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Singapore, India Far Exceed Growth for High Net Wealth in 2006
The choice of jewelry as an investment vehicle declines as wealth grows
Jun 28, 2007 8:33 AM
By Avi Krawitz
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RAPAPORT... Singapore and India showed the biggest growth in their count of wealthy individuals in 2006, spurring an all-round significant rise in the global wealth club, according to the 11th annual World Wealth Report.
The survey, conducted by financial services companies Merrill Lynch and Capgemini, showed that the financial wealth of the world’s high net worth individuals increased 11.4 percent to $37.2 trillion in 2006, marking its first double digit growth in seven years.
The number of individuals in the world with net assets (excluding their primary residence and consumables) above $1 million, increased 8.3 percent to 9.5 million, while the number of “ultra high net worth individuals,” with assets exceeding $30 million, grew 11.3 percent to 94,970.
Far outpacing the global growth, Singapore added 21.2 percent to its high net worth population while India’s grew 20.5 percent.
The reported showed that emerging economies proved resilient in 2006 with continued growth in their wealthy populations and solid investor cash flow to riskier corners of the market.
Emerging economies dominated the top ten fastest growers as Indonesia’s wealth club grew 16 percent, Russia’s by 15.5 percent and the United Arab Emirates’ by 15.4 percent. South Korea, South Africa, Israel, the Czech Republic, and Hong Kong all showed double digit growth. Latin America increased its number of wealthy by 10.2 percent spurred by substantial foreign direct investment, the report explained.
“The globalization of wealth creation has accelerated,” said Bertrand Lavayssière, group director, Capgemini Financial Services. “If 2005 was characterized by a flow of investment to international funds from high net worth individuals, 2006 ushered in a new era whereby emerging economies leaped ahead with direct foreign investment, strong domestic demand, and hefty stock market gains.”
The ranks of North American wealthy swelled by 9.2 percent in 2006, helping to solidify its first-place ranking in both the number of resident high net worth individuals and the size of their accumulated assets. In the United States, the high net worth population grew 9.4 percent, compared with 6.8 percent growth in 2005, while Canada showed a deceleration, growing 6.9 percent, next to its 7.2 percent growth in 2005.
Europe had its strongest growth rate since year 2000, increasing 6.4 percent for the year 2006.
The wealth report attributed the overall growth in 2006 to new highs in the global economy saying that “real gross domestic product and market capitalization growth rates – the two primary drivers of wealth generation – accelerated through 2006, which helped to increase the total number of high net worth individuals around the world as well as the amount of wealth they control.”
The report suggests however that economic growth will slow in 2007 as mature economies grow more moderately.
Within the World Wealth Report, the authors included an examination of the Forbes’ Cost of Living Extremely Well Index (CLEWI,) comparing the price inflation of luxury goods against that of everyday consumer items.
The cost of the luxury items tracked by the CLEWI rose 7 percent in 2006, while the cost of consumer goods and services, as monitored by the Consumer Price Index (CPI,) rose 4 percent, the World Wealth Report stated. In 2005, the CLEWI rose 4 percent while the CPI rose 3.6 percent.
“All else kept constant, the higher price increases reported in the most recent CLEWI signals that demand for luxury goods is outpacing demand for everyday consumables,” the report said.
The report further showed that wealthy individual’s allocated 26 percent of their “investments of passion” to luxury collectibles, 20 percent in art, and 18 percent in jewelry. Other collectibles such as wines, antiques and coins took 14 percent of the share, while 6 percent went to sports collectibles.
The report noted that jewelry showed greater geographic variations than other investments of passion, and was particularly popular among Middle Easterners who spent 32 percent of their luxury budget on jewelry in 2006. Europeans, Latin and North Americans spent less than 20 percent of their cash on jewelry.
Meanwhile, ultra net worth individuals devoted a smaller percentage of their passion-investment dollars to jewelry than high net worth individuals, “which suggests that the choice of jewelry as an investment vehicle - relative to other categories - declines as wealth grows,” the report suggested. “This may be because in the secondary market jewelry typically garners only about a third of its original price.”
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Tags:
Economy, Hong Kong, India, Israel, Jewelry, Russia, South Africa, United States
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