2012A GLOBAL PERSPECTIVE ON PRIME    PROPERTY AND WEALTH
THE WEALTH REPORT 2012Written by Knight Frank ResearchPublished on behalf of Knight Frank andCiti Private Bank by Think Pu...
2012A GLOBAL PERSPECTIVE ON PRIME    PROPERTY AND WEALTH
THE WEALTH REPORTA GLOBAL PERSPECTIVE ON PRIME PROPERTY AND WEALTH 4CONTRIBUTORSANDREW SHIRLEYAndrew edits The Wealth Repo...
THE WEALTH REPORT 2012                                                                                             WWW.THE...
THE WEALTH REPORT 2012                                                                              KNIGHTFRANK.COM | CITI...
MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH 8   RISE                                       ...
THE WEALTH REPORT 2012                                                                                                    ...
EMONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH10                                    conomic t...
THE WEALTH REPORT 2012                                                                                                    ...
MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH12                                              ...
THE WEALTH REPORT 2012                                                                                                WWW....
MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH14
THE WEALTH REPORT 2012                                                                WWW.THEWEALTHREPORT.NET             ...
WMONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH16                                             ...
THE WEALTH REPORT 2012                                                                                                    ...
MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH2018                                            ...
THE WEALTH REPORT 2012WWW.THEWEALTHREPORT.NET                            19              Shanghai:              poised to ...
MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH20NEW WORLD                                     ...
THE WEALTH REPORT 2012                                                                                                    ...
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
The Wealth Report 2012 - Knight Frank
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The Wealth Report 2012 - Knight Frank

  1. 1. 2012A GLOBAL PERSPECTIVE ON PRIME PROPERTY AND WEALTH
  2. 2. THE WEALTH REPORT 2012Written by Knight Frank ResearchPublished on behalf of Knight Frank andCiti Private Bank by Think PublishingFOR KNIGHT FRANKEditor-in-Chief: Andrew ShirleyExecutive Publisher: Victoria KinnardAssistant Editor: Vicki ShielMarketing: Rebecca MaherResearch enquiries: liam.bailey@knightfrank.comPress enquiries: rosie.cade@knightfrank.comFOR CITI PRIVATE BANKHead of Marketing, EMEA: Andrew RichmondMarketing, EMEA: Nadeem HussainPress enquiries: adam.castellani@citi.comFOR THINKConsultant Editor: Ben WalkerManaging Editor: Ben WillisCreative Director: Ewan BuckDesigner: Nikki AckermanSenior Account Manager: Jackie ScullyManaging Director: Polly ArnoldInformation Graphics: Paul WoottonPortrait Illustrations: Peter FieldPRINTINGPureprint Group Limited
  3. 3. 2012A GLOBAL PERSPECTIVE ON PRIME PROPERTY AND WEALTH
  4. 4. THE WEALTH REPORTA GLOBAL PERSPECTIVE ON PRIME PROPERTY AND WEALTH 4CONTRIBUTORSANDREW SHIRLEYAndrew edits The Wealth Reportand Global Briefing, KnightFrank’s prime property blogGRÁINNE GILMOREGráinne was an economicscorrespondent at The Timesbefore joining Knight Frank’sResidential Research teamVICKI SHIEL WELCOMEVicki, a former journalist, isa member of Knight Frank’sResidential Research teamLIAM BAILEY LIAM BAILEY NLiam is Head of Knight Frank’s HEAD OF RESIDENTIAL RESEARCH, KNIGHT FRANKResidential Research team andis a leading authority on globalprime property markets ever before have wealth creation, economic risk and politics been so closely intertwined with the performance of prime residential and commercialJAMES ROBERTS property markets. Drawing on insight from Knight Frank, Citi Private Bank andJames is Head of Knight Frank’s other leading commentators, The Wealth Report 2012 pulls together all theseCommercial Research team strands and explains their connections and likely implications.and specialises in prime global Using exclusive data and survey results, we uncover how the wealth beingoffice markets generated by the world’s fastest growing economies is an integral part of the equation, but also discover on page 16 that economic growth alone is not enoughILLUSTRATIONS BY to create cities considered genuinely important by the world’s wealthiest people.ADAM SIMPSON The central trend dominating primeAdam has contributed to major property markets has been the relentlessexhibitions in London, New York, growth of “plutonomy” economics, a The central trendBologna and Japan. Includedin the 2009 Art Directors Club phenomenon that sees the wealth of the richest 1% growing far quicker than that of dominating theYoung Guns awards the general population – a trend we initially performance of examined in our first Wealth Report in 2007. A year later, in the eye of the global prime property economic storm, plutonomy seemed under markets has been theDEFINITIONS threat as asset values plummeted. Ironically relentless growth of the response to the financial crisis did moreHNWI to revive the value of investments held by “plutonomy” economicsFor the purpose of this report we the wealthy than improve the position of theuse HNWI as an abbreviation for wider population. Gráinne Gilmore’s articlehigh-net-worth individual. Unless on page 10 of this year’s report highlightsotherwise stated, we define this growing political concerns about theas someone having over $25m of potential effects of income inequality.investable assets. My own analysis of prime residential property on page 26 points to the growing interest in wealth accumulationPRIME PROPERTY and wealth flows, both in the countries leading economic expansion in theA locations most desirable, and emerging world, and also across Europe and North America where this moneyusually most expensive, property. is increasingly being invested. In addition, our annual Attitudes Survey providesCommonly, prime markets have a a unique insight into HNWI investment and spending trends. The results aresignificant international bias. featured throughout the report and there is a detailed regional breakdown on page 64 of Databank. I hope you find our annual update on prime property and wealth both interesting and useful. If Knight Frank or Citi Private Bank can be of further help please do get in touch. You can find our contacts at the back of the report.
  5. 5. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 5 CONTENTS MONITOR PAGES 6-23Our map of the latest concentrations of global mega-wealth reveals that the momentum is undeniably with the world’s emerging economies. However, when it comes to choosing a home, it’s the familiar places that are still drawing the super-rich. PERFORMANCE PAGES 24-45Prime housing markets around the world have had a mixed year, but safe-haven locations are proving resilient. They are also attracting commercial investors. PORTFOLIO PAGES 46-57In light of ongoing global political and economic turmoil, the super-rich are thinking long and hard about how best to invest and safeguard their wealth. Many are looking to combine business with pleasure by investing in art, wine and sport. DATABANK 58 CONTACTS 66 KEY Throughout The Wealth Report we have used these symbols to signpost readers to content that draws on our Attitudes Survey of HNWIs, our PIRI index of global prime property markets and HNWI interviews. Attitudes PIRI Survey 2012 ATTITUDES SURVEY PRIME INTERNATIONAL WEALTH TALK What the wealthy think about RESIDENTIAL INDEX Exclusive insight from leading everything from property The ultimate guide lights and trendsetters in the to philanthropy to the best prime residential world of wealth property globally
  6. 6. THE WEALTH REPORT 2012 KNIGHTFRANK.COM | CITIPRIVATEBANK.COM 3 MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH EXPLORED Q How and why is the distribution of global wealth changing? Which cities do the wealthy consider the most important? How are luxury brands targeting emerging economies? 8 14 22 WEALTH FLOWS SLICK CITIES LIFE’S LUXURIES We investigate the The Wealth Report reveals Emerging economies are emerging centres of wealth the cities that really matter hungry for luxury, says across the world to HNWIs Cartier boss
  7. 7. MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH 8 RISE PREDICTED INCREASE IN CENTA-MILLIONAIRES 2011-2016 OF THE UNITED +23% STATES NEW RICH +59% BRAZIL THE DISTRIBUTION OF THE WORLD’S SUPER-RICH IS SHIFTING. GRÁINNE GILMORE SEEKS OUT FUTURE GLOBAL WEALTH HOTSPOTS AND DISCOVERS IT’S NOT ALL ABOUT CHINAECONOMIC CENTRE OF GRAVITY INCREASE IN CENTA-MILLIONAIRES BY GLOBAL REGION GLOBAL NORTH LATIN AMERICA AMERICA +29% +6% +67% 2006- 2011 +7% +6% 0% 2010- 2011 +37% +24% +60% 2011- 2016 1980 2012 2050 5,000 8,000London School of Economics professor Danny Quah has calculated that the world’s 17,000economic centre of gravity – the average location of economic activity by GDP – is on 21,000the move. By 2050, the steady rise of emerging economies in Asia will have pushed thetheoretical centre of gravity modelled by Professor Quah from its location in 1980 inthe Atlantic Ocean to somewhere between China and India by 2050. He predicts thatpolitical influence will follow a similar trajectory eastwards.SOURCE: GLOBAL ECONOMY’S CENTRE OF GRAVITY, QUAH (2011) 63,000 86,000 = 1,000 centa-millionaires, 2011 2016 Centa-millionaire = $100m disposable assets
  8. 8. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 9 +76% RUSSIA UNITED +44% KINGDOM +9% SWITZERLAND +106% CHINA +114% INDIA +15% JAPAN UNITED +25% ARAB EMIRATES +65% HONG KONG +67% SINGAPORESOURCE: LEDBURY RESEARCH WESTERN EASTERN AFRICA MIDDLE SOUTH & SOUTH- HNWI POINT OF VIEW EUROPE EUROPE EAST CENTRAL ASIA EAST ASIA MAIN THREAT TO YOUR WEALTH? -7% +50% 0% +100% +200% +80% The ongoing global financial crisis +8% 0% 0% 0% 0% +13% SINGAPOREAN +7% +67% 100% +50% +100% +44% Regional war MIDDLE EASTERN Nationalisation of land ZAMBIAN 3,000 1,000 2,000 3,000 5,000 2,000 3,000 6,000 Inflation INDIAN 14,000 15,000 A hostile takeover or the government 18,000 RUSSIAN 26,000 $39.9 TOTAL NET WORTH OF CENTA-MILLIONAIRES 2011 The devaluation of money HONG KONG For more survey results and investor intelligence, turn TRILLION to Databank on p58
  9. 9. EMONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH10 conomic turbulence GRÁINNE GILMORE HEADING EASTfailed to curb the rise in the number of ultra-wealthy Head of UK Residential Our global HNWI data also indicates a shifting emphasisindividuals last year, according to exclusive new figures Research, Knight Frank to the East. There are now 18,000 centa-millionaires inproduced for The Wealth Report. the region covering South-East Asia, China and Japan. There are now 63,000 people worldwide with $100m This is more than North America, which has 17,000, andor more in assets, according to Ledbury Research, which Western Europe with 14,000.specialises in monitoring global wealth trends. The By 2016, Ledbury Research expects that thisnumber of these centa-millionaires has increased by region will have extended its lead, with 26,000 centa-29% since 2006 and is forecast to rise even further (see millionaires, compared with 21,000 in North Americagraphic, p8). and 15,000 in Western Europe. But HNWIs were not spared On a country-by-country basis, the US will stillfrom the challenges that dominate in 2016, with 17,100 centa-millionaires, butfaced all investors across the While rapid GDP China will be catching up fast with numbers set toglobe last year. Amid growingeconomic and political tensions, growth does not in double from current levels to 14,000. “We believe the number and concentration of centa-manifested most clearly in the itself guarantee a rise millionaires accentuates the trajectory of current globaleurozone crisis and the ArabSpring uprisings, many world in HNWIs, rapidly wealth flows,” says James Lawson, Director at Ledbury Research. “Trends seen in this wealth bracket are likelystock markets fell sharply. growing economies do to be replicated in lower wealth tiers in years to come.”Commodity prices were alsovolatile and the growth in provide opportunities South-East Asian deca-millionaires (those with $10m or more in assets) already outnumber those in Europe,average global real estate values for wealth creation and are expected to overtake those in the US in theslowed – with the exception of coming decade.localised out-performance in These forecasts are influenced by the expectedsome markets (see our Prime economic performance of countries in the Asia-PacificInternational Residential Index, region. While rapid GDP growth does not in itselfp26, and our commercial guarantee a sharp rise in HNWIs, rapidly growingproperty trends report, p36). economies do provide key opportunities for large-scale The global economy expanded, but the pace of wealth creation.growth was much slower than in 2010. The US economy “Individuals can become millionaires or multi-grew by just 1.8% and GDP in the troubled eurozone millionaires through saving their earnings, a trend mostrose just 1.6%. In contrast, Asia managed to chalk up commonly seen in more developed and establishedeconomic growth of 7.9%, although even this was down economies. But, apart from those who inherit wealth,on the 9.5% achieved 12 months earlier. most people who are very wealthy, say with assets of The London School of Economics professor Danny $10m or more, are business owners,” Mr Lawson says.Quah forecasts that by 2050 the world’s economic centre “To amass this sort of wealth means there must be anof gravity, a theoretical measure of the focal point of alignment between opportunity and ability. For thoseglobal economic activity based on GDP, will have shifted who make more than $50m, the opportunity usuallyeastwards to lie somewhere between China and India arises because of a major liquidity event, and these are(see map, p8). Professor Quah calculated that in 1980 it more common, and can be tapped into more readily, inwas in the middle of the Atlantic. fast-moving economies.”
  10. 10. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 11 Singapore: highest GDP per capita now and in 2050 JOSEF HOFLEHNER / GALLERYSTOCKTABLE 1 TABLE 2 TABLE 3THE WORLD’S LARGEST ECONOMIC GROWTH GDP PER CAPITAECONOMIES 2010 - 20502010 GDP $tn 2050 GDP $tn TOP 10 % BOTTOM 10 % 2010 $US 2050 $US1 US 14.12 1 India 85.97 1 Nigeria 8.5 1 Spain 2.0 1 Singapore 56,532 1 Singapore 137,7102 China 9.98 2 China 80.02 2 India 8.0 2 France 2.0 2 Norway 51,226 2 Hong Kong 116,6393 Japan 4.33 3 US 39.07 3 Iraq 7.7 3 Sweden 1.9 3 US 45,511 3 Taiwan 114,0934 India 3.92 4 Indonesia 13.93 4 Bangladesh 7.5 4 Belgium 1.9 4 Hong Kong 45,301 4 South Korea 107,7525 Germany 2.91 5 Brazil 11.58 5 Vietnam 7.5 5 Switzerland 1.9 5 Switzerland 42,470 5 US 100,8026 Russia 2.20 6 Nigeria 9.51 6 Philippines 7.3 6 Austria 1.8 6 Netherlands 40,736 6 Saudi Arabia 98,3117 Brazil 2.16 7 Russia 7.77 7 Mongolia 6.9 7 Netherlands 1.7 7 Australia 40,525 7 Canada 96,3758 UK 2.16 8 Mexico 6.57 8 Indonesia 6.8 8 Italy 1.7 8 Austria 39,073 8 UK 91,1309 France 2.12 9 Japan 6.48 9 Sri Lanka 6.6 9 Germany 1.6 9 Canada 38,640 9 Switzerland 90,95610 Italy 1.75 10 Egypt 6.02 10 Egypt 6.4 10 Japan 1.0 10 Sweden 36,438 10 Austria 90,158GDP ($tn) by purchasing power parity (PPP) % GDP change year on year 2010 PPP US$SOURCE: GLOBAL GROWTH GENERATORS, CITI INVESTMENT RESEARCH AND ANALYSIS, 2011
  11. 11. MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH12 PERCENTAGE COMPOSITION OF WORLD GDP 1950-2050* 28% 29% 10% 28% 26% 9% 10% 24% 14% 27% 44% 25% 2% 10% 49% 8% 19% 22% 4% 3% 8% 8% 4% 4% 3% 11% 3% 9% 15% 4% 4% 2% 7% 4% 195 4% 7% 0 9% ia g 11% As opin 4% 4% el ev pe D 1% 8% 4% ro rn 4% Eu ste Mr 197 27% e 8% ica W 0 3% er hLawson 4% to 49% in Am ort N 1% 7% 5%adds: “Just 199 6% 2050. China S CI 0 8%looking at the 12% will overtake Ea dle 3% id 1% st Mwealthiest in some 201 the US to become the 0 3% Am atin ica Lemerging markets, you can er world’s largest economy 2% a ric 1% Afsee the sectors where they are 203 by 2020, which in turn will Eu ster nd 0 2% a Ea ralgenerating their wealth include natural be overtaken by India in 2050 ro n nt Ce peresources, manufacturing or construction.” 1% (see Table 1, p11). an d Jap 205 0 al d Ze an Willem Buiter, Citi’s Chief Economist, agrees: Citi research shows that while China and w lia an Ne stra Au“As part of the process of fast economic growth, vast India are likely to grow rapidly over the next 40wealth will be created. The distribution of that wealth years, there are other key countries with promisingwill be dictated by political factors as much as the chances for growth that do not necessarily match theeconomic process itself, but there will be high returns traditional assumptions about where future growth willfrom investment in skills and education.” emanate from. For example, Russia and Brazil, which make up theNEW WORLD PLAYERS *SOURCE: GLOBAL GROWTH GENERATORS, CITI INVESTMENT RESEARCH AND ANALYSIS, 2011 so-called BRIC nations alongside China and India, do not 9 HNWI FEARSWhile there is little doubt that the emerging economies FUTURE WEALTH make it on to Citi’s list of Global Growth Generators – orpresent the best chances for economic growth, not all CREATION “3G” countries (see commentary, opposite and Table 2,countries will prosper at the same rate. p11). Instead, Citi includes countries such as Bangladesh, Indeed, the International Monetary Fund (IMF) % Egypt, Indonesia, Iraq, Mongolia, Nigeria, Philippines,recently warned of the possibility of a “hard landing” Sri Lanka and Vietnam on this list.for some emerging economies if the effects of buoyant “All of these countries are poor today and havecredit and asset price growth, which have fuelled decades of catch-up growth to look forward to. Some ofconsumer demand in recent years, unwind. OF ASIA-PACIFIC them, including Nigeria, Mongolia, Iraq and Indonesia, The IMF predicts emerging economies will expand by HNWIs PESSIMISTIC also have large natural resources that we hope will be5.4% this year and 5.9% next year. While this certainly more beneficial than they so often have been in themarks a significant downgrade from previous forecasts, past,” Mr Buiter says.it still outpaces the average GDP growth of 1.2% and Mexico, Turkey, Thailand and Iran are also1.9% expected this year and next in advanced economies. “Many poor economies have opened up and reached 36% mentioned as countries to watch, as is Brazil, although Citi says major fiscal or political adjustments wouldthe modicum of institutional quality and political have to take place before they would be eligible to joinstability that are needed for fast growth and rapid catch- the 3G list.up,” Mr Buiter says. OF EUROPEAN While these countries can expect rapid economic This, in turn, will mean an end to Western hegemony HNWIs PESSIMISTIC growth, much of the wealth already held in developedin terms of output (see chart above). Citi forecasts that economies will be maintained, according to Citi. For morethe North American and Western European share of survey results Measuring a country’s affluence in terms of GDP perworld real GDP will fall from 41% in 2010 to just 18% in and investor capita shows that Singapore currently tops the chart, intelligence turn2050. Developing Asia’s share is expected to rise from to Databank with Norway and the US in second and third place on p58
  12. 12. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 13 GLOBAL GROWTH GENERATORS WILLEM BUITER Willem Buiter explains why acronyms such as BRIC are no longer relevant when discussing the world’s fastest growing economies Citi has created a new way of expressing the key drivers of global growth and investment opportunities. The term “Global Growth Generators”, or 3G, describes countries, regions, cities, trade corridors, sectors, industries, firms, technologies, products and asset classes that over the next five, 10, 20 and 40 years are expected to deliver high growth andrespectively (see Table 3, p11). By 2050, Singapore is WILLEM BUITER profitable investment opportunities.expected still to be in the top spot, with Hong Kong and Citi’s Chief This change in terminology is necessaryTaiwan moving up to take the second and third places. Economist because it points to a different approach toBut the US, Canada, UK, Switzerland and Austria will all thinking about the future drivers of growthstill be in the top 10, although the US will have dropped and investment potential around thedown to fifth place in the overall rankings. world. It is particularly useful now because catchy acronyms and labels have spawnedUNCERTAIN FUTURES unhelpful taxonomies of countries andIn terms of continued wealth creation, the world’s become obstacles to clear thinking aboutHNWIs remain upbeat. Less than a quarter are future growth and profit opportunities. pessimistic about their future wealth prospects, Developing/emerging versusaccording to the results of developed/advanced/mature economies,The Wealth Report 2012 BRIC, the Next Eleven, the 7 Percent ClubAttitudes Survey. The dissatisfaction are no more helpful concepts for Citi’s global client base than the Magnificent However, Tina Fordham,Senior Global Political with income inequality Seven or the Nine Nazgûl.Analyst at Citi, warns that the already being It is also worth noting that the expression “Global Growth Generators”dissatisfaction with incomeinequality already being manifested in the is not simply a new name or label for themanifested in the Occupy Occupy Wall Street same collection of countries currently known as “emerging markets” (EMs). Wall Street demonstrationswill gain momentum, and demonstrations will Indeed, we hold the view that somethat there could be a long- gain momentum countries currently in the emerging marketterm recalibration between category are not necessarily among thegovernments, businesses and future global growth generators. And insociety as a result. “It could take principle, there could be countries that area decade or longer for the ‘new not currently classified as EMs that couldnormal’ to emerge,” she says. become, or could become again, sources Indeed, at this year’s World Economic Forum in of global growth. We don’t proposeDavos, income inequality was among the issues at replacing the term “emerging markets” withthe top of the list of countries’ current concerns, the term “3G”, but instead use 3G to tagleapfrogging environmental issues, which dominated those entities we consider likely to thrive inthe global agenda for many years before the financial our globally integrated economy.crisis struck. Mr Buiter agrees, warning that the political backlash WILLEM BUITER IS CITI’S CHIEF ECONOMIST. HE HAS BEEN A MEMBERagainst income inequality, both in advanced and OF THE BANK OF ENGLAND’Semerging economies, could strengthen. “Governments MONETARY POLICY COMMITTEE AND A COLUMNIST FOR THE FINANCIAL TIMESmay use more taxation instruments and globallythere may be a further attack on tax havens. Recentgovernmental and intergovernmental activity in theseareas is not a passing phase,” he says. “It’s going to be atougher playing field for the rich.”
  13. 13. MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH14
  14. 14. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 15 CITYPOWER EMERGING ECONOMIES MIGHT DOMINATE GLOBAL ECONOMIC GROWTH FORECASTS, BUT TWO STUDIES SUGGEST THE WORLD’S ESTABLISHED TOP CITIES WILLCONTINUE TO DRAW THE WEALTHY FOR SOME TIME TO COME. VICKI SHIEL LOOKS AT THE NUMBERS LONDON REMAINS THE CITY OF CHOICE FOR THE WORLD’S SUPER-RICH HOWARD KINGSNORTH/GETTY IMAGES
  15. 15. WMONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH16 ith the VICKI SHIEL leading cities in 10 years’ time, suggestingseismic shifts taking place in economies, power structures and Residential Research, it will be some time yet before theirsocieties around the world, a very different economic landscape is Knight Frank influence fades.developing in which the rise of the emerging economies looks set When asked what makes a global city, theto be a permanent feature. But what does this mean for the world’s top-scoring indicators were personal safetyglobal cities? Traditionally the likes of London and New York have and security, economic openness and socialreigned supreme, but will they be able to maintain their dominance stability, which is perhaps unsurprisingin the face of growing competition? given recent geopolitical turmoil around Research by Knight Frank suggests that, for now at least, their the globe, and goes some way to explainingposition looks safe. This year sees the first instalment of our new-look London’s impressive performance. Thoughglobal cities study – a sentiment survey that draws on the insight deemed less important, the availability ofof Citi Private Bank’s wealth advisors around the world, as well as luxury housing and excellent educationalluxury property specialists from Knight Frank’s global network. opportunities, as well as the presenceThe objective of the survey is to assess the importance of key cities of other HNWIs, were also noted as keyto HNWIs, based on everything from investment potential and attributes – all of which London and Neweconomic openness to their appeal as somewhere to live or visit. York have in abundance. According to our findings, London continues to lead the pack, But for how long can London andcoming top in virtually every category of our survey. New York retain these top spots? Beijing,But that could all change with emerging-economy Shanghai, Singapore and Hong Kong are hotcities such as Beijing and Shanghai rising up the London continues on their heels in our table of the leadingranks as places to watch over the next decade. Here we consider the results of our survey as well to lead the cities in 10 years – Beijing made it to third place in this league (a rise of six places),as the findings of research into the competitiveness pack. But that followed by Shanghai, Singapore and Hongof 120 cities, conducted by the Economist IntelligenceUnit (EIU) and commissioned by Citi Private Bank. could change Kong, knocking Paris down to seventh place. Beijing and Shanghai also lead the list of as emerging cities growing in importance most quicklyGLOBAL CITIES SURVEY economy cities to HNWIs, followed by London, Singapore,We asked respondents to rank the most important Hong Kong and New York. This reflects theglobal and regional cities to HNWIs now and in 10 rise up the ranks impact of the flourishing economies of theyears, and to pinpoint those growing most quickly East. But is economic growth alone enoughin importance. We also asked them to rank cities to make a city really matter to HNWIs?in terms of economic activity, political power,quality of life, and knowledge and influence (see EIU GLOBAL CITY INDEXDatabank, p63). Research commissioned by Citi Private Bank London took the pole position in almost every from the EIU ranks the competitivenesscategory. Survey respondents from all regions bar one voted it the of 120 of the world’s top cities. New York,city that matters most to their clients now. Even respondents in Asia London and Singapore top the rankings,Pacific put London and New York ahead of Hong Kong, Singapore, while the highest-scoring Chinese city isShanghai and Beijing. Only respondents in Latin America disagreed, Beijing (39).putting London in third place after New York and Miami. London But going only by GDP growth – one ofand New York remain in first and second place in our league of the the 31 indicators in the ranking – nine of
  16. 16. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 17 63 WHAT IT TAKES TO BE A GLOBAL CITYVERY IMPORTANT FACTORS % OF HNWIs SAYS PERSONAL SECURITY 21% OF HNWIs SAY EDUCATION For more city rankings the top 10 cities in the world are in China. and investor The top 20 are all in China or India. And intelligence turn except for Doha, Lagos, Panama City, to Databank on p58 and Lima, the top 30 are all in the Asia- Pacific region. Many of those fast-growing Chinese cities, ELSEWHERE IN THE WORLDTHE CITIES THAT MATTERTO HNWIs –GLOBAL however, performed significantly less well ONES TO WATCHCITIES SURVEY for freedom of expression and human rights Though the leaders in our global cities survey represent – something that may hinder any future the usual big players, the wider results reveal theMOST IMPORTANT NOW ascent to the top of the overall ranking. emergence of other interesting trends1 London Their performance in the “global appeal”2 New York3 Hong Kong category – which considers factors such as SAO PAULO Currently ranked 18, but our respondents4 Paris the number of companies located there expect Brazil’s largest city to climb 10 places in 10 years to5 Singapore from the Fortune 500 index of the largest US become the eighth most important city in the world.6 Miami7 Geneva companies – is also relatively poor, with just MIAMI Ranked six in the overall table. South American8 Shanghai Beijing (5) and Shanghai (23) making the top respondents voted it the second most important city in9 Beijing 80 of the 120 cities studied. the world after New York, while North Americans put10 Berlin it at number five. The city is a growing hub for SouthMOST IMPORTANT IN10 YEARS EASTERN PROMISE Americans doing business in North America. The statistics on China’s growth are DUBAI Despite its struggles in recent years, it was voted1 London remarkable. Its luxury goods market is the 13th most important city in the world.2 New York3 Beijing growing 35% annually and luxury brands MUMBAI, NEW DELHI, RIO AND ISTANBUL4 Shanghai such as Prada and Gucci are opening stores All cities that our respondents said are growing rapidly5 Singapore in cities mostly unknown outside China. in importance.6 Hong Kong7 Paris But the relative anonymity of these8 Sao Paulo secondary cities could well change in the9 Geneva near future. Even the most conservative10 Berlin forecasts suggest that by 2025 China willGROWING IN IMPORTANCE have around 130 cities with over one millionTO HNWIs THE FASTEST inhabitants, more than the US and Europe governments are developing, their citizens1 Beijing combined. Of those, around 90 are expected are demanding more rights, and the cities2 Shanghai to have over five million people, while eight are blossoming. If I were to choose one that3 London will be home to more than 10 million. To will join the future list of global cities, I4 Singapore5 Hong Kong put this into perspective, New York is the might choose Dalian [in north-east China],6 New York only US city that has a population of more although many would say China’s next great7 Sao Paulo8 Dubai than five million (8.2 million in 2010). city is Chongqing [in the south-west]. There9 Mumbai This raft of second and third-tier cities are around 30 million people living there10 Paris is likely to become increasingly influential, and a staggering amount of money is being says Jim Rogers, a US investor based in spent on its development.” Singapore: “These secondary cities are SEE OVERLEAF FOR PREDICTIONS OF THE becoming more powerful – their local WORLD’S LEADING CITIES IN 2050
  17. 17. MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH2018 China opens its economy, currency and LONDON OR NEW YORK: The most markets, it will continue to grow. It also has significant driving force of any city is a well-educated and strong labour force. its people. It is crucial to have a liveable Democracy, human rights and freedom environment for increasingly mobile of speech have been improving for some populations, and to attract a significant time now and I believe will continue to foreign workforce. More than one-third of do so. Thirty years ago there was just one people in New York and London are foreign- newspaper, radio station and television born. Despite their astonishing growth, channel. Now there are many media outlets, Asian economic powerhouses fail to reach50 and demonstrations take place each year that level of cosmopolitan culture. New where no one dared before. Shanghai does York or London will continue to top the have its drawbacks: the traffic and pollution indices, but only if they ensure their strong are terrible because the economy is growing cultural offers are unmatched and maintain faster than the infrastructure. open immigration policies. JIM ROGERS DAVID ADAM Investor, Singapore Managing Director, Global Cities, London SHANGHAI: The “head of the dragon” LONDON: The global cities of the future has more freestanding buildings over will remain those that can provide security 400 metres than any city in the world, and diligence to international firms and and a cityscape to rival the West’s most clients, while evening out inequalities at impressive. With the Chinese economy on home. London will continue to be one such course to overtake the US as the largest centre if it continues to follow structural in the world, in some estimates as soon adjustments in its economy. These include as 2020, Shanghai is poised to take this bringing large institutional investors mantle. Doubts persist about whether into the rental market, which will turnWe asked leading the state capitalist “one-party” model can Londoners into renters rather than ownerscommentators to continue to balance growth while pacifying the growing and vocal middle class. But and divert the surplus from real estate into more productive capital.predict the world’s top these concerns are likely to be overcome DR SAVVAS VERDIScity in 2050. Shanghai, due to the sheer size of the market, a maturing of the economy and inevitable, Chief Executive, Rankdesk, London SEE OUR INTERVIEW WITH CARTIER CEOChina’s financial centre, incremental, political reform. BERNARD FORNAS FOR MORE INSIGHT, P22 NICHOLAS HOLTemerged as the most Asia-Pacific Research Manager,popular choice Knight Frank, Singapore CITIES OF THE FUTURE RENATO GRANDMONT SHANGHAI: It has the world’s largest container port, fastest A shift is taking place from developed to developing train, longest metro system and economies – not a simple West to East shift, but a multi- is currently working on the directional one to places such as Sao Paulo, Mexico City world’s second tallest building. and Istanbul. The East is increasingly important, with But what is vitally important in China’s plethora of 1 million-plus cities, led by Shanghai a global city is a strong brand. and Guangzhou. But demographics alone are not the Frankfurt and Hong Kong lose deciding factor. I think the cities of the future will includeSHANGHAI: The city is a catalyst for out to New York and London Cairo, Lagos, Johannesburg and Mumbai, as well ascultural and technological innovation and as global cities because nobody established global centres such as New York, Londonrepresents Chinese modernity – in 1980 dreams of “making it big” in and Moscow. We will also likely see a number of newthere were no skyscrapers, today it has twice Frankfurt. A true global city players emerge. As a final thought, let us not forget thatas many as New York. By 2050 its population is one with a brand people some refer to the the social media site Facebook as theis projected to reach 50 million. Market recognise, an image to which world’s largest country. Technological developments meanliberalisation will help Shanghai become they aspire and a place where people can live where they want, which may affect thea global financial centre and it is forging they dream of living. Shanghai pre-eminence of cities in time (see p20 for more thinkingahead as a cultural hub and global performs well on all these and on future cities).tourist destination. is where the next generationTIM HANCOCK AND ROHIT TALWAR of ambitious entrepreneurs RENATO GRANDMONT IS CHIEF INVESTMENT OFFICER FOR CITI WEALTH MANAGEMENT AND CITIForesight Director and Chief Executive, Fast and visionaries will dream of PRIVATE BANK IN LATIN AMERICAFuture Research, London making their mark. BRYN ANDERSONSHANGHAI: The most important city in Valuation Director,China in the past and it will be again. As Brand Finance, London
  18. 18. THE WEALTH REPORT 2012WWW.THEWEALTHREPORT.NET 19 Shanghai: poised to become the world’s leading city in 2050 New York: a rich cultural mix keeps it in the top league of world cities JEAN-LUC BERTINI/PICTURETANK, MARK HENLEY/PANOS
  19. 19. MONITORGLOBAL WEALTH DISTRIBUTION AND LOCATIONS FAVOURED BY THE SUPER-RICH20NEW WORLD avoid locating in London or New York, where costs are high, and if Copenhagen servesORDER their purposes just as well, there is little doubt as to where they will go. The mass- consumption sector is the opposite: the New York 2 3While the balance of urban more cans of coke or mobile phones you can Chicago 1 Washingtonpower today is held by a sell, the better. These are the geopolitical urban vectorssmall number of megacities, underlying the global economy that I believesome believe that could all will shape the future: 1 WASHINGTON/ 2 NEW YORK/change. Here we share some 3 CHICAGO: These cities are becoming 13 Brasiliaof the latest thinking on more important geopolitically than the United States is as a country. Chicago is 12 Rio de Janeirothe rise of urban networks rising fast as a geopolitical actor – think of 11 Sao Pauloand the emergence of a new the state visit by Chinese president Hu Jintao in January 2011, when he stopped not just inbreed of city that punches Washington but also in Chicago. 4 BEIJING/ 5 HONG KONG/above its weight 6 SHANGHAI: Beijing is the centre of power, but Hong Kong’s global intermediary role is critical. Shanghai is the leading 7 Berlin national industrial and financial centre. 7 BERLIN/ 8 FRANKFURT: With Berlin the 8 Frankfurt DOMINANT CITIES seat of the European Union’s most powerful REPLACED BY MULTIPLE economy and Frankfurt the seat of the EU CITY NETWORKS Central Bank, this axis is the bulwark for the Saskia Sassen EU. If there were no EU, they would not be as significant geopolitically. Predicting which cities will lead the world in 9 ISTANBUL/ 10 ANKARA: Istanbul, long 2050 is not a straightforward economic story; the East/West and North/South hinge city, 14 Brussels it is about geopolitics, as the global city is an in combination with Ankara, is rapidly international actor of sorts. becoming a major global policy nexus. The emerging urban geopolitics is 11 SAO PAULO/ 12 RIO DE JANEIRO/ centred in networks of cities – mostly, but 13 BRASILIA: The new politico-economic not exclusively, global cities. This began in heavyweight axis next to now-established the late 1980s and now serves as important China. The Brazilian Development Bank infrastructure for the global economy. is richer than the World Bank, and its It has become clear over the last few decades economic power is large and ascendant. that our geopolitical future is not going to be 14 BRUSSELS: The EU may be struggling determined by the ‘G2’ combination of the with economic crises in several member Istanbul United States and China. It will instead run states, but its institutions and capabilities 9 10 Ankara via 20 or so strategic urban networks. These are unlike those of any other union of states. networks have grown in importance on the 15 CAIRO/ 16 BEIRUT: They rearticulate what back of the globalisation and urbanisation of the Middle East means as a region. Beirut an increasing number of economic activities. has long had politico-economic networks Those cities that work together begin to matter worldwide; Cairo has a history of empire. 16 Beirut more in the global economy and in geopolitics 17 GENEVA/ 18 VIENNA/ 19 NAIROBI: These than their respective countries. cities have the critical mass and mix of Firms that sell to other firms rather institutions devoted to social questions 15 Cairo than consumers thrive on the specialised and justice for the powerless, with Nairobi differences of global cities. Consider London, increasingly important in a rapidly New York and Paris – they are all major urbanising world. They have long been financial centres, but they are specialised overshadowed by global finance and mega- in very different sectors of finance. What militaries. But they will emerge as critical 4 Beijing matters to these firms is not the city as a actors in the global commons. supermarket, but as a specialised shop. By this rationale, different firms will prefer PROFESSOR SASKIA SASSEN IS CO-CHAIR OF THE 6 different city networks. The various city COMMITTEE OF GLOBAL THOUGHT AT COLUMBIA Shanghai UNIVERSITY, AND COINED THE TERM “GLOBAL rankings and indices do measure something CITY”. IN 2011 FOREIGN POLICY MAGAZINE that matters. But for many firms, if they can NAMED HER AMONG ITS TOP 100 THINKERS 5 Hong Kong
  20. 20. THE WEALTH REPORT 2012 WWW.THEWEALTHREPORT.NET 21 1 3 1 2 FAST-GROWING EMERGING MARKET MIDDLEWEIGHTS Jaana Remes The unprecedented pace and scale of urbanisation in developing countries is among the few bright spots on a global economic 7 horizon clouded by ageing populations, increasingly volatile resource prices and debt 13 crises. It is no longer just a story about the rise of 12 megacities such as Shanghai or Mexico City. 11 We believe the cities to watch in 2050 are the 400 emerging market “middleweights” – fast- HNWI POINT OF VIEW 6 WHAT MAKES A GLOBAL CITY? growing cities with populations between 200,000 and 10 million. This dynamic group includes many cities that are not household names today: A vibrant international business sector 1 LINYI, 2 KELAMAYI and 3 GUIYANG in AMERICAN China; 4 SURAT and 5 NAGPUR in India; and 6 CONCEPCION and 7 BELEM in Latin Safe and cosmopolitan America. Yet collectively they are global growth LATIN AMERICAN engines, reducing poverty, expanding the global middle class by millions of households, and It must follow the London model: entrepreneurial, cosmopolitan, free creating new market opportunities for local and enterprise, capitalist, favourable tax multinational companies. structure, great entertainment, cultural, enriched society with great diversity 3 JAANA REMES IS SENIOR FELLOW AT THE MCKINSEY MIDDLE EASTERN 14 8 7 GLOBAL INSTITUTE, SAN FRANCISCO 17 18 WWW.MCKINSEY.COM/INSIGHTS/MGI Be an international financial centre and an investment conduit for foreigners 9 10 and residents alike 16 GLOBAL INTELLIGENT HONG KONG 15 4 5 COMMUNITIES Louis A. Zacharilla Sustainable property values in all real estate sectors, including residential, office, retail and industrial. Property Most people will not have heard of these three values are a barometer of the health cities. But 1 WATERLOO in Canada, 2 SUWON of the overall economy and also the 19 attractiveness of a city in South Korea, and 3 EINDHOVEN in The SINGAPOREAN Netherlands are working together as part of an important fraternity and movement. These three, Good public transport, be safe and along with about 100 others, have transformed have strong governance themselves into what we call “intelligent INDIAN communities” – cities and communities that have worked diligently to produce a very good Boast a wide range of recreational facilities and good infrastructure quality of life for citizens. Each has entered AFRICAN an international awards programme and been reviewed by academics and experts in For more order to be given this title. They are modelled survey results on a holistic set of criteria including good and investor intelligence turn telecommunications access, a knowledgeable to Databank workforce, innovation in their local governments on p58 and culture, and activities aimed at closing digital and social divides. Broadband and the2 4 emergence of a global digital infrastructure have 2 1 made these improvements possible. By 2050, no 6 matter where a person lives, they will be able to 3 5 participate in the global economy. LOUIS A. ZACHARILLA IS CO-FOUNDER OF THE INTELLIGENT COMMUNITY FORUM, NEW YORK WWW.INTELLIGENTCOMMUNITY.ORG

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