The amount of money you need to be in the top one per cent wealthiest people in Australia has doubled over the past two years, according to new data from Knight Frank’s The Wealth Report 2023.
In the latest update from the report series, entitled Wealth Populations, Knight Frank identified the level of net individual wealth it takes to reach the one per cent threshold across the world.
In Australia, the entry point to the top one per cent is US$5.5 million, up from US$2.8 million in 2021, seeing the country shoot up the rankings from seven to third, behind Monaco and Switzerland, which retained their rankings of first and second from 2021.
In Monaco, which has the world’s densest population of super-rich individuals, the entry point for the principality’s branch of the one per cent is US$12.4 million, almost double Switzerland at US$6.6m.
New Zealand and the US sit in fourth and fifth place, with US$5.2m and US$5.1m respectively required.
Knight Frank’s Head of Residential Research Australia Michelle Ciesielski said while being in the top one per cent might be thought of as the epitome of success, entry into this exclusive wealthy club falls well short of Knight Frank’s definition of an ultra-high-net-worth individual (UHNWI) – somebody whose net wealth exceeds US$30 million.
“The level of wealth required to reach the wealthiest one per cent varies extensively depending on where you live in the world, but it has risen across the board since Knight Frank last published the analysis in The Wealth Report in 2021, reflecting the growth in wealth portfolios over the past two years, despite the dip in 2022,” she said.
“A large contributor to the top one per cent wealth level doubling in Australia over the past two years has been prime residential property performance recording an upward trajectory, resilient despite the rising cost of finance, as we know 49 per cent of this cohort tend to be cash buyers.
“On average, the UHNW population in Australia owns 2.9 homes, or equivalent to 36 per cent of their total wealth is in primary and secondary homes. For their investible wealth, 94 per cent of their portfolios tend to be held in Australia; 34 per cent is in some form of commercial property ownership whilst 21 per cent is in equities.
“It’s notable that the ongoing inequality of global wealth could see a greater focus on this group – particularly in terms of 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.”
Growing UHNWI and HNWI population in Australia
The most recently released data from Knight Frank’s The Wealth Report 2023 also found Australia’s wealthy populations are forecast for significant growth over the next five years.
It found the number of high-net-worth individuals (HNWIs) – defined as those with a net wealth of more than US$1 million – was set to grow by 71.1 per cent between 2022 and 2027 in Australia, rising from 2,214,326 in 2022 to 3,789,629 in 2027.
This level is 2.5 times the growth in HNWI in the previous five years, between 2017 and 2022.
|HNWI POPULATIONS (US$1m+)||% CHANGE|
|UHNWI POPULATIONS (US $30m+)||% CHANGE|
Meanwhile, the number of UHNWIs in Australia – defined as those with a net wealth of more than US$30 million – is set to grow by 40.9 per cent over the next five years from 17,456 in 2022 to 24,589 in 2027, almost 3,000 additional UHNWIs than the 31.1 per cent growth over the past five years.
The growth in the number of Australian HNWIs and UHNWIs from 2021 to 2022 was a modest 4.8 per cent and 2.1 per cent respectively.
Ms Ciesielski said while the growth in wealth numbers within Australia over the past year had been modest, the recorded increase was significant given there had been a decline in the global population of UHNWIs.
“Reflecting the strong economic rebound, the global population of ultra-high-net-worth individuals fell by 3.8 per cent in 2022, after a record climb of 9.3 per cent in 2021,” she said.
“The fall last year in the total number of UHNWIs globally was due in large part to the weak performing equities and bond markets, which saw UHNWI wealth fall by 10 per cent in 2022. On the flip side however, 100 prime residential markets globally saw average price growth of 5.2 per cent and luxury investment assets grow 16 per cent, which helped steady the decline.
“We can’t underestimate how much the pandemic bought forward decision-making, rebalancing of portfolios and revaluating how time is spent in Australia going forward, given many spent longer periods of time grounded at home than they had over the past decade,” she said.
“This resulted in more local investment in Australia and given we were better insulated from global economic turmoil, this reinforced to many the advantage of creating and maintaining wealth close to home.
“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 per cent to almost 750,000 from 579,625 in 2022.”
While the UHNWI population contracted last year globally, the number of high-net-worth individuals (HNWIs) – those with US$1m or more in net assets – expanded by 2.9 per cent to almost 70 million worldwide. The top three countries for HNWI growth were Malaysia, Brazil and Indonesia.
The Middle East was the standout region with 16.9 per cent growth in UHNWIs (those with US$30m+ in net assets) in 2022. The UAE was the fastest growing country with an 18.1 per cent increase, bringing the number of UHNWIs to 1,116. Saudi Arabia was not far behind with 10.4 per cent annual growth.
Africa also proved resilient with 6.3 per cent growth in UHNWIs whilst Australasia and the Americas remained largely static with 0.7 per cent and 0.2 per cent growth respectively. Asia’s UHNWI population fell by 6.5 per cent, yet three of the top 10 highest growth markets were held by Asian countries – Malaysia, Indonesia and Singapore saw their wealth populations expand 7-9 per cent
Europe was the hardest hit region with declines of 8.5 per cent in the number of UHNWIs. Four-fifths of the region’s countries experienced a decline in their UHNWI population. Of the handful of markets seeing their UHNW population increase were Ireland with 3.9 per cent rise and the wealthy safe haven of Monaco with 0.9 per cent growth.