Though the Wealth Report 2017 largely talks about a totally different wealth league to the average Australian property investor, it would be wise to understand what the ultra-rich are doing with their money. Maybe we can learn something that will help our investing?
Sydney and Melbourne are the top 2 destinations for ‘HNWI’ (High-het-worth individual – someone with a net worth of over US$1m excluding their primary residence). Sydney leads the worldwide list with over 4,000 new HNWI migrants and Melbourne with over 3,000.
Although this next sentence may sound laughable to many Australians, particularly first home buyers, you could conclude from the report that Sydney and Melbourne property markets are ‘comparatively cheap’ property markets compared to other major capital cities around the world. The report compared how much US$1m will buy you in each capital city:
17m2 in Monaco, 20m2 in Hong Kong, 26m2 in New York, 30m2 in London, 42m2 in Geneva, 43m2 in Singapore, 46m2 in Shanghai, 55m2 in Paris, 58m2 in Beijing, 59m2 in Sydney, 61m2 in Los Angeles, 79m2 in Miami, 87m2 in Berlin, 91m2 in Tokyo, 99m2 in Mumbai, 102m2 in Instanbul, 110m2 in Melbourne, 162m2 in Dubai, 176m2 in Sao Paulo, 209m2 in Cape Town.
A question you may sometimes ask yourself is where do the ultra-rich allocate their wealth? According to the report which surveyed over 900 of the worlds leading private banking and wealth advisers, rich people in Australasia allocate approximately 25% of clients’ wealth to real estate investments such as second homes and 25% of wealth is allocated to their private homes. These same advisers were asked what sectors of the property market were becoming more of an interest to their clients. Residential property was interesting for 63% of respondents, 48% in office property and 23% in retail property.
According to the report clients on average owned 2.7 first and second homes in Australasia. This would effectively mean on average a high net worth individual owned a private place to live in and 2 investment properties.
Next time you are out with friends a great conversation starter may be how many millionaires are there in Sydney and Melbourne? To which you can reply 106,800 and 74,800. If you want to wow their socks off, tell them there are over 3,700 multimillionaires ($10m+) in Sydney and 2,690 in Melbourne. To finish you can say there are over 1,230 ultra high net worth individuals ($30m+) in Sydney and 900 in Melbourne. Over the next ten years the number of ultra high net worth individuals is set to increase by 70%.
In summary what can we really learn about investing? Possibly not a huge amount. We don’t necessarily have a spare million or two sitting around. However, we can see high net worth individuals value Sydney and Melbourne. Enough so to migrate. This is good news. Maybe our property market isn’t as highly priced as we may think. Imagine if you lived in Monaco! Maybe we could afford to buy a door handle. Rich people like property! It seems in Australasia they are allocating over 50% of their wealth towards it. Lastly it seems the number of millionaires is forecast to increase by over 70% in the next 10 years. All in all it seems to be pretty positive.