London has retained its crown as the most important city for the ultra-wealthy, but is set to be overtaken by New York by 2023, according to the 2014 Knight Frank Wealth Report.

London is set to be overtaken by New York by 2023 as the most important city for the ultra-wealthy, according to the 2014 Knight Frank Wealth Report, which also predicts an increase in the ranks of UHNW individuals of 30 per cent over the next decade.

While New York and London retained their positions as the two favourite cities of the ultra-wealthy, both are set to face fierce competition from Asia in the coming years as the Asian property market looks set to boom. While Singapore, Hong Kong and Geneva round off the top five global locations for UHNW individuals this year, Shanghai is set to replace Geneva in fifth spot by 2023.

“History, location and their long-established wealth mean that London and New York’s positions look unassailable, at least for now. It is further down our leader board that the real city wars are being waged. The main battleground is Asia, where a handful of locations are slugging it out in the hope of establishing a clear lead as the region’s alpha urban hub," said Liam Bailey, head of residential research at Knight Frank.

Property prices
According to the report, Asia experienced the biggest property price increase in 2013, led by Jakarta with an annual growth of 37.7 per cent, followed by Auckland, Bali, Christchurch and Dublin. The report also found that cities that were hardest hit by the economic downturn were bouncing back strongly. In terms of property performance, Dublin recorded an increase in annual growth of 17.5 per cent while Dubai experienced 17 per cent growth.

“Inevitable debates have ensued as to whether Dubai and Dublin are on the cusp of another bubble.   However, in both cases average prices have yet to approach, let alone exceed, their pre-crisis highs," said Knight Frank’s head of PIRI analysis Kate Everett-Allen.

“Cash buyers are driving sales and regulation is tighter with some purchase and ownership costs higher than in 2008. This follows Ireland’s introduction of a new local property tax in 2013 and transfer costs in Dubai doubling to 4 per cent during 2013," added Everett-Allen.

Madrid has joined Dublin as a key European market in recovery, with prices climbing 5 per cent. Munich also saw 10 per cent uplift, emblematic of the surge in pricing in prime German city markets. This is partly being led by safe haven flows from investors in less secure eurozone countries looking to insure against the possibility of a collapse in the euro, Knight Frank said.

UHNW individuals
Despite continued economic turbulence, the number of ultra-wealthy individuals across the world rose by three per cent last year and those that have $30 million or more in net assets is set to grow by nearly 30 per cent over the next decade.

While Europe will remain home to most UHNW individuals, the biggest growth will be in Africa. The number of people with $30 million or more in assets will climb by 53 per cent by 2023, underpinned by a 92 per cent rise in Nigeria and a 74 per cent rise in Kenya.

“The growth of UHNW individuals in China and India coupled with an eye-catching 144 per cent increase in Indonesia and a stellar 166 per cent hike in Vietnam will help push the total number of UHNW individuals up by 43 per cent in 2023,” said Bailey.  

The report also predicts that UHNW spending is set to increase in 2014. Over a third of the wealth advisors surveyed said that they expect their clients’ spending on luxury goods to rise this year, while only 7 per cent predict a fall in expenditure.   

African respondents were most bullish about their clients' spending activity, with almost half anticipating higher levels of luxury purchasing activity, while Europeans were the most cautious, with 31 per cent expecting an upturn in activity.

The report highlighted how investments of passion, such as art and classic cars, are also growing in popularity around the world.

According to the survey, 49 per cent of the survey’s respondents said their clients were becoming more interested in art, while the latest results from the Knight Frank Luxury Investment Index, featured in the report, show that classic cars have grown in value the most (+456 per cent) over the past 10 years.

Overall, the index, which tracks nine asset classes including cars, art, wine, watches and stamps, grew by 8 per cent in 2013 and 179 per cent per cent over a 10-year period.

“This performance shows that objects that are beautiful to look at can also make good investments, but markets such as art can be very volatile and the performance of an index will not necessarily be reflected by individual works," said editor of the report Andrew Shirley.