Australia’s ultra-rich set to crack $1.1 trillion in assets

The country’s ultra-wealthy are on track to have $1.1 trillion in assets within five years, defying the pandemic, sharemarket volatility and even the outbreak of global conflicts.

The country’s wealthy are defying the coronavirus pandemic, share market volatility and even the outbreak of global conflicts, to be on track to hold more than $1.1 trillion worth of assets in five years, according to real estate giant Knight Frank.

While their holdings might look a little different than in earlier generations – with crypto assets now on the agenda – perennials like premium real estate, art, stocks and bonds will remain.

Local investors have been battered by a rough start to share market investing this year but many will take the opportunity to rebalance their portfolios, says Knight Frank chief executive James Patterson.

“This is a really good time to trade, where there is volatility,” he said, citing Ukraine-related gyrations in asset markets.

The view from One Barangaroo in Sydney. Picture: Supplied

But the wealthiest are coming off a bull run in both shares and property.

Partly due to the concentration of these industries in the city, Sydney leads Australia’s ultra-high net worth population, with a quarter of them residing in the NSW capital.

Mr Patterson says there is also a lot of “old money” in states like Victoria which has stood the test of time. “They’ve invested very well, whether it’s in equities or property. And I think they’ve also been very counter cyclical,” he said.

Private wealth tends to play market volatility well. “There’s obviously some very shrewd investors. They have picked the peaks; they have got out and got back in very well again,” he said.

But there are some changes afoot thanks to the tech revolution with Mr Patterson noting a 24-year old app developer bought a multimillion-dollar apartment in Crown Resort’s One Barangaroo tower on Sydney Harbour.

“I think the smart investors have started quite young and, if you look at wealthy families, with their assets, they don’t sell very often,” he said.

Some are also chasing new sectors like childcare and petrol stations. “I think a lot of them like cash flow. And that’s what the wealthy are looking for,” he said.

Knight Frank estimates the wealth amassed by ultra-high net worth individuals in Australia now exceeds $863bn and is expected to rise above well $1.1tr by 2026.

The country’s ultra-high net worth population jumped by 10.1 per cent in 2021, and is projected to grow by 31 per cent over the next five years.

At the very top end, the billionaire population in Australia is projected to grow by a further 37 per cent over the next five years

Supplied Editorial Knight Frank chief executive James Patterson

Knight Frank’s latest Wealth Report shows that the fortunes of the wealthy not only remain resilient but are strengthening and accumulating.

The population of ultra-high net worth individuals, with a net worth of $US30m or more, is growing in Australia and around the world, with lifestyle shifts and pandemic restrictions prompting the boost.

This local cohort is on an upward trend and growing fast, increasing by 124 per cent over the last five years, well ahead of global growth of 75 per cent.

Knight Frank says the local group now comprises 20,874 people and it will hit 27,330 people over the next five years. At the high end, the number of local billionaires is expected to grow by a further 37 per cent over this time.

Asset price rises, from property markets to stock markets to luxury collectibles, have helped boost the fortunes of the wealthy.

Property remains a cornerstone of wealth, comprising almost two-thirds of the holdings of the ultra-wealthy.

Knight Frank Australia chief economist, Ben Burston, said the onset of Covid-19 led to an unprecedented amassing of savings across Australia’s population. “We predict that 2022 will be a record year for global cross-border investment, when investors will have the opportunity to rebalance portfolios, execute business plans and implement strategic goals.,” he said.

Last year was also a record 12 months for private capital investment into commercial real estate, and the sector remains intrinsic to the holdings of wealthy investors, making up an average of 37 per cent of their holdings.

Supplied Editorial The view from One Barangaroo. Picture: Supplied

“It’s likely that we will see eco-investing, inflation and asset rotation as the key investment drivers for commercial property investment this year,” Mr Burston said.

But newer style holdings like cryptoassets are now featuring. A higher proportion of Australia’s wealthy invested in cryptoassets last year than on the average globally, with 27 per cent of the local wealthy taking the dive against 18 per cent globally.

According to The Economist magazine, the global value of cryptoassets was $US2.4tr at the end of 2021, a 12-fold increase since early 2020. There are now more than 8,000 cryptocurrencies in circulation for investors to choose from, as well as myriad non-fungible tokens available, with 16 per cent of Australia’s wealthy now investing in NFTs compared to the global average of 11 per cent.

The wealthy are not immune to global threats and cited the disruption created by global supply chain instability as their most pressing concern. This was followed closely by new Covid-19 variants, indicating that strong local vaccination rate is not considered a sign that the overarching threats of the pandemic are behind us. Inflation and armed conflicts were also ranked equally as of concern.