“ EXPECT INCONSISTENCIES TO REVEAL DIFFERING SETS OF PRIORITIES AND VALUES IN 2023.”

In 2021, the number of consumers with $5 million+ in net worth hit a record high of 4.2 million, according to Wealth-X. Data from Credit Suisse also shows wealth made its biggest jump ever that year – climbing nearly 13%.1

Though 2022 saw a slip to four million from these soaring figures, the number of wealthy individuals worldwide is still up considerably over 2020. The numbers have also improved compared to mid-2022, when worldwide wealth dipped by 6.4% (again, compared to historic highs).

Things are likely to continue on this upswing as we move into 2023 and beyond. In fact, Credit Suisse estimates that the number of worldwide millionaires will surge by 40% by 2026 – a mere three years down the road. By that point, an estimated one in seven adults will have a net worth of at least $1 million.

THE IMPACT OF THE U. S. DOLLAR

It’s also worth noting that this wealth is measured in U.S. dollars, which have grown significantly in value over recent years. This skews the wealth numbers a bit, particularly where the USD-to-local-currency exchange rate has dropped.

The USD/GBP rate, for example, fell 10% in 2022, making for a significant decline in USD-measured wealth in the U.K. The same goes for Japan. With a nearly 15% decline in the exchange rate between USD and JPY (Japanese Yen), the number of residents meeting our $5 million USD threshold dropped considerably.

The impact of wealth measured in other currencies may have had an alternate effect, even increasing the number of wealthy individuals in some cases.

Factors To Watch In Global Wealth

There are many factors that will influence global wealth trends this year, and these will vary quite a bit from one region to the next. Overall, though, experts project global economic growth around 1.7% this year and 2.7% by 2024, according to the World Bank. 2 They’re not huge numbers, but it’s growth nonetheless – and a good indicator of the general strength of the world’s economies. In some places, the possibility of a recession looms –primarily in the U.K. and other Euro-based countries. Inflation, geopolitical conflicts like the war in Ukraine, higher interest rates, and stock market volatility could also play a role in where wealth heads worldwide this year.

Fortunately, many of these concerns only further drive consumers toward real estate purchases – especially at the high end of the market.

HNW individuals are known to be in tune with market fluctuations, and they tend to move their wealth strategically when economic challenges persist. Since real estate has long been considered a strong hedge against inflation and a smart way to diversify one’s overall investment portfolio, we can largely expect the world’s affluent to turn toward property investments as a way to preserve their long-term wealth in uncertain times.

In fact, according to Coldwell Banker Global Luxury’s The Trend Report 2022, about 40% of those with a net worth of $1 million+ plan to purchase a property in the next one to three years.

The Power In Population Shifts

Changes to worldwide populations and demographics will trickle down to real estate in big ways this year, too. For one, the number of worldwide millionaires is now at its highest point in history, and by 2026, there will be around 1.6 million individuals with a $1 million net worth or higher.3 Most of those will be concentrated in the U.S., China, Japan, the U.K., France, Germany, and Canada.

In the ultra-high-net-worth (UHNW) category, which Credit Suisse defines as $50 million in net worth or above, the Zurich-based bank estimates there will be nearly 400,000 worldwide by 2026. It can be assumed that many of these new ultra-wealthy consumers will be of younger generations. In the U.S. and Canada, millennials and Generation Xers have grown their wealth the most over the last three years, notching increases of about 25% (U.S.) and 19% (Canada) compared to the 7% to 11% uptick seen by all generations as a whole.

“

BY 2026, MILLIONAIRES WILL TOTAL 1.6 MILLION AND THOSE WITH $50 MILLION+ WILL TOTAL NEARLY 400,000 WORLDWIDE”

If these trends continue, younger consumers will wield more and more power in the real estate community, particularly given their propensity for property investments.

According to the 2022 Bank of America Private Bank Study of Wealthy Americans, affluent consumers aged 21 to 42 allocate a mere 25% of their portfolios to stocks and are significantly more likely to invest in alternative investments – real estate included. 4 For investors 43 and older? Stocks make up more than half of their portfolios and alternative investments, a mere 5%.

Younger cohorts are also highly likely to purchase abroad. In 2021, the 25-to-34-year-old group came in last in terms of international real estate interest. By 2022, they moved up to second, with only 55-and-up consumers coming in ahead.

Opportunity Presents Itself

Home equity levels have surged over the past few years and should give existing property owners serious cash to work with in 2023. Strategic investors may decide to put that cash toward secondary homes, pieds-a-terre, and vacation properties in international markets – particularly if they’re facing inflation and economic uncertainty at home.

There is also relative strength of the U.S. dollar that opens many doors. With the value of US$ up over 14% compared to some currencies, many affluent consumers whose wealth is in US$ or other strong currencies may see the wealth-building opportunity that global investments present – as well as the increased buying power and notable discounts they’ll find on the ground abroad.

Finally, the changing lifestyles that have emerged out of the COVID-19 pandemic also present more buying opportunities for many HNW individuals. This is particularly true for those who enjoy work-from-home arrangements – even partial ones – as this lends itself to a more geographically flexible investment strategy overall.

Investment Trends

Ages: 43+