London's resilience and the impact of wealth creation on property markets

Rory Penn: We've been through a pretty turbulent twelve months, what has been the impact of the pandemic on wealth creation over the last 12 months, and what is your forecast going forward?

Flora Harley: Well, the huge amount of fiscal and monetary support that we've seen across the world in 2020 really helped to bolster asset prices. In fact, the global ultra-high-net-worth population, which are those with $30 million or more in net assets, grew by 2.4% to more than 520,000 individuals across the world.

This is quite a substantial growth, and many didn’t forecast that this would happen at the beginning of the pandemic in March 2020. We're also increasingly optimistic about the future. Over the next 5 years, we're predicting that the global ultra-high-net-worth population will grow by 27% and, whilst America, North America and the US are the key dominant wealth hubs, Asia is the story here with 39% growth, the fastest of any world region, led by places such as India and Indonesia. We are predicting more than 60% growth in those countries and, in China, over a decade we are forecasting a 246% rise in their ultra-high-net-worth population.

Rory Penn: That 2.4% growth over the last twelve months, how does that compare to previous years?

Flora Harley: Well, it's around a third of the year before, where we saw 6% growth in ultra-high-net-worth population. So yes, it is a slowdown, but it was just so unpredictable at the beginning of 2020. Asset prices, property market performance, and diversified portfolios are some of the key reasons cited by our attitude survey respondents on why we saw the resilience in wealth. That's the global context, so why does this matter for London?

Rory Penn: London is a very international city, it always has been. We're sitting in London now, we live and breathe the property markets. From a commercial perspective, London has always attracted overseas capital. Our data shows that 53% of buyers in London's commercial real estate markets are from overseas. And on the residential side, that numbers are even higher. If you look at the top end of the residential market, over 70% of buyers in the last 12 months have been from overseas. The year before that figure was almost 90% - so a hugely international marketplace. The impact of private capital will continue, we think, to play a huge role in the performance of Central London markets.

Rory Penn: Flora, we've touched on wealth creation and you talked about 27% growth in the number of ultra-high-net-worths. I think that's another 115,000 odd ultra-high-net-worths globally. Much of that capital will flow overseas, in terms of cross border investments and we're expecting a lot of it to come to London. In the Wealth Report you touched on London being a global super city - a top two city, what do you mean by that? Can you give us some perspective?

Flora Harley: Well, in our annual City Wealth Index we look at where ultra-high-net-worths live, spend time and invest and this year in unprecedented fashion which has dictated 2020, we had a tie at the top. London and New York were inseparable. On one side New York does have more ultra-high-net-worths than London with over 7,000. London has 6,600 but it also has more millionaires than New York - more than 874,000 of them.

On the investment side New York has more global firms headquartered there and a strong appetite from domestic investors in their commercial real estate whereas London has, as you said, that strong cross-border appeal. Despite Brexit, despite the pandemic and the political uncertainty that we've seen over the last few years, London continues to dominate. I think it's important that firms, businesses and individuals are all committing to London in the longer term. At the beginning of 2021 we've sae a record quarter for IPOs in the City of London.

More than £13 billion has been raised which is more than double the previous record set in 2006. What is more important is that technology has really been highlighted in the last year as a growing sector and it's going to pave the way for much more - London is the European tech hub! Across 2020 European tech firms raised a record amount in venture capital and London was responsible for a quarter of Europe's total, which is more than three times its nearest rival. So, it just shows the dominance and the underlying fundamental draw that is there in London.

Rory Penn: So, is London home to some of the top tech firms?

Flora Harley: I think it's clear that London has a huge tech presence. We've got Apple, we've got Spotify, we've got Facebook, we've got Google - all of them seem to still have a presence in London and some are actually expanding their footprint in the city. So, it's just showing that they really believe in the future of London as that tech hub of innovation.

For more information please get in touch with the Private Wealth team.