Wealth-X has released it’s 2014 report on the Ultra High Net Worth population. These 211,275 households with $30m in liquid assests or more are huge drivers of the global luxury business and cultural markets that are bound up in their emergence. As the chart above suggests, art is a central part of their identity. Owning globally recognized art, is a badge of membership in this rapidly growing global class and one reason the auction houses are seeing a strong influx of new buyers, often at the very top of the market.
Here’s Wealth-X on the luxury market in general:
The average UHNW individual spends US$1.1 million a year on luxury goods and services, ranging from expenditure on travel to food. We estimate that these individuals are responsible for almost 19% of the entire luxury market – higher than the 17% share of the market they accounted for last year. Their increasing importance in this sector is partly due to the fast growth in UHNW population and wealth, which saw their average net worth and liquidity rise.
Furthermore, demand for luxury good and services from high net worth and mass affluent individuals seems to have ebbed a bit in the last year, while UHNW individuals have not modified their purchasing patterns significantly. For UHNW individuals, many luxury items and experiences are part and parcel of their lifestyle and are not necessarily considered a “luxury”. For example, UHNW individuals with private jets use their aircraft not only for leisure, but also for business purposes. On the other hand, while yachts, and particularly superyachts, are usually a non-necessity, many UHNW individuals lead very public lives, and the privacy of a family holiday on a yacht is a very special treat.
Preferences and tastes within the UHNW population differ, but across all clusters, the growth in so-called “experiential” luxury is evident as more and more UHNW are craving intangible and invaluable luxury experiences over and above material luxury goods.
To help understand the global nature of this group, Wealth-X also looked at where the UHNW households are buying safe-haven properties which would seem to be a secondary driver of the art market:
On average, UHNW individuals own 2.7 properties, and hold over 8% of their net worth in real estate assets. Female UHNW individuals tend to hold more of such assets, with an average holding of US$20 million in real estate, compared to US$14 million for their male counterparts.
79% of the world’s UHNW individuals have more than two residences, but for the majority of these individuals, their primary and secondary residences are within the same country. Despite the fact that most UHNW individuals’ business interests span more than one location, many choose not to own property in all the places they visit on a regular basis. Instead, UHNW individuals’ secondary residences are often located in regular vacation spots, or strong real estate markets in which these individuals wish to invest.
At least 30% of the world’s UHNW population have at least one residence outside of their primary business country. The prevalence of North American and European countries as top locations for secondary residences among the world’s UHNW individuals re-emphasises the reason for Wealth-X’s long-term optimism regarding these regions’ UHNW population and wealth. These countries are considered safe havens for the world’s wealthiest. Nonetheless, the importance of some of the world’s key markets outside of these regions – such as China, Hong Kong, Singapore and India – shows that the shift of wealth creation towards Asia is not only on its way, but is also attracting more foreigners, who hope to benefit from the strong growth potential the region continues to offer.