The AfrAsia Bank UK 2018 Wealth Report provides insights on wealth trends in the United Kingdom over the past 10 years, with projections for the next 10 years. The report also provides comprehensive wealth breakdowns for the wealthiest 20 cities in the UK. Plus, the report also examines local High Net Worth Individuals (HNWI’s) trends including the most popular universities, degrees, sectors, cities and suburbs for millionaires (HNWIs) in the UK.
There are approximately 65 million people living in the United Kingdom. London is the largest city in the country and its main economic hub. The UK is the 4th largest wealth market in the world (in terms of total wealth held) after USA, China and Japan. Notably, it ranks ahead of Germany on this measure.
Private wealth held by all the individuals living in the UK amounts to US$9.9 trillion. Around US$3.6 trillion (36%) of this is held by HNWIs.
The wealthiest cities in the UK are listed below. Note: “Total wealth” refers to the private wealth held by all the individuals living in each city. It includes all their assets (property, cash, equities, business interests) less any liabilities.
The Top 3
• London: Total wealth held in the city amounts to US$2.7 trillion. The makes London the 2nd wealthiest city in the world (after New York). The most affluent suburbs in London include the likes of: Knightsbridge, Belgravia, Richmond and Hampstead. Major sectors in the city include: financial services (banks, wealth managers), professional services (law firms, consultancies), media (TV, entertainment, news, publishing), IT and real estate.
• Edinburgh: Total wealth held in the city amounts to US$315 billion. Edinburgh is the financial capital of Scotland and the 2nd wealthiest city in the UK. New Town in Edinburgh is especially affluent.
• Manchester & Trafford: Total wealth held in the area amounts to US$273 billion. Manchester is the main financial and business hub in Northern England. It is also one of the fastest growing cities in the UK (in terms of wealth growth over the past 10 years). Major sectors in the city include: financial services, manufacturing, retail and IT. This report is the result of New World Wealth’s extensive research covering the wealth market in the United Kingdom. The report covers wealth trends in the country over the past 10 years, with projections for the next 10 years.
The UK is the 5th largest economy in the world (in nominal GDP terms) with an annual GDP of around US$2.6 trillion – source: Trading Economics.
The UK’s main export partners are: USA (14% of total exports), Germany (10%), Holland (6%), France (6%), Ireland (5%) and Switzerland (5%). Major exports include: automobiles, gas turbines and pharmaceuticals.
The UK’s US$ GDP per capita declined significantly during the review period, from around US$50,100 in 2007 to around US$39,700 in 2017 – source: World Bank. This drop was mainly due to a significant deprecation of the GBP against the USD over this period.
The UK economy is expected to grow slowly over the next 10 years, with annual GDP growth forecasts in the country averaging around 1.7% per annum (source: EIU Viewswire).
Major risks to the UK going forward include:
Worldwide stats (for Dec 2017):
• Total private wealth held worldwide amounts to approximately US$215 trillion. Around US$75 trillion (35%) of this is held by HNWIs.
• The average individual has net assets of US$28,400 (wealth per capita).
• There are approximately 15.2 million HNWIs in the world, each with net assets of US$1 million or more.
• There are approximately 584,000 multi-millionaires in the world, each with net assets of US$10 million or more.
• There are approximately 26,600 centi-millionaires in the world, each with net assets of US$100 million or more.
• There are 2,252 billionaires in the world, each with net assets of US$1 billion or more.
Distribution of wealth in the UK
UK stats (for Dec 2017):
• The UK is the 4th largest wealth market in the world (in terms of total wealth held) after USA, China and Japan. Notably, it ranks ahead of Germany on this measure.
• UK locals hold US$9.9 trillion in net assets (or wealth). Around US$3.6 trillion (36%) of this is held by HNWIs.
• The average UK individual has net assets of approximately US$153,000 (wealth per capita).
• There are approximately 827,000 HNWIs living in the UK, each with net assets of US$1 million or more.
• There are approximately 26,000 multi-millionaires living in the UK, each with net assets of US$10 million or more.
• There are 1,167 centi-millionaires living in the UK, each with net assets of US$100 million or more.
• There are 103 billionaires living in the UK, each with net assets of US$1 billion or more. Only three
counties worldwide have more billionaires than UK, namely: USA, China and India.
The following table provides a breakdown of the main industries in which HNWIs in the UK have acquired their wealth:
• Real Estate
• Financial & Professional Services
• Tech & Telecoms
• Retail & Fashion
• Basic Materials
• Hotels & Leisure
• Transport and Logistics
Prime real estate
The most expensive towns and cities for prime residential property in the UK (measured in US$ per square meter) include the likes of: London, Bray and Henley.
Notably, London is one of the most expensive cities in the world to buy prime residential property. The most expensive parts of London are Knightsbridge and Belgravia.
It should be noted that London residential prices have fallen over the review period – according to our in-house indices, prime prices there declined from around US$48,000 per square meter at the end of 2007 to around US$35,000 per square meter at the end of 2017.
It is important to note that our indices work off a different basis from most other residential indices. Our indices track the square meter prices achieved in selected prime 200 to 400 square meter apartments in each area, which we believe is the best way to check for price movements. We focus on the most exclusive apartment complexes in each area (i.e. Prime). So for London, we focus on the best apartments in Knightsbridge and Belgravia.
The four main ways used to check price growth in an area include:
• Transactional indices – these are normally compiled by major banks. They are based on the total/average value of purchases that go through the bank during a period. In our view, these are the least accurate – they are often restated heavily over time.
• Average sales price indices – also normally compiled by major banks. These indices can be distorted by big sales (i.e. the sale of a mansion) during a particular month/quarter.
• Repeat sales indices – this index is very accurate but difficult to compile over a short period of time or in a small area as it requires multiples sales on the same property.
• Square meter price growth – we use this one. By focusing on sales in certain apartment complexes one can get an idea on how square meter prices are changing. This does not require a large sample. Normally for an area such as Knightsbridge in London, tracking 3 to 4 prime apartment blocks can give one a very good indication of price movements. The only limitation of these indices is that they only work well on apartments as houses normally have gardens and additional land which is difficult to value on a square meter basis.
Many of the most expensive apartments in London are hotel residences. Originally a New York phenomenon, the hotel residence trend has started to catch on in other major cities and holiday hotspots around the world. ‘Hotel residences’ refer to apartments/villas in existing hotels which can be purchased. They essentially allow owners to live in a hotel permanently and enjoy the same services as normal guests do (i.e. room service, dining, cleaning etc.).
Hotel residences are often difficult to identify such as ‘One Hyde Park’ in London – the apartments there are essentially hotel residences serviced by the Mandarin Oriental next door.
Reasons for their rising appeal include:
• Appeal to those that travel a lot – facilities are maintained whether one is there or not.
• Access to services – room service, cleaning.
• Access to facilities – pool, spa, entertainment, dining, bar.
• Good security and big reception area for meetings.
Banyan Tree, the St Regis, the Mandarin Oriental, the Four Seasons, the Conrad Hilton and the Ritz Carlton are the main providers of hotel residences worldwide.
• Mandarin Oriental Residences (One Hyde Park) – London, UK.
• Ten Trinity Square – London, UK.
Examples in others parts of the world:
• Baccarat Residences – New York, USA.
• Palazzo Tornabuon – Florence, Italy.
• The Plaza Pied-a-terre – New York, USA.
• St Regis Residences – New York, USA.
• Four Seasons Private Residences – Seychelles.
At the end of 2017, UK based wealth managers together managed around US$2.2 trillion in HNWI funds. This includes around US$850 billion that is managed by family offices. Notable players in this market include:
• Barclays Wealth.
• St James’s Place.
• Brewin Dolphin.
• Rothschild & Co.
• C. Hoare & Co.
• Stonehage Fleming.
• Smith & Williamson.
HNWI Migration trends
Over the past 30 years, the United Kingdom has been one of the biggest recipients of migrating HNWIs. We estimate that over 85,000 HNWIs have moved to the UK since 1990.
However, this trend changed in 2017 when the country experienced its first major HNWI net outflow for a single year. Although around 1,000 HNWIs came into the UK during the year, this was more than cancelled out by a bigger outflow of around 5,000 HNWIs, resulting in a net outflow of around 4,000 HNWIs for the year. Note: figures rounded to nearest 1,000.
Possible reasons for the UK’s poor performance in 2017:
• New taxes on non-doms and foreigners with homes in the UK made it more expensive and more complicated for migrating HNWIs to buy homes in the UK.
• The UK’s traditionally high inheritance taxes made the likes of Australia and the US more appealing to migrating HNWIs (post Brexit). Notably, Australia has no inheritance taxes, whilst in the US the inheritance tax threshold is much higher than in the UK. Both Australia and the US experienced large HNWI net inflows in 2017.
• Rising crime levels and rising religious tensions (especially in London). Crime deters HNWIs from staying in a country.
Concerns for London
London was obviously a hotspot for migrating HNWIs for many years. However, this trend appears to have changed over the past couple years as migrating HNWIs now prefer moving to other “international cities” such as Sydney, Melbourne, New York, Geneva and San Francisco. “International cities” refer to first world cities which attract business people from all over the world. They tend to have English as their main language.
Notably, over the past few years, many wealthy Londoners have moved out of the city to nearby small affluent commuter towns such as Bray, Taplow and Marlow. This is a notable trend that is gaining momentum. A large number of wealthy Londoners have also left the UK altogether – many of these individuals have gone to the US and Australia.