Australia takes third place worldwide in wealth required to be in the top 1% of wealthiest people

Did you know that the amount of money you need to be in the top 1% of wealthiest people in Australia has doubled over the past two years?

Well, the latest The Wealth Report of Knight Frank Research revealed that in Australia, the entry point to the top 1% is US$5.5 million, up from US$2.8 million in 2021.

Interestingly our overall increasing wealth means that Australia has shot up the rankings from seven to third, behind Monaco and Switzerland, which retained their rankings of first and second in 2021.

Which country leads with the highest 1% entry point?

According to Knight Frank's data, Monaco, which has the world’s densest population of super-rich individuals, the entry point for the principality’s branch of the one per cent is US$12.4 million, almost double Switzerland at US$6.6m.

Meanwhile, New Zealand and the US sit in fourth and fifth place, with US$5.2m and US$5.1m respectively required.

Australia's top 1% of wealth

According to Michelle Ciesielski, Head of Residential Research  Australia at Knight Frank, "while being in the top 1% might be thought of as the epitome of success, entry into this exclusive wealthy club falls well short of Knight Frank’s definition of an ultra-high-net-worth individual (UHNWI) – somebody whose net wealth exceeds US$30 million."

She further commented:

“The level of wealth required to reach the wealthiest one per cent varies extensively depending on where you live in the world, but it has risen across the board since Knight Frank last published the analysis in The Wealth Report in 2021, reflecting the growth in wealth portfolios over the past two years, despite the dip in 2022.

A large contributor to the top one per cent wealth level doubling in Australia over the past two years has been prime residential property performance recording an upward trajectory, resilient despite the rising cost of finance, as we know 49 per cent of this cohort tend to be cash buyers.

On average, the UHNW population in Australia owns 2.9 homes, or equivalent to 36 per cent of their total wealth is in primary and secondary homes.

For their investible wealth, 94 per cent of their portfolios tend to be held in Australia; 34 per cent is in some form of commercial property ownership whilst 21 per cent is in equities.

It’s notable that the ongoing inequality of global wealth could see a greater focus on this group – particularly in terms of greater taxation on assets to support government spending throughout the pandemic, and even emissions as countries seek to develop sustainable strategies for the environment and society.”

Growing High Net Worth population in Australia

According to the recently published data in Knight Frank's The Wealth Report 2023, Australia's affluent population is expected to experience substantial growth over the next five years.

The report reveals that the number of high-net-worth individuals (HNWIs), defined as those with a net wealth exceeding US$1 million, is projected to increase by 71.1 per cent between 2022 and 2027, rising from 2,214,326 in 2022 to 3,789,629 in 2027.

This growth rate is 2.5 times higher than that observed in the preceding five years from 2017 to 2022.

Furthermore, the report indicates that the number of ultra-high-net-worth individuals (UHNWIs), with a net wealth surpassing US$30 million, is anticipated to grow by 40.9 per cent over the next five years, reaching 24,589 in 2027 compared to 17,456 in 2022.

This signifies an increase of nearly 3,000 UHNWIs, surpassing the growth rate of 31.1 per cent witnessed during the previous five-year period.

The growth in the number of Australian HNWIs and UHNWIs between 2021 and 2022 was relatively modest, at 4.8 per cent and 2.1 per cent, respectively.

Ms Ciesielski said:

"While the growth in wealth numbers within Australia over the past year had been modest, the recorded increase was significant given there had been a decline in the global population of UHNWIs.

Reflecting the strong economic rebound, the global population of ultra-high-net-worth individuals fell by 3.8 per cent in 2022, after a record climb of 9.3 per cent in 2021.

The fall last year in the total number of UHNWIs globally was due in large part to the weak-performing equities and bond markets, which saw UHNWI wealth fall by 10 per cent in 2022.

On the flip side, however, 100 prime residential markets globally saw average price growth of 5.2 per cent and luxury investment assets grow 16 per cent, which helped steady the decline.

We can’t underestimate how much the pandemic bought forward decision-making, rebalancing of portfolios and evaluating how time is spent in Australia going forward, given many spent longer periods of time grounded at home than they had over the past decade.

This resulted in more local investment in Australia and given we were better insulated from global economic turmoil, this reinforced to many the advantage of creating and maintaining wealth close to home.

The recent dip in global UHNWIs is likely to prove short-lived as the world adapts to a new economic environment, so over the next five years, Knight Frank forecasts that the global UHNWI population will expand by 28.5 per cent to almost 750,000 from 579,625 in 2022.”

In the past year, while the global population of ultra-high-net-worth individuals (UHNWIs) decreased, the number of high-net-worth individuals (HNWIs), with net assets of US$1 million or more, increased by 2.9 per cent, reaching nearly 70 million worldwide.

Malaysia, Brazil, and Indonesia were the top three countries showing HNWI growth.

The Middle East stood out as the region with the highest growth in UHNWIs, with a 16.9 per cent increase in 2022.

The United Arab Emirates (UAE) experienced the fastest growth, with an 18.1 per cent rise, resulting in a total of 1,116 UHNWIs.

Saudi Arabia closely followed with a 10.4 per cent annual growth.

Africa demonstrated resilience with a 6.3 per cent growth in UHNWIs, while Australasia and the Americas experienced minimal growth at 0.7 per cent and 0.2 per cent, respectively.

Asia's UHNWI population declined by 6.5 per cent; however, three Asian countries, namely Malaysia, Indonesia, and Singapore, were among the top 10 markets with the highest growth rates, expanding their wealthy populations by 7-9 per cent.

Europe suffered the most significant impact, with an 8.5 per cent decline in the number of UHNWIs.

The majority of European countries saw a decrease in their UHNWI population.

However, a few markets such as Ireland experienced a 3.9 per cent rise, and the affluent haven of Monaco had a 0.9 per cent growth in its UHNWI population.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.