What the rich do with their money

Even as we read about all the economic woes of the world, a recent report has revealed that the number of wealthy people across the globe is actually on the rise.

And it seems that many of them are intent on enjoying their riches, splurging on expensive “toys”, jewels and art.

Each year Merrill Lynch Wealth Management and Capgemini release their World Wealth Report where they monitor thhe world’s “high-net-worth individuals.” That is people with at least $US1 million ($966,000) in investable assets, excluding their home. increased by 8.3 per cent in a year to 10.9 million people last year.

So what do millionaires do with their dough?

The Australian reports more and more are spending it on so-called “investments of passion” including luxury cars. No surprise then that Mercedes-Benz reported a 15 per cent increase in worldwide sales over the year, while Ferrari sales in the rapidly developing economy of China were up nearly 50 per cent.

Cultural differences as to the spending habits of the wealthy are interesting, with cashed up Europeans spending more on art, for both investment and aesthetic reasons, while Middle Eastern people are more likely to buy diamonds and jewels.

Australians are doing well
And Australians are not doing too badly either, with 193,000 estimated to join the ranks of the world’s wealthy last year, up from 174,000 in 2009.

Of note is the fact that the rich folk in the Asia-Pacific region show a marked preference for real estate, with real estate investment trusts proving popular investment choices. In fact 27 per cent chose to put their wealth into bricks and mortar, a rise of 19 per cent on last year.

Why property?
Merrill Lynch reports that, “Real estate investment in Australia . . . reflects a fundamental flight to quality, as foreign funds seek shelter in the mature and tangible property sector of that market’s thriving commodity-based economy.”

Australian investors hold about 40 per cent of assets in the property sector and a further 25 per cent in equities, 14 per cent in fixed income, 18 per cent in cash and 4 per cent in alternative investments, such as derivatives and foreign currency.

The figures clearly indicate that Australia’s love of all things real estate is continuing to extend far beyond the ideal of home ownership as more of us considered to fit into the world’s wealthy class look to property as our preferred investment vehicle.

Given its less volatile nature than the stock market and the fact that it’s a necessary commodity in terms of housing our growing population, I think we’re onto a winner.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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