Traditional investments, not luxuries, are helping wealthy households
The wealthy continue to get richer, but it seems that traditional real estate, not the luxury market, is driving returns.
Lower interest rates, declining inflation, and rising home prices helped many households last year, and the wealthy also profited.
According to research by consulting firm Knight Frank, there were 43.4 percent more high-net-worth individuals (HNWIs) with assets exceeding £10 million worldwide in 2024.
According to Knight Frank, the number of people worth at least £100 million increased by 4 percentage points and crossed the 100,000 threshold for the first time.
However, the investments that drove returns were not luxury or passion projects like vintage cars. Knight Frank's most recent wealth report revealed that its Luxury Investment Index actually experienced a 33% decline in the previous year.
Rather, the wealthy have profited from a recovery in the stock market, the emergence of Bitcoin, and the prime real estate markets.
How many people have a lot of money?
Knight Frank estimates that there are currently 234 million HNWIs worldwide.
Although North America leads the world in HNWI, all regions of the world saw growth of 5.2 percent this year.
Africa saw the second-highest increase at 4.7 percent, while Asia saw the second-highest at 5 percent. Latin America was at 1 point 5 percent, Europe at 1 point 4 percent, the Middle East at 2 point 7 percent, and Australasia at 3 point 9 percent.
According to Knight Frank, the United States is home to nearly 39 percent of all HNWIs, which is nearly twice as many as China. In the £100 million+ range, the percentage increases to more than 40%.
Knight Frank's global head of research, Liam Bailey, stated: "The US's resilience helped sustain investor confidence even as the global economy slowed in 2024.
"Through 2024, the trends driving wealth creation persisted, such as the rise of financial markets driven by the stock market and the bitcoin run. Resilient international trade also fueled growth in spite of geopolitical unrest.
See how your net worth stacks up against peers using our guide to average net worth by age.
Where do the rich earn their living?
HNWIs' portfolios have benefited from the equity markets, which have been aided by the US technology boom.
The record-high price of Bitcoin has also helped cryptocurrency investors.
However, the market for luxury real estate has also recovered.
In 2023, prime residential prices increased by 3 percent annually; last year, they increased by 3 percent.
The Knight Franks Prime International Residential Index tracks 100 markets, and 77 of them saw positive annual price growth.
With average prime prices up 18percent in Seoul, 17percent in Manila, and 16percent in Dubai, Asian and Middle Eastern markets dominated.
Saudi Arabia's real estate markets did well this year as well; average prices in Jeddah and Riyadh increased by 9 and 16 percent, respectively.
In the meantime, the Knight Frank Luxury Investment Index (KFLII), which monitors the performance of ten well-liked investments of passion, actually saw a decline of 3.3 percent for the second consecutive year.
Only five of the ten collectibles sectors that were monitored saw growth in 2024, and even the best-performing ones saw only a slight increase.
The best-performing luxury asset class in 2024 was handbags, whose prices increased by just 2.8%.
Classic cars, which are typically very popular, grew by only 1.2 percent.
The wine, whisky, and fine art industries were the weakest.
Knight Frank reported that the value of rare whisky and fine wine dropped by 9 percent and 9 points, respectively, while art was down 18 points.
Increased supply and shifting consumption patterns were held responsible for this.
But in the long run, luxury collectibles have paid off for investors, according to Bailey.
He went on: "Your investment would now be worth US£5.4 million if you had made an investment of US£1 million in 2005 and followed KFLII. By the end of 2024, the same sum invested in the SandP 500 would have been worth US£5 million.
"It should come as no surprise that the luxury market fared better during the global financial crisis than financial investments, and because it was possible to finance these investments, the collectibles boom continued for more than ten years after 2008. Even though it took equities a few years to catch up, the financial sector has consistently produced higher returns over the last ten years, and especially the last five.
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