A Report Finds World’s Richest People Lost $10 Trillion In 2022

A Report Finds World’s Richest People Lost $10 Trillion In 2022

As a result of the crisis, ultra-high-net-worth individuals (UHNWIs) in Europe lost 17 per cent of their fortunes. The net worth of a UHNWI consists of both the primary residence and a second home worth $30 million or more.

Last year’s Ukraine crisis fostered an energy crunch in Europe and led to inflation, according to Knight Frank research head Liam Bailey. 

The result was a sharp increase in global interest rates in 2022, which Collins English Dictionary dubbed the permacrisis. 

Market volatility has been driven by global economic uncertainty accompanied by inflation, high-interest rates, and the Russia-Ukraine war, which contributed to a bear market after a 13-year bull run.

Increasing interest rates is a key means of controlling inflation around the world. The US Federal Reserve has made efforts to target inflation at 2 per cent, which it has done eight times since March 2022.

International Monetary Fund’s January forecast for global economic growth increased by 0.2 percentage points over October’s prediction. In comparison with 2022, growth is estimated at 2.9% for 2019. 

UHNWIs’ wealth in 2022 rose by 40 per cent, but most were negatively affected by changes in rates in residential, commercial, and fixed income, as well as investments in passion and other assets. 

Wealth decreased by 11.7% in Australasia and 10.7% in the Americas in 2022, with Europe experiencing the most significant decline.

Among the countries with the smallest drops, Africa registered a 5 per cent drop, followed by Asia and the Middle East, each with a 7 per cent drop.

Despite this, 69% of wealthy investors expect to grow their portfolios this year due to asset repricing, perceived value opportunities, and expected economic recovery. 

Thirty-three per cent of respondents would like to see capital appreciation in 2023, while 25 per cent would like to preserve their wealth. 

The Asian-Pacific region has the most optimistic high-net-worth individuals (HNWI) – those with a net worth of more than $1 million, including their primary residence – on growth. In Europe and the US, wealth preservation is the top priority as interest rates take their toll. 

As investors diversify and hedge against inflation, Knight Frank predicted increases in investment allocations. 

The pandemic has come at a time when 29 per cent of investors are reducing debt volumes. Furthermore, the desire for mobility has surged, with 13 per cent of UHNWIs considering getting a second passport.

A report predicts Singapore and Dubai will also increase as wealth centres soon. Dubai ranked 23rd in a survey by Henley & Partners last September. 

According to Henley & Partners, a global wealth research firm, the city’s number of high-net-worth individuals has increased to 67,900, up from 54,000 in June 2018. 

It has adopted a number of economic, legal, and social reforms in recent years to strengthen the UAE’s business environment, attract foreign direct investment, create new visas for skilled workers, and offer incentives to companies looking to expand.

An amendment to the 10-year golden residency initiative was introduced in 2019 to simplify eligibility criteria. 

As of March 2021, the UAE will also offer a one-year visa for digital nomads, allowing them to resume employment in their home countries while working in the Emirates.

The boom in so-called digital nomads is continuing- disrupting outbound countries, destination markets, tax systems, residential rental demands, and office requirements. 

After years of significant gains, Knight Frank’s Research Director and Editor-in-Chief, Liam Bailey, stated that a historic shock had hit the extremely wealthy. 

The Ukraine conflict aggravated the already surging inflation and the European energy shortage. As a result, global interest rates jumped sharply in 2022, causing the permacrisis, which Collins English Dictionary aptly dubbed the global economic crisis of that year. 

The study found that only 4 out of 10 UHNWIs, defined as those whose net worth exceeds $30 million, including their primary residence, increased their wealth in 2017. 

Residential real estate, commercial real estates, fixed income, and passion investments, such as art or expensive wines and whiskeys, declined in value. 

The decline in wealth is not surprising, according to Bailey, given the abrupt change in monetary policy that led to the worst performance for conventional blended portfolios since the 1930s. 

In Europe, average net worth decreased by 17%, followed by Oceania and the Americas. A drop of 5% in Africa and 7% in Asia compares favourably.

Rich people continue to spend millions on new luxurious homes despite the decline in their financial fortunes. 

Forty-three houses sold in London and New York last year for more than $25 million each. Compared to New York, London’s sales over the ultra-prime level increased by 26%, whereas New York’s sales declined by 35%. 

Regarding ultra-prime sales, London and New York are the top markets for those investing in luxury properties. While high-end sales are expected to decline this year, China’s reopening and consumers’ desire for lifestyle purchases will support activity.

edited and proofread by nikita sharma