate

According to data from the Wealth Report, almost a third of investors see real estate investments as inflation protection and meaningful diversification. In the coming year, 19% of UHNWIs want

invest directly in profitable real estate, while 13% choose the indirect route via real estate funds or direct investments. Luxury real estate in New York, Los Angeles and London has been very popular among the super-rich for years: The major cities led the field in terms of number of sales, with London even recording the highest turnover since 2014 on the ultra-prime market (25 million dollars and more).

But it doesn't always have to be New York, Los Angeles or London: Currently, real estate in cities such as Lisbon, Taipei and Athens is also seeing big price jumps, and frankfurt is even at the top with an average 10% rise in prices for first-class real estate. One reason for the paradigm shift: The quality of life, which includes hours of sunshine, green spaces and the reconciliation of work and private life, is an important decision criterion — and is dominated by smaller cities. Knight Frank's City Wellbeing Index, for example, which lists Oslo, Zurich and Helsinki as the happiest places to live, does not include any of the top cities.

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Art, Classic Cars, Watches & Fine Wine

According to the report's data, (multi) millionaires also tend to spend more money on luxury goods that combine enjoyment and return opportunities. The Knight Frank Luxury Investment Index (KFLII), which has already risen by 16% in 2022, reflects the passion for luxury goods and collectibles. Art (+29%) and classic cars (+25%) lead the table — driven by record-breaking sales, auctions and some large and unique collections that hit the markets.

• The flourishing art segment Sebastian Duthy explained from Art Market Research:

“Several collections from individual owners, including works owned by Microsoft founder Paul Allen and American investor Anne Bass, achieved total values of more than 2.5 billion dollars, which is more than doubling collection sales in 2021. Blue-chip works regularly break auction records with the provenance of a prominent collector, and last year was no exception: five works grossed more than 100 million dollars.”

• Investments in Classic Cars were also driven by outstanding auction results. For example, a Mercedes-Benz Uhlenhaut Coupé worth 143 million US dollars set a new record for the most expensive car ever sold.

• In the segment luxury watches, which in 2022 was in third place in KFLII with an increase of 18%, the turnover of leading auction houses grew by 33% to a total of 475 million pounds. A look at each auction catalog shows that sales over the past five years have been dominated by just three models: the Nautilus from Patek Philippe, the Royal Oak from Audemars Piguet and the Rolex Daytona.

• The index for Fine Wine recorded an increase of 10%, a slightly lower increase than in 2021 (+16%). According to experts, this is due to the fact that some of the index's top performers may have peaked. For example, selected Burgundy wines have already risen in value by more than 80% over the past five years.

Investments in collectibles also offer interesting return prospects in the long term: According to data from the Wealth Report 2023, the price of rare and coveted classic cars has risen by 194% over the past ten years; Fine Wine has risen by 120% in the same period.

In order to also give retail investors access to investments in luxury goods that are otherwise only reserved for HNWIs or UHNWIs, FINEXITY launches the digitization and tokenization of tangible assets. In this way, investors can benefit from the attractive renitechancing opportunities of selected properties, watches, classic cars, fine wine, works of art or diamonds just like an owner.