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The global perspective on prime property and investment
2017
11th Edition
THE WEALTH REPORT THE WEALTH REPORT
WELCOME TO
The Wealth Report
11th Edition
R
The Wealth eading the 11th edition of The Wealth Report and looking
Report 2017 ahead to the rest of 2017, there is no doubt that the world
COMMISSIONED BY is at a crossroads.
Lord Andrew Hay As the report enters its second decade, the global
milestones of 2017 will include the first year of Donald Trump’s
WRITTEN BY
Knight Frank Research presidency, the opening overtures of the UK’s Brexit negotiations,
pivotal German and French elections and a critical succession
DESIGNED BY
of power in China. All have the potential to be as far reaching
Knight Frank Creative
and influential on wealth creation and wealth flows as the global
PRINTED BY financial crisis, which defined the first decade of The Wealth Report.
Optichrome
In this time of rapid change and volatility, Knight Frank remains
independent and committed to matching people and property
Knight Frank Sub-editor perfectly, identifying and understanding residential and commercial
EDITOR Louise Bell, Sunny Creative property opportunities in key global markets, and working increasingly
Andrew Shirley closely with our clients, both new and long standing. To achieve this,
Photography we have three unwavering points of focus:
GLOBAL HEAD OF RESEARCH
Liam Bailey Portraits of Lord Andrew Hay, • Market-leading research, providing our clients with the
Liam Bailey and Andrew Shirley deepest insight
RESEARCH by John Wright
• An industry-leading technology platform, keeping our
Gráinne Gilmore
Anthony Duggan Calvin Klein Villa by Bruce Weber clients informed and enabling them to transact efficiently
Kate Everett-Allen Georgio Armani Yacht by Frederike Helwig • A total commitment to outstanding client service,
James Roberts Selected images by Getty
delivered by the best professionals.
BUSINESS DEVELOPMENT Binding together these strands of our DNA is an ever growing
Sarah May-Brown Illustration network. Last year, in response to client demand, we opened a new
Benjamin Flouw office in the Philippines and further offices in London, Germany and
GROUP HEAD OF MARKETING,
COMMUNICATIONS AND DIGITAL the Alps, as well as re-establishing an exceptional team in Shanghai.
Infographics
Fiona O’Keefe Our new Family Office initiative is driven by our clients’ growing
Nicholas Felton
CatalogTree emphasis on wealth preservation as much as wealth creation.
GLOBAL PUBLICATIONS MANAGER
Holly Harvey Quiddity Media For this audience in particular, this report is essential as it
Definitions
delivers insight and advice not just for the coming year, but for
HEAD OF CORPORATE UHNWI
Now Available the next decade. For those readers who have yet to work with us,
COMMUNICATIONS Ultra-high-net-worth individual
Alice Mitchell View The Wealth Report and properties
– someone with a net worth of The Wealth Report offers an insight into the thought leadership that
from around the world on your device today.
over US$30m excluding their underpins the service provided by our transactional, consultancy,
HEAD OF RESIDENTIAL PR
primary residence investment and valuation teams, based in 413 offices in 60 countries
Daisy Ziegler
around the world.
HNWI
CREATIVE DESIGN LEAD I hope that you find the report illuminating and thought provoking.
High-net-worth individual –
Christopher Agius
someone with a net worth of For some, it will raise as many questions and possibilities as it
DESIGNER over US$1m excluding their answers. Do please get in touch so that we can help you address
Mia Birchall primary residence
any requirements or challenges you may have.
The Wealth Report will be updated over the coming months as
PRIME PROPERTY
The most desirable and most we pass through the changing landscape of 2017. It promises to be
expensive property in a given a fast-moving year and we would be delighted to work with you to
location, generally defined as guide you through it.
the top 5% of each market
by value. Prime markets
often have a significant
ALL KNIGHT FRANK CONTACTS: international bias in terms LORD ANDREW HAY
firstname.familyname@knightfrank.com KnightFrank.com/WealthReport of buyer profile GLOBAL HEAD OF RESIDENTIAL
1 | KNIGHTFRANK.COM
THE WEALTH REPORT Contents
04. 29. 61.
From the Property Trends Databank
Editor GOING UP, GOING DOWN
This year’s PIRI 100 sees the gap between the top
performers and the rest of the pack growing wider
NEIGHBOURHOOD WATCH
A round-up of the world’s hottest new zones,
quarters, barrios and ’burbs
The numbers behind the trends,
including all the findings from
this year’s Attitudes Survey
With thought-provoking contributors, • page 30 • page 36
in-depth analysis and detailed data,
The Wealth Report offers a unique HOME COMFORTS MANY HAPPY RETURNS
insight into what matters to UHNWIs How many houses, where and why? Why commercial property is
The latest prime property purchase trends putting a smile on investors’ faces
06.
• page 34 • page 40
FUTURE VIEW A FAMILY AFFAIR
The global trends shaping the future Insights from the first ever Knight Frank
of the prime property market Family Office Investment Trends survey
• page 35 • page 42
The Big RIGHT PLACE, RIGHT TIME
With the surge in online shopping comes a wave
Interview of opportunities in a new sector: urban logistics
• page 44
Eurasia Group’s Ian Bremmer HOT PROPERTY
on why an independent America Where’s next? Our guide to the most
tops his list of geopolitical risks happening commercial property hubs
facing the world in 2017 • page 46
49.
10. Luxury
Global Spending
Wealth Trends
Trends LIQUID ASSETS
It’s a good year for wine, according to the
Knight Frank Luxury Investment Index
UNCERTAINTY RULES • page 50
What next for wealth creation
in a post-truth world? ALL PASSION SPENT
• page 12 Our brief guide to investing in luxury
assets promises more pleasure, less pain
NEW HORIZONS • page 54
Our experts predict the next wave
of wealth creation hotspots THE EXPERIENCE ECONOMY
• page 16 The luxury investments bringing
benefits that money simply can’t buy
WORLD IN MOTION • page 56
Tracking and regulating wealth
flows is moving up the agenda
• page 18
BARRIERS AND OPPORTUNITIES
From Blockchain to Brexit, the factors driving
the movement of wealth and the wealthy
• page 20
68.
CITYSCAPE
Mapping the cities that matter
most to the world’s wealthy
• page 22
A QUESTION OF PRIORITIES
From private jets to public schools
– and making philanthropy count
• page 24
Final word
Privacy is fast becoming an
unattainable luxury, says Liam Bailey
2 | KNIGHTFRANK.COM 3 | KNIGHTFRANK.COM
THE WEALTH REPORT From the Editor
Bogotá
Buenos Aires
Mexico City
From the editor
Rio de Janeiro Miami Barcelona
Madrid Brussels Cape Town
São Paulo
Barbados
Abu Dhabi
Chicago Edinburgh
Houston Geneva
Dublin Cannes Dusseldorf
Tel Aviv
From geopolitical shifts to luxury spending trends, Atlanta
Toronto
The Wealth Report 2017 brings together the latest Seoul
intelligence and the sharpest insights into the issues Dallas New York Munich
that matter most to the world’s wealthiest people
Seattle
London Berlin
Hamburg
Los Angeles
Doha Amsterdam Moscow
Rome Vancouver
Istanbul Zurich
Milan San Francisco
Paris Frankfurt
Chennai
Auckland
Mumbai
Riyadh
Dubai
Singapore Sydney
Bengaluru Delhi Melbourne
Tokyo Hong Kong Phuket
Muscat Bali
Jakarta
Bangkok
Washington DC Kuala Lumpur
Osaka Manila
Ho Chi Minh City
Taipei
Shanghai
Beijing
Fuzhou
Dalian
Qingdao
Guangzhou Nanjing
Chengdu
Hangzhou
Tianjin Chongqing
Wuhan
Shenzhen
Xian
E
Wenzhou
diting The Wealth Report is always an interesting
journey. Ideas that seemed timely when we first sat IN-DEPTH DATA
down to plan the content are often overtaken by events
and, much to the chagrin of our long-suffering design Number obsessives should make
team, we find ourselves updating articles hours before the print the Databank section (page 61) their
deadline to ensure they are as relevant as possible to our readers. first port of call. Our detailed wealth
The past 12 months have seen more than their fair share of THOUGHT-PROVOKING distribution data produced by New
political and economic upheaval, the implications of which we CONTRIBUTORS UNIQUE UHNWI INSIGHT World Wealth is a vital source of
have tried to capture throughout the report. The following is a intelligence for anybody involved with
selection of my personal highlights from the 2017 edition that Although The Wealth Report is Our annual Attitudes Survey, which the wealth industry, while information
show why I believe The Wealth Report is uniquely placed to keep underpinned by our own expertise, this year is based on responses from like our guide to the world’s most PRIME PROPERTY
its readers ahead of the curve in these volatile times. we also like to share thought- almost 900 of the world’s leading popular private jet routes – obtained by MARKET EXPERTISE
provoking insights and perspectives private bankers and wealth advisors, crunching literally millions of figures
from leading industry commentators lies at the heart of The Wealth Report – gives a fascinating insight into the Although the range and depth of
ANDREW SHIRLEY
EDITOR, THE WEALTH REPORT and influential UHNWIs – a certain and offers a unique perspective habits of the wealthy. The findings content featured in The Wealth Report
Donald J Trump featured in 2008 – on the investment decisions and of our own proprietary research are clearly highlights that Knight Frank
and the 2017 edition is no exception. lifestyle choices of the world’s scattered throughout the report. Our understands not just the property
A number of our contributors have wealthiest individuals. The survey’s new City Wealth Index on page 22, for needs of its clients, but also their wider
THE BIG PICTURE AND THE DETAIL recently published successful books: findings are featured throughout example, reveals the most important interests and aspirations, property
in the light of recent events, both the report and are also broken down urban hubs for the wealthy, while the remains the bedrock of the report.
Few people read a report from start to finish; but if you do opt to begin at Technocracy in America by Parag on a regional basis in the Databank results of our ever popular Luxury The PIRI 100, which really emphasises
the beginning, you will find that The Wealth Report follows a clear narrative Khanna (page 20) and Superpower: section (page 61). On page 24 we Investment Index on page 50 highlight the extent of our global expertise,
journey. We kick off with our Global Wealth Trends section, looking at the Three Choices for America’s Role in include a fascinating focus on trends some of the most expensive objects of tracks the performance of the world’s
big political and economic issues driving wealth creation around the world, the World by Ian Bremmer are looking in private aviation, education and desire to go under the hammer in 2016 leading city, sun and ski luxury
including a pertinent essay by Liam Bailey, our Global Head of Research, like particularly timely reads. I was philanthropy. Swedish businessman – US$11m for a wristwatch, anybody? property markets and it is always
on the growing efforts of governments to control and track the movement lucky enough to get an hour of Percy Barnevik’s approach to Finally, don’t miss our elegant and fascinating to see which locations are
of wealth around the world. Following that, our Property Trends section, Dr Bremmer’s time recently to discuss successful philanthropy, via his ingenious infographics,several of at the top and bottom of the table.
now colour-coded so you can flick straight to it, looks at the performance of his views on the big political risks charity Hand in Hand International, which were developed for us this year I don’t want to spoil the surprise, but
the property markets we call home or invest in. And finally our glossy Luxury facing the world; read the interview will be of particular interest to those by Nicholas Felton, whose work sits in Asian cities dominate the top end of
Spending Trends chapter focuses on the finer things in life like art, cars and on page 6 or watch video content looking to maximise the impact of the permanent collection of New York’s the rankings this year. To find out why
boats, including a feature on the reasons we like to own them. at wealthreport.com their philanthropic endeavours. Museum of Modern Art. and see the full results, turn to page 30.
4 | KNIGHTFRANK.COM 5 | KNIGHTFRANK.COM
THE WEALTH REPORT The Big Interview
A quick scan of the numerous grip-and-grin photographs lining
Risk monitor
the walls and shelves of his office gives some clue as to why he so
values the 70-year era of American exceptionalism and laments its
I like to think I’m a pretty optimistic guy,
passing. Many feature a fresh-faced Dr Bremmer with leaders of
the ex-Soviet republics. His first trip abroad as a young man was to but 2017 is the most significant year for
In our keynote interview, Ian Bremmer, best-selling author and head of one of
the world’s leading political risk consultancies, Eurasia Group, talks exclusively
Russia and far from the closed, inward-looking society he expected
to find, he discovered a generation of young people gazing outwards,
political risk since World War Two
with The Wealth Report about the challenges facing the world in 2017 – and
introduces many of the themes that recur throughout the report inspired by the freedoms and culture of the US. What followed were
the collapse of the Soviet Union and the fall of the Berlin Wall.
ANDREW SHIRLEY, Without an America willing to taking the lead, many of the
EDITOR, THE WEALTH REPORT
bonds that maintain global stability, such as agreements covering
trade, the environment and defence, will weaken or fall apart,
says Dr Bremmer. “You are so eroding the trust between major
governments, you are so eroding the guardrails provided by the
multilateral institutions and architecture that the Americans have
set up, that when crises inevitably occur the potential for them to
escalate quickly or unwisely is actually much more significant.”
Potential flashpoints
F
rom this day forward, a new vision will govern The list of places where such flashpoints could occur around the
this land. From this day forward, it’s going world is worryingly long. Turkey (Risk 8) makes it into Eurasia’s
to be only America first.” top 10 for the second year running, but the fact that later this year
With these two short, yet immensely China’s Communist party is holding its 19th National Congress,
symbolic, sentences, spoken as part of his inauguration which will thrash out the details of the country’s leadership
address in Washington DC on 20 January 2017, succession, makes parts of Asia, including debut entrant North
America’s 45th President Donald Trump formally Korea (Risk 9), particularly volatile, Dr Bremmer says.
called time on seven decades of interventionist US “Trump’s new appointees on trade make it very clear that his
foreign policy. Seven decades that since the Second hawkish line on China is something that is going to continue, but
World War have seen the world’s most powerful nation let’s keep in mind that this is possibly the single worst time for the
attempt to wield its influence to imprint its own values US to try this approach. If ever there was a year when Xi Jinping
on the rest of the globe. was going to be maximally unwilling to show weakness, or softness
While Mr Trump’s supporters welcomed his pledge to or restraint in response to a perceived slight, it would be this year.
make America great again, to rebuild its strength from He has got to be seen as tough, unyielding and uncompromising.”
within and to focus on addressing their own domestic However, he concedes, it is possible that Trump’s unorthodox
woes, many other Americans were more nervous about approach could succeed where Barack Obama’s foreign policy
the future. Across the Atlantic, speaking at The World failed, and help to establish a more stable world order. “We could
Economic Forum in Davos, Switzerland, Ian Bremmer, end up with a tit-for-tat trade row that could seriously hurt both
founder and President of Eurasia Group reiterated his economies in 2017, lead to military confrontations, see the Japanese
brief obituary: “Pax Americana is dead.” take a big hit in trade and tourism and the South Koreans, with a
It comes as little surprise to hear him say this. new government from the liberal opposition, flip towards Beijing.
A couple of weeks earlier in his office on the 15th “But then if Xi Jinping has his successful leadership transition and
floor of a building on Fifth Avenue in Manhattan’s Trump has his Jesus moment – ‘Wow, the Chinese really hit me and
fashionable Flatiron district, Dr Bremmer had told me I need to do a new deal’ – things could look very different. Trump,
why he thinks the death of what he calls “Indispensable like Nixon, could end up creating the basis of a G2 [Dr Bremmer
America” and the nation’s rebirth in the shape of coined the phrase G-Zero to describe the world today, where he
“Independent America” is bad news for the world. believes no single country has the power or inclination to shape a
So bad, potentially, that it tops Eurasia’s eagerly truly global agenda] between the US and China. It’s possible, but
awaited annual list of the 10 biggest geopolitical risks it won’t be in 2017 and we’re going to have to get through a lot of
currently facing the world. Top Risks 2017 was released volatility before Trump can make it happen.”
a few days before our meeting, and Dr Bremmer had The other big alpha male of global politics, Vladamir Putin,
spent most of the week touring New York’s TV studios doesn’t explicitly make it into the Eurasia top 10, but he’s certainly
explaining that choice and why, when combined with going to be part of the mix, ready to take advantage of the power
POLITICS
Eurasia’s other risks, in particular a China liable to vacuum created by America’s unwillingness to lead, and of ongoing
Image courtesy of Eurasia Group
MATTER:
overreact (Risk 2) and a weakened Angela Merkel political and economic discord within Europe. Having this time last left:
Ian Bremmer.
less able to hold Europe together (Risk 3), he thinks year unequivocally stated that Donald Trump would not become top:
Vladamir Putin,
we are entering what he describes as a “geopolitical the US president, Dr Bremmer is understandably not ruling out Marine Le Pen
and Donald
recession”. “I like to think I’m a pretty optimistic guy, a victory by the right-wing Marine Le Pen in this year’s French
Trump.
but 2017 is the most significant year for political risk presidential elections. “Independent America leaves Putin with a below:
Angela Merkel
since World War Two,” he warns. lot of running room,” he says. and Theresa May
6 | KNIGHTFRANK.COM 7 | KNIGHTFRANK.COM
THE WEALTH REPORT The Big Interview
Technology, in the form of energy, connectivity or “Global economic growth in a world of recession is The declining power of governments to address society’s big
RISKY BUSINESS
automation, is a theme that also resurfaces frequently going to be low, and the quality of growth is going to problems brings the conversation on to wealth inequality, the issue
Eurasia Group’s Top Risks 2017
in Dr Bremmer’s commentaries, sometimes as an be lower. When emerging markets are responsible that in one shape or another really drives most of the risks facing
When you’ve got a billionaire running
opportunity – “technology has helped lift over a billion for most of the world’s growth, there will be higher the world today. Last year, on these pages of The Wealth Report, our
people out of poverty” – but often as a risk. Automation, volatility – and that means UHNWIs are going to be
1 Independent America
keynote interviewee, Lynn Forester de Rothschild, expressed a hope the country, the chances are it’s going
for example, is now a far bigger threat to blue-collar
jobs in the US than globalisation, he believes.
paying more attention to the safety of their capital
than the size of their returns,” says Dr Bremmer.
2 China overreacts
that the Movement for Inclusive Capitalism, which she champions,
would help create a fairer system of capitalism and globalisation.
to be a good place to be a rich person
As well as creating tension between the White House But the biggest risks aren’t necessarily economic, 3 A weaker Merkel But as Brexit, the US elections and numerous other populist-
and Silicon Valley (Risk 7), he also sees a number of he points out. “As inequality grows, walls are going up driven political outcomes show, voters aren’t prepared to wait for
festering technology issues potentially colliding in and people in positions of great wealth are increasingly 4 No reform those running the system to mend it gradually. Instead, they are
the Middle East, with worrying implications for the being targeted. The Panama papers were not about pinning their hopes on a new breed of politician wielding a scalpel.
stability of the region (Risk 5). “The first billion people the middle classes, they were about the wealthy. Now, 5 Technology and the Middle East Is wealth inequality a problem that can be fixed, I ask Dr Bremmer.
that had access to the internet were wealthy elites in UHNWIs’ biggest concern is not their capital, it’s their “No,” comes the short answer. “I think that we will address it in
6 Central banks get political
the developed world and emerging markets that were personal safety. As the dangers of kidnapping, for many different ways around the world. Some will be successful,
largely aligned with the status quo,” he says. “But example, go up, they will need to consider how they some will merely kick the can a bit further down the road, and
7 The White House versus Silicon Valley
when you actually start hooking up the global rank want to live their lives, how they interact with the some will be incredibly explosive. In the US, for example, you’ll
and file a lot of people are very discontented. That’s world as a whole, and how they feel about themselves 8 Turkey see some very effective policy responses to inequality, but they’ll
particularly true in the Middle East.” as human beings. What kind of future do they want for happen in certain municipalities and certain states, they won’t
That discontent is increasingly being honed into their children? What kind of society do they want to 9 North Korea happen nationally. Inequality across America as a whole will grow.”
something more virulent by the spread of partisan or live in? They need to think more about that, frankly. Part of the problem, Dr Bremmer argues, is that the data used to
extremist news and social media outlets across the That should be the principal concern that they have.”
10 South Africa measure wealth inequality is “way out of date”. “Full employment,
web that allow left or right-wing consumers to only Despite all this, Dr Bremmer isn’t all bearish about for example, is no longer a very useful metric because you’ll have so
listen to the points of view they hold themselves, the outlook for UHNWIs in 2017, particularly those Red herrings: US domestic policy, India v Pakistan, Brazil many people employed in the gig economy where labour will be on
says Bremmer. “That doesn’t matter in the US because living in the US. Ironically, while an Independent demand. You’ll need to look at whether these people have satisfying
frankly most Americans America may be a big lives, are they able to think of themselves as productive and think
are politically apathetic. risk to the world, it of future pathways for their children. Those are the questions that
But in the Middle East could be good news I think governments have been very inadequate at answering.”
if you’re connected and for domestic wealth The ability of politicians to answer the questions now being
you’re not watching UHNWIs are going to be creators, he reckons, in asked of them by electorates eager for change will define how
Al Jazeera, you’ll be
watch i ng sec t a r ia n
paying more attention to the the short term at least.
“Certainly, if you
much riskier the world really becomes in 2017. “What we do has
never felt so important,” says Dr Bremmer, as we wrap up our
news. It’s Sunni versus safety of their capital than look at the orientation chat. Hopefully those who can make a difference are listening.
Shia, it’s tribe versus o f T r u m p ’s i n it i a l
tribe – and it’s ripping the size of their returns cabinet appointments For more insights from Dr Bremmer, watch exclusive video content
these countries apart.” it appears to be a safe at wealthreport.com
The energy revolution bet that you’re going
of the past five years has to see less regulation,
also severely affected lower corporate
the ability of Middle Eastern governments to use oil taxation and more support for infrastructure and
revenues to uphold the lifestyles of their citizens, adds privatisation. When you’ve got a billionaire running
Dr Bremmer. “Suddenly, Saudi Arabia wasn’t the swing the country, the chances are it’s going to be a good
producer any more: it was America. New technology place to be a rich person.”
destroyed the social contract in the Middle East. The world’s key urban hubs also have reason to be
“When you put these things together, you realise optimistic, he believes. “The places that are doing very
that it’s not just about the borders that were set up by well and are going to do a lot better are cosmopolitan
the Europeans but don’t align with historic notions global cities. Dubai, Singapore, Shanghai, Auckland,
of identity, and it’s not just that the US doesn’t want Copenhagen, London and New York are all going to
to be the policeman after failed wars; it’s really the do exceptionally well.” Dr Bremmer believes these are
explosive nature of technology that these governments the places that over the next 10 years or so will benefit
can no longer deal with.” most from new technologies like driverless cars, which
So, all things considered, how risky is the outlook? will help create “much more liveable environments”.
Pretty risky, it turns out. “If you’d talked to me at any However, the rise of the city brings its own
point since I started this company and asked, ‘Ian, challenges. “They are not countries, so you’ll see
do you think there is any risk of war between key that central leadership erodes as the legitimacy of
governments?’ I would have said no. I still don’t think governments gets weaker. The ability to drive national
THE DISRUPTORS
it’s likely, but I can’t say that now.” policies to help raise all boats becomes much more left: Chinese President Xi Jinping
extols the virtues of globalisation
And what are the implications for the world’s challenging. The great thing about Singapore is that above: Protests against the use of
wealthiest people? After all, by and large, they bounced it’s a country and a city at the same time, so you can tax havens by the wealthy
right: The Trumps and the Obamas
back pretty quickly from the global financial crisis. do both of those things.” at President Trump’s inauguration
8 | KNIGHTFRANK.COM 9 | KNIGHTFRANK.COM
THE WEALTH REPORT Global Wealth Trends
IN THIS SECTION
Global Wealth Distribution
Wealth Trends
We take an in-depth look at the latest
wealth creation trends, while leading
experts name the next global hotspots
- page 12
Wealth Migration
The big issues shaping the decisions of the wealthy We map the movement of wealth
around the world, and
investigate how governments
are seeking to control it
- page 18
Global Cities
Knight Frank’s new City Wealth Index
identifies the cities that matter
- page 22
Attitudes Survey
The factors influencing the investment
and lifestyle decisions
of the world’s wealthy
- page 24
10 | KNIGHTFRANK.COM 11 | KNIGHTFRANK.COM
THE WEALTH REPORT Wealth Distribution
GLOBAL WEALTH Historical and predicted UHNWI population growth trends
Uncertainty rules
RUSSIA & CIS
In this post-truth world, uncertainty has never been greater. Yet despite this,
NORTH AMERICA US$480bn
Total UHNWI wealth 2016: US$7,310bn 5,170 +60%
the world’s UHNWI population continues to grow. The Wealth Report looks
at the latest trends in wealth creation – and at the shape of things to come +31% Number of UHNWIs 3,230 +36%
95,860 in 2026 2,380
GRÁINNE GILMORE
HEAD OF UK RESIDENTIAL RESEARCH +31% 73,100 in 2016
EUROPE
US$4,970bn
55,810 in 2006 55,700 +12%
49,650 +17%
42,610
P
ost-truth was Oxford Dictionaries’ 2016 While the overall number of UHNWIs has grown, regulatory reform in India will help bolster its already
international word of the year. While the considerable variation remains between growth rates positive economic performance. In China, despite
phrase itself has been around for a decade or in different regions and countries, reflecting the local indications that economic growth is slowing, the sheer
so it is only in the past 12 months that it has factors that underpin wealth creation and the mobility scale of the economy, coupled with strong growth
become part of our everyday discourse, prompted by of ultra-wealthy people. This “multi-speed” trend is in the local high-tech, media, entertainment and
a series of seismic political events and, in particular, set to continue over the next decade, with the number healthcare sectors, will deliver 140% growth in ultra-
by the unexpected outcomes of the UK’s referendum of UHNWIs predicted to climb by an average of 12% in wealthy populations, New World Wealth forecasts.
on leaving the EU and the US presidential election. Europe, compared with a forecast 91% growth in Asia
The consensus seems to be that we are now living in over the same period. Overall, the number of ultra- East v west
a post-truth world, where appeals to belief or emotion wealthy people worldwide is expected to grow by 43%. At a regional level, North America may not be topping
are more important than facts in shaping public “There may be widespread uncertainty on a global, the charts with its forecast 31% rate of growth over
opinion. The result? Ever greater uncertainty over the regional and national level, but there are also strong the next 10 years, but it will still be the key hub for
5,330
future path of fiscal, economic and political policy. fundamentals in many economies, with signs of real UHNWIs in 2026, with a population of 95,860. However,
+42% 7,570
Yet, despite this uncertainty, wealth creation progress being made around regulation and policy Asia will be starting to challenge for this title. At present,
+37% 10,350
gathered some momentum during 2016, resulting in which will help economic growth to flourish in some Asia has 27,020 fewer UHNWIs than North America;
LATIN AMERICA MIDDLE EAST
a modest rise in the global population of ultra-wealthy places,” Mr Amoils explains. by 2026, this difference will have shrunk to just 7,680.
US$810bn
people and reversing last year’s decline. The number of The dramatic growth of UHNWIs in Asia is set Nevertheless, the US is expected to see higher & CARIBBEAN 20,820
individuals with US$30 million or more in net assets, to be reinforced by stellar growth rates in several growth (+30%) in its ultra-wealthy population over the US$790bn
defined as UHNWIs, rose by 6,340, boosting the total countries, including Vietnam, which is expected to next decade than many other developed economies;
ultra-wealthy population to 193,490, according to data see its ultra-wealthy population rise by 170% to 540 a sign that, despite an inevitable period of uncertainty
prepared for The Wealth Report by New World Wealth. over the next decade – the highest rate of growth in as the new president sets out his stall, the country’s
4,970
Some 60 people saw their wealth move past the US$1 the world. Millionaire numbers are expected to jump economic fundamentals are still aligned with wealth
7,370 +48% 46,080 +121%
billion mark, taking the total number of billionaires to from 14,300 to 38,600 over the same period. creation. However, Canada is expected to see a 50%
10,270 +39%
2,024, an increase of 45% in the past decade. The World Bank has described the transformation increase in its ultra-wealthy population, albeit from
of the Vietnamese economy over the last 25 years as a much lower base, reflecting its growing status as a 3,030 +33%
Political uncertainty “remarkable”, with economic and political reforms “safe haven” from political upheaval. 2,270 +13%
The increase was far from being a foregone conclusion, translating into higher incomes. Although the bank Australasia is expected to see a 70% rise in UHNWIs 2,010
especially given that nearly three-quar ters of warns that the country is vulnerable to economic and between now and 2026, thanks not only to its healthy 88,180 +91%
respondents to our Attitudes Survey highlighted environmental shocks, the outlook for the economy economy but also the attractive lifestyle it offers. “The
political uncertainty as a significant threat to their remains strong, with average GDP growth of around ongoing migration of wealthy people to Australia
AFRICA ASIA AUSTRALASIA
US$260bn US$4,840bn
clients’ ability to create and preserve wealth. But 6% forecast annually until 2020. “We expect Vietnam and New Zealand is helping to underpin wealth US$460bn
wealth growth has been bolstered by several financial millionaire numbers to be boosted by strong growth populations,” says Mr Amoils. “In addition, there 2,270
factors, as Andrew Amoils, Head of Research at New in the local healthcare, manufacturing and financial has been some recovery from the commodity price
GLOBAL UHNWI POPULATION 4,220 +86%
World Wealth, explains. “One key influence on income services sectors,” says Mr Amoils. crash of 2015, along with resilient stock market 2006 2016 2026
in 2016 has been the performance of stock markets Substantial growth is also forecast in Sri Lanka performances and robust real estate returns. In the 136,200 193,490 +42% 275,740 +43% 7,180 +70%
in dollar terms. In many countries this was much and India. As Andrew Kenningham, Chief Global future, this region will have the attraction of good
Source: New World Wealth
stronger in 2016 than 2015.” Economist at Capital Economics, highlights overleaf, economic fundamentals and ‘safe haven’ status.”
12 | KNIGHTFRANK.COM 13 | KNIGHTFRANK.COM
THE WEALTH REPORT Wealth Distribution
However, even this level of growth will only take CITY LIMITS
the total of UHNWIs living in the Australasian region 10-year forecast growth
in UHNWI residents
to 7,180. Despite the modest growth in ultra-wealthy
populations expected in Europe, Australasia’s total
ultra-wealthy population will still be smaller than
that of several European countries in 2026, including Pune, India
Germany (8,750) and Switzerland (8,570). 170%
In Europe, the UK will remain the front-runner in
terms of UHNWI numbers in 2026, with a forecast
population of 12,310, up 30% from today, despite
Shanghai, China
high levels of economic and political uncertainty 150%
as the country negotiates its exit from the EU. By
contrast, New World Wealth forecasts little growth in
the ultra-wealthy populations of Germany, France,
Nairobi, Kenya
Italy and Spain. “Here, growth will be constrained by
80%
growing religious tensions, a combination of rising
taxes and higher state pension obligations and public
healthcare costs, and the loss of high-skilled jobs to
Asia,” says Mr Amoils. “We also expect to see some New York, US
30%
Moscow is home to 1,760 UHNWIs outward migration of HNWIs from these countries.”
The number of ultra-wealthy people in Russia and
GLOBAL TOUR the CIS is forecast to rise by 60% over the next decade,
Wealth data for selected countries
with Azerbaijan and Kazakhstan matching the growth Ankara, Turkey
UHNWI WEALTH GROWTH rate expected in the Russian Federation. This will take -20%
the total number of UHNWIs in the region to 5,170.
2006–2016 2016–2026 Source: New World Wealth
Vietnam +320% +170%
India +290% +150%
China +281% +140%
Africa rising This development in Ras Al Akhdar, Abu Dhabi, UAE, is home to almost 400 UHNWIs
Kenya +93% +80% The growth in ultra-wealthy populations in Africa
Australia +85% +70%
Russian Federation +31% +60% (33%) and Latin America (37%) will also outpace that WEALTH RISKS with its neighbour to the north as the new US president during 2016. What these countries share is the ability
UAE +70% +60% in Europe and North America. In Africa, sharp rises The issues worrying UHNWIs settles into his role. Argentina is expecting to see a to attract migrating HNWIs and to offer a fiscal and
Hong Kong +50% +40%
Singapore +58% +40% are expected in countries such as Mauritius, Ethiopia, 30% rise in those with $30 million or more in net assets political “safe haven” as well as excellent quality of
South Africa +8% +30%
Tanzania, Uganda, Kenya and Rwanda. In fact, of the Political between now and 2026; but Brazil, which currently life – which, as we have already seen with reference
United Kingdom +28% +30% 73%
United States +30% +30% 20 countries whose ultra-wealthy populations have uncertainty has the second-biggest ultra-wealthy population in to Australasia in particular, will be a recurring theme
Brazil +47% +20%
Monaco +65% +20%
grown most rapidly over the last decade, 11 are in Africa. the region, will see its growth rate more than halve over the next decade.
Saudi Arabia +38% +20% In pole position sits Mauritius which, with its from 47% between 2006 and 2016 to 20% over the This trend has bolstered Monaco’s status as the
Switzerland +40% +20% 67% Potential fall in
Germany +13% 0% reputation as a relatively safe, business-friendly asset values coming decade, amid ongoing political upheaval and country with the highest levels of UHNWIs per head of
Nigeria +40% 0% country with lower tax rates than many countries outward HNWI migration. population. To put this into context, the US has a total
Spain -9% 0%
Turkey +18% 0% in Africa, is expected to remain a popular retirement The ultra-wealthy population remained static population of 321 million and a UHNWI population
Rising
hotspot for the wealthy. “The country will also be 59% overall in the Middle East in 2016 and, while it is of 73,100, the world’s largest, giving a ratio of two
taxes
bolstered by its strengthening local financial services, forecast to grow by 39% over the next decade, this UHNWIs per 10,000 people. The comparable ratio
TOTAL POPULATION GDP UHNWIs PER UHNWIs with a forecast 130% rise in its UHNWI population still marks a slowdown compared with the 48% for Monaco is 320.
COUNTRY million (US$bn) 10,000 PEOPLE ($30m+)
over the next decade,” Mr Amoils says. 56% Capital growth seen over the last 10 years. Saudi Arabia felt Another strong performer, Malta, which saw a
controls
INDIA 1,311 2,074 0.05 6,740 While the total UHNWI population in these African the impact of lower oil prices during 2016, resulting 12% increase in its ultra-wealthy population in 2016,
countries is starting from a relatively low base, wealth in a 10% decline in numbers, while the extreme is benefiting from its investor visa and residency
CHINA 1,371 10,866 0.10 14,310
is expected to increase all the way up the chain, with 41% Rising interest political upheaval in Turkey during the year and the programme and strong growth in the local IT, financial
KENYA 46 63 0.03 120 rates
7,500 new millionaires set to be created over the next devaluation of the lira caused the country’s UHNWI services and real estate sectors.
RUSSIAN FEDERATION 144 1,326 0.19 2,750 decade in Kenya alone. population to shrink by a fifth. Looking ahead, Mr Amoils says the mobility of
New World Wealth does not forecast any growth Europe, Africa and Latin America also saw their UHNWIs looks set to increase still further – and
UAE 9 370 1.65 1,510
in the ultra-wealthy population in Nigeria over the ultra-wealthy populations decline in 2016. In Europe, to extend its reach beyond the current hotspots.
SINGAPORE 6 293 4.52 2,500 coming decade. This follows on from a 20% decline some 1,470 people saw their wealth slip below the $30 “We may see more mobility among those who
last year alone due to economic and political tensions million threshold, equivalent to a 3% annual fall, are already UHNWIs in the coming years as they
UNITED KINGDOM 65 2,849 1.45 9,470
in the country. However, Geoffrey Yu, who heads up although the strength of the dollar may have had an search for locations that offer a secure environment,
UNITED STATES 321 17,947 2.15 68,990 economically, politically and personally. Yet around
the UK Investment Office at UBS, gives an alternative impact as all of New World Wealth’s data is calculated
BRAZIL 208 1,775 0.10 2,060 perspective on page 17, outlining the opportunities for in dollar terms. Africa and Latin America both saw the world, burgeoning economic growth in some
wealth creation that could come to fruition if stability 2% declines in their UHNWI populations in 2016. countries is providing many opportunities for wealth
MONACO 0.04 6 321 1,210
of governance is achieved. Yet a handful of countries – including Canada, creation, and in some cases creating new wealth hubs
Source: The Wealth Report Attitudes Survey
In Latin America, Mexico is predicted to see its ultra- Malta, the United Arab Emirates, Qatar, Monaco and away from traditional locations.”
Note: % of respondents who agreed or agreed strongly
Sources: New World Wealth, World Bank wealthy population increase by 40%, although the that the issue could threaten their clients’ ability to Israel, as well as Australia and New Zealand – enjoyed
Sources: New World Wealth, World Bank create or maintain wealth over the next five years.
country will undoubtedly be reassessing its relationship significant growth in their ultra-wealthy populations For full country and city-level data see Databank, page 61.
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THE WEALTH REPORT Wealth Distribution
KENNINGHAM
BRODERICK
New horizons
DE KLERK
GEOFFREY
Political upheaval, governance reform and growing urbanisation
ANDREW
are leading to the emergence of new global hotspots, say our experts
KELSEY
GRÁINNE GILMORE
HEAD OF UK RESIDENTIAL RESEARCH
DEON
YU
Asia-Pacific analyst, Head of UK Investment Office, Chief Global Economist, Head: Wealth Africa,
Eurasia Group UBS Wealth Management Capital Economics Standard Bank Wealth and Investment
In past years, China has driven Nigeria is worth watching as a India hit the headlines in late 2016 With rapid urbanisation, greater
more than half of the growth in potential hotspot for wealth creation. over its decision to withdraw high financial inclusion and a youthful
UHNWI and HNWI populations. The key factor will be whether denomination notes in a bid to crack population, sub-Saharan Africa offers
The question now is how its changing greater stability of governance can down on the “black economy”. major growth opportunities. While
economic model and slowing growth be achieved, but there are reasons The move created a short-term cash each country is unique, there are
will affect this trend. Much will to be optimistic, especially after crunch; but it also sent a powerful some common themes. Agriculture
depend on the pace and scope of the last general election in 2015. If message about the government’s is one example: as global pressure on
reform. A commitment to expanding there is a further round of political determination to modernise the food production grows, the focus will
channels for overseas investment change, people will feel more secure economy and reduce corruption. inevitably turn to Africa, which has
Istanbul, Turkey, is at the centre of a geopolitical storm and deepening domestic financial investing from overseas – and the There were further signs of progress 60% of the world’s unplanted arable
markets, combined with a shift from wealth created in the country will too with the passing of the country’s land. Another is consumption, with
G
e op ol it ic a l event s h ave a lway s h a d to anticipate what impact the presidency of Donald manufacturing to services, tech and be more likely to stay put. The tech first national bankruptcy law and the growth of the middle class going
t he power to re shape t he la nd scape Trump, who is already busily reshaping US foreign innovation, will underpin continued and telecoms sector is strong, in a national sales tax, raising hopes hand in hand with greater stability
for economic g row t h a nd wea lt h policy, will have on their economies. wealth creation. But those who particular mobile banking. As an oil that long-delayed reforms may now and better governance. Ghana, which
The UN recently c r e a t ion . I nc r e a s i n g ly t hou g h , t he Forecasting the future is always a challenging have benefited from government exporter, Nigeria also benefits from take effect to make the labour market saw a peaceful handover of power
rise of globalisation is augmenting the influence business, but in this environment, it becomes even connections and market distortions the stabilisation and potential uplift more flexible and facilitate land following last year’s election, imports
calculated that the of “local” events, giving them the potential to more so. Our New World Wealth forecasts for wealth will see the pace of wealth creation of oil prices. It is imperative that acquisition. India has a resilient, around 90% of goods, creating real
Arab Spring has cost cha nge t he out look not on ly for one count r y
but also the wider region and, in some cases, the
creation, explored on previous pages, are largely based
on economic modelling, as are many of the forecasts
slow, as more sectors open up to
competition. In implementing
any commodity windfall is invested
in education, infrastructure and
diversified economy; it is not reliant
on commodities and its domestic and
opportunities for entrepreneurs.
This is also true of Kenya, despite
the Middle East some whole world. issued by large organisations around the world. reform, the government will need productivity, and in a manner that foreign debt burden is manageable. the risks posed by the forthcoming
Alongside this trend, a tidal wave of “populism” – However, there is a range of opinions on where, how to balance slowing growth with the benefits all segments of this diverse Finally, with a number of hotspots election. We see the potential for
$US600bn in lost marking a departure from the political norms seen and why wealth growth may emerge, based on varied risk of domestic unrest, meaning society. When starting from a low across the country, including entrepreneurs to do well in these
economic growth in recent history – has increased the chances that expectations of future political events. that baseline conditions for wealth base, very simple changes to political, Mumbai, Chennai, Hyderabad, countries and elsewhere, whether
economic fortunes will pivot on political outcomes. We asked four leading think-tanks, economists creation will persist in the medium fiscal and governance frameworks Bengalaru and Delhi, and many by creating stronger, smarter family
The UN recently calculated that the Arab Spring has and investors to share their wealth creation hotspots. term. However, over the long term we can make a big difference – “the sector specialities, there is a broad businesses or providing professional
cost the Middle East some US$600bn in lost economic Their views are thought provoking – and show why expect sources of growth to evolve. returns on reform” will be high. base for economic growth. services as economies expand.
growth, while regions around the world are trying numbers may not necessarily tell the whole story.
16 | KNIGHTFRANK.COM 17 | KNIGHTFRANK.COMTHE WEALTH REPORT Wealth Migration
2017, and is predicted to result in an outflow from
World in motion
GOING WITH THE FLOW Singapore in particular. The Greek government has
The latest data on HNWI migration confirms the strong and Demand for new put forward plans for a tax amnesty covering funds
Casino crackdown growing attraction of Australia, the US and Canada as held in Switzerland which would tax, legitimise and
As money moves at a faster rate, so government efforts destinations for the footloose wealthy. Cities such as Sydney nationalities is highest potentially lead to the repatriation of hitherto
As the movement of wealth around the world continues to increase,
so too does the desire of governments to regulate and control it
to control its movement also gain momentum. Once
again, by way of illustration we need look no further
and Melbourne top the list of growth markets. The list of cities
seeing an outflow of wealth is topped by European centres,
from China, Russia and the undeclared funds. The Greek proposal comes in the
wake of a similar amnesty announced by Italy in 2015,
LIAM BAILEY than China where wealthy investors – officially limited with Paris and Rome seeing outflows of 7,000 and 5,000 HNWIs Middle East, with around and is intended to discourage the flow of funds from
HEAD OF GLOBAL RESEARCH to US$50,000 a year in offshore transfers – have respectively in a year. London remains an outlier in Europe, Switzerland to other offshore jurisdictions ahead of
become adept at ma ximising opportunities for maintaining an annual net inflow of 500 HNWIs. India and
four-fifths of US EB-5 visas the introduction of the CRS.
converting money into other currencies. China are large net exporters of wealthy migrants – but with
going to Chinese nationals
The Chinese government reacted in 2016 by rapid domestic wealth creation, losses here are less Stamp duty
regulating access to casinos in Macau, a classic concerning than those in Europe. The past 12 months have also seen a rash of new rules
route for moving money, and limiting credit for card- that aim to control the destination of investment
holders travelling abroad. In 2017 the authorities flows. Three Australian states – Victoria, New South
went further by tightening the rules regarding Wales and Queensland – have introduced an additional
acceptable investments for offshore transfers – with
Highest net inflows of HNWIs by city stamp duty surcharge for foreign buyers of residential
property explicitly excluded. Further restrictions property, in addition to the new 10% withholding
INFLOW AS
seem likely, either formally via policy announcements, % OF HNWI tax on sales by foreign residents of high-value
or informally through administrative processing. CITY NET INFLOW POPULATION Australian property.
But China is not unique in its efforts to restrict Elsewhere, we see a new capital gains tax for
SYDNEY 4,000 4%
movement. Examples abound. Foreign companies short-term property investments in New Zealand, the
with direct property holdings in Russia are now additional rate of stamp duty on high-value property
MELBOURNE 3,000 4%
obliged to file details with the authorities. Since the purchases in the UK, and a new empty homes tax in
start of 2016, Brazil has required the identification TEL AVIV 2,000 6% Vancouver. Clearly, the expansion of so-called “cooling
of natural persons who are the ultimate beneficial measures” designed to control international wealth
ow ners of newly reg istered ent it ies. A nd, DUBAI 2,000 5% flows into property shows no sign of easing.
a s T he Wealth Repor t went to pre s s , t he U K
SAN FRANCISCO 2,000 2%
government was consulting on similar moves for Africa rising
foreign companies, mirroring rules introduced in As The Wealth Report confirmed in 2016, migration
VANCOUVER 2,000 8%
2016 for UK registered companies. of wealth can also take more enduring forms,
This growth in regulatory activity based on SEATTLE 1,000 5% with 16% of UHNWIs considering a permanent move
understanding where private wealth sits globally The Burj Khalifa in Dubai, which saw a net inflow of 2,000 HNWIs in 2015
overseas. The latest data from Henley & Partners
will surge further in 2017, ahead of the introduction PERTH 1,000 4% indicates that the world’s wealthy spend over
of the OECD’s Common Reporting Standard (CRS). US$2.4bn each year acquiring new nationalities.
The CRS is set to have a critical impact on wealth Demand is highest from China, Russia and the
migration, heralding as it does the sharing of Middle East, with around four-fifths of US EB-5 visas
unprecedented amounts of financial data on foreign
Highest net outflows of HNWIs by country goi ng to Ch i ne se nat iona ls. T he co st va r ie s
citizens between governments. As we explore overleaf, considerably, from a few hundred thousand dollars
OUTFLOW AS
this new reality is raising some searching questions in some Caribbean islands to US$1m and more for
T
% OF HNWI
he movement of private wealth across the world is critical in driving on data and personal security and even potential COUNTRY NET OUTFLOW POPULATION citizenship in Cyprus and other European locations.
the performance of asset markets and, in particular, property. Some investment and residency patterns. In t he contex t of cont inued rising dema nd
FRANCE 10,000 3%
movements in wealth take the form of temporary investments while for overseas property, the fact that such schemes
others, like migration, are more permanent. And as these shifts grow Amnesty international CHINA 9,000 1%
offer property as an investment route is a powerful
in both frequency and magnitude, so too do their impacts and the extent of Even money already held in offshore centres is not draw. Even here though, pressure from regulators
the reaction to them. immune from greater oversight. These are significant ITALY 6,000 2% is for r u le cha nge to reduce or even proh ibit
As with most global trends these days, if you want to understand the scale wealth pools: at the end of 2016, the store of private demand for property altogether (see reforms in the
of wealth flows there is no better place to start than China, where a heady mix wealth held in offshore financial centres totalled INDIA 4,000 2% UK and Singapore by way of example). Inevitably,
of stellar wealth creation and political and economic volatility has led to rising around US$10 trillion. Although only 1% and 6% of this will have a dampening effect on demand for
GREECE 3,000 5%
capital movement. Capital outflows from China have been a constant since early private wealth from the US and UK respectively is these particular schemes.
2014, prompted by a slowdown in the domestic economy, instability in local asset held in these centres, for the Middle East and Latin The overriding impression left by any analysis
RUSSIA 2,000 2%
markets, a desire for diversification and the need for a hedge against depreciation America the total is closer to 25%. of global wealth flows is one of flux. Nevertheless,
as China sells dollars to support the yuan. While the rate of growth in wealth held in centres SPAIN 2,000 2% t here a re t wo con st a nt s: f ir st, ever g row ing
Property remains a substantial target for this outbound capital. This is such as Hong Kong and Singapore has averaged 10% demand from the wealthy to move their money
borne out by the findings of The Wealth Report Attitudes Survey, which confirm annually in recent years, a rash of tax amnesties in BRAZIL 2,000 1% into safe havens; and second, the corresponding
that 32% of UHNWIs will invest in offshore real estate in the next two years. preparation for CRS is persuading some investors determination of governments to exercise control
Chinese investment in US residential property, for example, has risen from barely to repatriate funds. The Indonesian tax authorities’ over that process. Evidence to date suggests that
top:Busy airports such as Source: New World Wealth
US$300m in 2006 to over US$30bn in 2015, and now accounts for nearly one amnesty on undeclared tax liabilities arising from while wealth flows can successfully be corralled and
London’s Heathrow are the Note: All data rounded to nearest 1,000 and for 12 months to end of 2015.
in every five foreign purchases. engines of global wealth mobility foreign assets ran from July 2016 until March redirected, they will not be curbed.
18 | KNIGHTFRANK.COM 19 | KNIGHTFRANK.COMTHE WEALTH REPORT Wealth Migration
Brexit will shift the dynamics of wealth migration
Barriers and opportunities
ANDREW AMOILS New World Wealth
The Panama papers leak has shown that
there are no guarantees when it For many observers the UK’s decision in 2016 to leave the EU was a disaster
both in broad economic terms and, more specifically, in terms of its ability
What are the key factors influencing the movement of wealth and the wealthy? comes to data protection to attract and retain wealthy residents. However, in our view, the forthcoming
Leading experts share their predictions with The Wealth Report Brexit process will not result in an outflow of wealthy individuals from the
UK; rather, it will mean that existing HNWIs will be more likely to remain
and indeed to be joined by a growing list of new arrivals.
New citizenship Data sharing will influence This view is backed up by the fact that over the past few years many of the
Blockchain will options will open up investment decisions wealthy UK residents we have interviewed have voiced concerns over the UK’s
change…everything DR CHRISTIAN KÄLIN Henley & Partners RICHARD MORLEY Partner, BDO open border policy with Europe, as well as wider issues relating to the euro
DAVID FRIEDMAN CEO, LifeChain and economic dislocation within the EU.
The number of residence and The introduction of the CRS means As home to Europe’s dominant business and financial services cluster, the
Blockchain is set to cut a swathe citizenship-by-investment that the volume of private data being UK is in a uniquely advantageous position. It is the only English-speaking
through the investment world – programmes is proliferating, and shared between governments is set major-sized economy in the region: a fact that helps to attract HNWIs and
especially that part of it where issues we are expecting a further slew to to grow exponentially. their businesses from across Asia, Australasia, Africa and North America.
relating to data, privacy and security be announced in 2017. At its simplest, the CRS will We anticipate that the UK’s traditional alliances with the US, Canada,
intersect. At its core, Blockchain is a Recent European reforms mean help signatory governments ensure Australia and New Zealand will all grow stronger post-Brexit. Specifically,
distributed ledger whose architecture that, for example, the Cyprus that their citizens have paid the we expect Britain to reintroduce two-year working visas for citizens from
offers a secure and seemingly Citizenship-by-Investment appropriate level of taxation on Canada, Australia and New Zealand in the next few years.
unhackable infrastructure that will Programme now offers more their global investments. In reality,
give UHNWIs the ability to accelerate affordable access to the EU, with though, this is likely to mean coming
the deployment and monitoring of the minimum investment reduced face-to-face with a host of logistical
their global capital across portfolios. to €2m. Investment options have problems. Governments must make
Currently, every transaction been restructured, and now include sure that they have the capacity both
requires validation of identity by the choice to invest in real estate or to host and use the data received and
a third party, adding friction to the development land. Also in Europe, to sift out misinformation, and that
process. By creating a permanent applications for the Malta Residence they are equipped to deal with the
and unalterable record of each and Visa Programme opened last risk of data leaks.
transaction, Blockchain eliminates year. This gives individuals the right No one should underestimate the
the need for validation, reducing to reside, settle and stay indefinitely scale of the challenge posed by the
that friction and leading to greater in Malta, with free movement of first two problems on this list: even
control and trust. Ultimately, easier travel within the Schengen zone. well-resourced tax departments
transactions should prompt a rise Elsewhere, in the Caribbean, in Europe are running hard to get
in volumes, spurring additional Grenada’s Citizenship-by-Investment prepared. But the latter point is also
global flows of wealth. Programme has recently been hugely significant, especially as the
As the Common Reporting reformed, and now offers visa- “Panama papers” leak has shown
Standard (CRS) continues to gain free travel to all major countries, that there are no guarantees when
traction across global tax regimes, and double taxation treaties with it comes to data protection.
The world will become more globalised, not less there is an opportunity for investors CARICOM and the UK, as well as There are real issues surrounding Immigration will be the key political issue
PARAG KHANNA Global strategist and bestselling author to get ahead of the curve and an E-2 Investor Visa Treaty, giving the security of UHNWIs in those NADINE GOLDFOOT Partner, Fragomen LLP
influence the way governments successful applicants the right to jurisdictions where government
Votes for both Brexit and Trump last year were held up as examples of globalisation being in retreat. share information in the future, enter, live, work and stay in the US. control of data will be weak and Migration – of investors, and of people in general – will present considerable
I very much disagree with this diagnosis. I believe that these votes were votes against London and encouraging the exchange of Aside from such programmes, the where there is the potential for challenges in 2017, both within the EU and internationally. Immigration is
Washington’s mismanagement of globalisation rather than against globalisation itself, from which accurate, transparent and timely data ability to move around the world is extortion. The result may well be a central issue for the new US presidency, and a prominent feature in
everyone benefits on the whole, even – eventually – those who lose their jobs in antiquated industries. via a platform built on Blockchain. becoming easier thanks to a growing that UHNWIs currently based in elections across Europe.
Despite my view that we will see more globalisation, investors will inevitably have to navigate an In our view, the main risk for number of visa waiver agreements. the emerging world will choose to More broadly, against a backdrop of growing global instability and security
increasingly complex geopolitical environment in the future. There will be more pressure from governments Blockchain is not that someone Like the UAE before it, Kuwait is in move their investments, themselves concerns, questions of economic migration and “forced migration” are
for investment into areas like energy, industry and real estate, both for the jobs this will create and the will “hack” into this aggregation discussion with the EU regarding and their families elsewhere in becoming conflated in political discourse. Some countries with high historical
secondary economic activity it will stimulate. top: of data and assets, but that at some exemption for its citizens from the order to minimise personal risk. immigration levels, such as Switzerland and the UK, are feeling the heat and
I can foresee new tax measures being introduced to incentivise capital to remain or be reinvested. Donald Trump’s point a government might find such Schengen visa; Georgian nationals So, where will they go? The US have introduced restrictive policies, albeit ones that do not necessarily act as
victory in the
Such measures are already popular in emerging markets. The bigger issue, though, remains: how will US presidential a concentration of information have been granted visa-free travel is set to be the biggest destination a bar to HNWIs looking to invest.
election is
governments go about trying to lure fresh investment capital? announced an irresistible target for control. privileges to the Schengen zone; of choice. As long as it sits outside In the UK too, the roadmap to Brexit currently remains unclear, and
While the great global centres like London continue to offer investors admirable returns over the long right: However, this is a geopolitical risk and China and Serbia now have the CRS it will become an outlier in with it the shape of the nation’s post-Brexit relationship with the EU. The
Malta is one
term, the cost of investment and assets is itself a barrier to entry. If I were asked to point to a future growth of a number rather than a technology issue. The a visa-free agreement with each attracting wealth and investments. next 12 months should bring some clarity. The end of 2016 saw a noticeable
of countries
area, I would strongly tip investing in emerging and frontier markets, based on the demographic trends of to introduce potential offered by Blockchain for other. Expect to see more such Expect to hear squeals emanating change in the demographic of those looking to take advantage of investor
urbanisation, and the new pragmatism of governments in investing in infrastructure in non-core districts attractive new accelerating global capital flows far announcements through the course from tax havens, particularly of the (and entrepreneur) visa programmes globally, with a significant increase in
residence
of major cities as well as in second- and third-tier cities. programmes outweighs the potential risks. of this year. island and alpine variety. appetite among European and US HNWIs that looks set to continue into 2017.
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