Dan McEvoy
The rich are getting richer but it is traditional property that appears to be driving returns rather than the luxury market.
Many households were boosted by rising house prices, falling inflation and lower interest rates last year and this has also benefited the wealthy.
Research by consultancy brand Knight Frank shows the number of high-net-worth individuals (HNWIs) – those with more than $10 million in assets – rose by 4.4% globally in 2024.
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The number of individuals worth at least $100 million climbed 4.2%, surpassing the 100,000 mark for the first time, Knight Frank said.
But it wasn’t luxury or passion investments such as classic cars driving returns. In fact Knight Frank’s latest Wealth Report showed its Luxury Investment Index actually fell 3.3% last year.
Instead, a rebound in the stock market, the rise of Bitcoin and prime property markets has benefited the rich.
Where are the wealthy making their money?
The equity markets, helped by the technology boom in the US, have given the portfolios of HNWIs a boost.
Cryptocurrency investors have also benefited from the Bitcoin price hitting a record high.
But the prime property market has also had a resurgence.Prime residential prices rose 3.6% annually last year, up from 3.3% in 2023.
Of the 100 markets tracked in Knight Frank’s Prime International Residential Index, 77 recorded positive annual price growth.
Asian and Middle Eastern markets dominated, with average prime prices up 18.4% in Seoul, 17.9% in Manilla and 16.9% in Dubai.
Saudi Arabian property markets also performed strongly this year, with average prices in Riyadh up 16% and Jeddah rising 9.6%.
Meanwhile, the Knight Frank Luxury Investment Index (KFLII), which tracks the performance of 10 popular investments of passion, actually fell for the second year in a row, declining by 3.3%.
Only five out of the 10 collectibles sectors tracked managed growth in 2024, even for the top performers the uptick was modest.
Handbags were the best performing luxury asset class with prices marginally rising 2.8% in 2024.
The usually popular classic cars sector grew by just 1.2%.
The weakest sectors were fine art, wine and whisky.
Art was down 18.3%, Knight Frank said, while fine wine and rare whisky values fell by 9.1% and 9% respectively.
This was blamed on changing consumption patterns and increased supply.
But Bailey said luxury collectibles have delivered for investors over the long term.
He added: “If you had invested US$1 million in 2005 and tracked KFLII, your investment would now be worth US$5.4 million. The same amount invested in the S&P 500 would have been worth US$5 million by the end of 2024.
“Unsurprisingly, the luxury sector weathered the global financial crisis better than financial investments, and with the ability to leverage these investments through financing, the boom for collectibles lasted for well over a decade from 2008. While it took equities several years to catch up, the past decade, and the past five years in particular, has seen a consistent pattern of stronger returns from the financial sector.”
Asset class
| 12-month price change (%)
| 10-year price change (%)
|
|---|---|---|
KFLII
| -3.3
| 72.6
|
Handbags
| 2.8
| 85.5
|
Jewellery
| 2.3
| 33.5
|
Coins
| 2.1
| 47.5
|
Watches
| 1.7
| 125.1
|
Cars
| 1.2
| 58.9
|
Coloured diamonds
| -2.2
| 3.8
|
Furniture
| -2.8
| 140.9
|
Whisky
| -9.0
| 191.7
|
Wine
| -9.1
| 37.4
|
Art
| -18.3
| 54
|
How many high net worth individuals are there?
According to Knight Frank estimates, there are now 2.34 million HNWIs across the world.
While North America leads in HNWI numbers this year – up 5.2% – growth was recorded across all world regions.
Asia saw the second highest increase at 5%, followed by Africa at 4.7%. Australasia was at 3.9%, the Middle East at 2.7%, Latin America at 1.5% and Europe at 1.4%.
The US is home to almost 39% of all HNWIs, according to Knight Frank, almost twice the level of China. In the $100 million-plus bracket, the figure rises to over 40%.
Liam Bailey, global head of research at Knight Frank, said: “While the global economy slowed through 2024, the resilience of the US helped prop up investor confidence.
“The trends powering wealth creation, including growth in financial markets led by equity markets and the bitcoin run, continued through 2024. And despite geopolitical tensions, resilient global trade further contributed to growth.”
See how your net worth compares to peers in our average net worth by age guide.
Investments for the wealthy
Here are some of the best investments that are worth wealthier individuals considering:
Venture Capital Trusts
Venture capital trusts (VCTs) are a form of investment trust and a popular investment among wealthier individuals, largely because they tap into otherwise inaccessible assets and carry significant tax benefits.
Specifically, they offer 30% income tax relief on purchases of new VCT shares, as long as these are held for five years, on up to £200,000 every year. Investing the maximum amount would allow you to deduce £60,000 from your income tax calculation.
VCT shares also qualify for tax-free dividends, and any sold at a profit won’t incur capital gains tax (CGT).
They can typically only invest in companies worth less than £15 million, so these are generally a risky investment that is best approached with a long term perspective in mind.
EIS
Besides VCTs, another government scheme to encourage investment into smaller businesses is the Enterprise Investment Scheme (EIS).
The EIS is similar to VCTs in that investments are CGT-exempt and dividends do not incur tax. Shares purchased through the EIS also incur 30% income tax relief, though they only have to be held for three years rather than five for this to apply.
Shares bought through an EIS are held by you directly, though, rather than via an investment trust. As such, they aren’t as liquid; you’ll only be able to sell shares when any given company reaches a liquidity event, such as a sale or an IPO.
EIS portfolios are typically fairly small, around 10 companies, and managed on your behalf by a specialist.
Gold bullion
Physical gold in the form of bullion is one of the oldest means of storing and, indeed, expressing wealth in history. Buying gold bullion through a broker or a registered custodian is one way of crystallising wealth into physical form.
Gold prices typically rise during periods of uncertainty. However, bear in mind that gold prices can be volatile; while gold has been on a strong run of late, it frequently changes course, and the fact that it pays no income means you could be left with little to show for your investment besides a shiny gold bar.
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