What the wealth? The Knight Frank Report 2024
Comparatively high interest rates, turbulent stock markets, falling real estate prices and geopolitical uncertainty factors: Investors faced numerous challenges in 2023. In good times and bad, the British, globally active real estate company Knight Frank publishes its “Wealth Report.” The study examines economic developments over the past twelve months and their effects on various asset classes and predicts which financial trends will dominate the world in the current year. Find out what Knight Frank predicts for 2024 and how private investors can react to them.
Declining inflation, interest rate speculation, and geopolitics
Knight Frank has been one of the world's leading independent real estate consulting firms for more than 125 years and publishes numerous, highly acclaimed reports relating to the luxury investment segment.
The 2024 Knight Frank Wealth Report First, it points out that the markets have recovered compared to the previous year. But geopolitical uncertainty means that the road remains bumpy for investors. Inflation and labor markets are stable in many industrialized nations. That is why the discussion is primarily about whether and - if so - when the key interest rates will be reduced again. However, the geopolitical situation is extremely unstable. As the British Foreign Secretary put it, the warning signs are “on high alert,” and a rise in energy prices as a result of conflict escalations is a real possibility. In addition, GDP growth is expected to slow down compared to 2023. In addition, we are facing the most historic US election year, below-average growth in China, and the latent threat of climate-related disasters.
Based on this, Knight Frank summarized the most important financial trends and investment information for 2024 in his 18th edition of the Wealth Report:
The number of ultra-rich is rising
2023 was characterized by high interest rates, inflation and turbulent stock markets. However, the Knight Frank Report shows that bold investors have nonetheless achieved attractive returns that could offer them opportunities this year. Due primarily to growth in the USA and the Middle East, the number of UHNWis (people with ultra-high net worth) increased significantly.
At the end of 2023, there were 4.2% more UHNWIs than in the previous year. This means that almost 70 very wealthy investors were added every day. As a result, the global total number rose to just over 626,600. Growth was led by North America (+7.2%) and the Middle East (+6.2%). Although Europe lagged behind in terms of generating new wealth, the continent continues to be home to the richest 1% of the world's population. This trend confirms Knight Frank's forecast that the number of wealthy people worldwide will rise by 28.1% over the next five years to 2028. Asia is likely to make a particular contribution to this, with high growth in India (50%) and Mainland China (47%).
Investment property luxury real estate
But where to put the millions? The answer is once again: concrete gold. Real estate is and will remain an attractive investment destination, as the capital value of residential properties in the world's leading markets rose by 3.1% in 2023. Especially because investors through Rising rents worldwide have achieved higher returns on residential properties. More than a fifth of UHNWIs are therefore planning to buy real estate in 2024 as well. When choosing the appropriate location, they focus on factors such as value enhancement potential or location, ESG criteria, wellness and climate.
Following Knight Frank, Auckland is leading the price development in the premium purchase price segment with an increase of ten percent, while Mumbai, Dubai, Madrid and Sydney together complete the top five. Sydney is in the top position in the rental forecast for 2024. Luxury properties in Mallorca According to Knight Frank's Prime International Residential Index (PIRI), seven percent will gain in value in 2024.
Real values: Trending art, jewelry and watches
In addition to residential real estate, other tangible assets, such as luxury goods, remain popular.
In particular, the art (+11%), jewelry (+8%) and watches (+5%) segments increased significantly in value over the past year. Because in a time of uncertainty, investments in alternative capital investments for stability in the portfolio. In addition, art, diamonds and luxury watches represent elegance, prestige and value retention over generations.
As motives for so-called “passion investments,” UHNWIs accordingly also name reasons such as status, affiliation or intellectual interest. According to the report, luxury collectibles account for around 20% of their portfolios. 48% of global UHNWIs will regard art as a popular investment. This is because the winnings can be very high, especially with rare champions. For example, achieved Picasso's “Femme a la Montre” In 2023, an auction price of just under 140 million dollars.
Jewelry achieved the second-best performance in the luxury goods asset class. Last year, the leaders in this sector included extremely rare pieces such as the Bleu Royal ring with a 17.61-carat Fancy Vivid Blue diamond, which sold for over 43 million dollars. One reason for the high auction price could be the trend towards colored “fancy” diamonds be. The rare gemstones developed positively with an average growth of 2% in 2023.
Despite difficult market conditions, collector watches also recorded an average increase of 5% in the past year. Die The most important brands for investors were still Patek Philippe and Rolex.
The challenging past few years have shown that there is one rule in particular on the markets: investing. Because despite difficult market conditions, tangible and collectibles in particular have achieved good returns.
