Posted by Leonard Steinberg on October 8th, 2013

In the on-going debate about the depth of buyers for the $ 22billion worth of inventory coming to the New York residential real estate market, I thought it wise to evaluate wealth in general…..and luckily a Credit Suisse Report on the subject hit my desk this morning. Here are some interesting observations. Global wealth has reached a new all-time high of $241 trillion, up 4.9% since last year and 68% since 2003, with the USA accounting for 72% of the latest increase, 20% more than the pre-crisis high in 2006 and 54% above the recent low in 2008.  Average wealth per adult reached a new all- time high of USD 51,600, surpassing its 2007 high (mostly driven by a soaring stock market, that some say is artificially fueled by cheap money). Inequality remains high, with the top 10% of the world population owning 86% of global wealth (compared to barely 1% for the bottom 50% of all adults).

  • Global wealth is expected to rise by nearly 40% over the next five years, reaching $334 trillion by 2018. Emerging markets are responsible for 29% of that growth. China will account for nearly 50% of the increase in emerging economies’ wealth. Wealth growth will primarily be driven by growth in the middle segment, but the number of millionaires will also rise markedly over the next five years.
  • Distribution of wealth in China is very different, and apparently more balanced than that of India, and reflects China’s role as the vanguard of the emerging consumer.
  • There has been a resurgence in Eurozone wealth recently, while in Japan total household wealth has fallen by $5.8 trillion this year, equivalent to 20% of Japanese net worth. Japan suffered very little during the global financial crisis. Overall, the rise in net wealth was split evenly between financial assets and non-financial assets, but the pattern varied across regions. The change in financial assets dominated in North America and Asia-Pacific. In all other regions – especially China and India – non-financial assets accounted for most of the increase. Household debt also rose according to our figures. Although the global rise of 1.7% was relatively small, India and China recorded sizeable increases: 16% and 20%, respectively.
  •  Is the USA still the land of opportunity? It supposedly requires ten generations or more to lapse before the wealth of an individual in North America is completely independent of the wealth of their ancestors: however, individuals in China and India have a relatively high probability to be upwardly mobile as a result of the high economic growth in these countries. The average wealth of an adult in the USA is about $ 250-300,0000.00, about half that of Switzerland. Australians and NOrwegians are wealthier than Americans.
  • Middle class on global standards are the one billion adults located in the $10,000– 100,000 range. Changes to wealth levels since mid-2012 have affected the pattern of wealth distribution. The rise in average wealth combined with a population increase has raised the number of adults with at least $10,000 by about 10%. The number of millionaires worldwide has risen by 1.8 million, of which the United States alone accounts for 1.7 million new members.
  • Worldwide it is estimated that there are 98,700 Ultra High Net Worth individuals, defined as those whose net worth exceeds $ 50 million. Of these, 33,900 are worth at least $ 100 million and 3,100 have assets above $500 million. North America dominates the regional rankings, with 48,000 UHNW residents (49%), while Europe has 24,800 individuals (25%), and 14,200 (14%) reside in Asia-Pacific countries, excluding China and India. The number of USA billionaire has almost doubled in a decade.
  • There are now 31.4 million High Net Worth adults with wealth between $ 1 million and $50 million, most of whom (28.1 million) lie in the $1–5 million range: The USA has about 14.2 million in this category. This year, for the first time, more than 2 million adults are worth between $ 5 million and 10 million, and more than 1 million have assets in the $ 10-50 million range.
  • The number of millionaires worldwide is projected to rise by 50% to 47.6 million by 2018, a rise of almost 16 million. The USA will remain the undisputed leader in terms of aggregate wealth, with total net worth approaching $100 trillion by 2018. At today’s prices, this corresponds to approximately $88 trillion, 23% higher than the 2013 level. While the number of millionaires in emerging economies is still far below the level in the USA (18.6 million) or Europe (15.0 million), it is expected to increase substantially in the next few years. Asia-Pacific is expected to increase its number of millionaires by 3.8 million, reaching 9 million by 2018. China could see its number almost doubling by 2018, raising the total to 2.1 million. Pushed by Brazil (an extra 186,000) and Mexico (an extra 87,000), we also expect a substantial increase in the number of millionaires in Latin America, which will reach almost 1 million in five years’ time.
  •  Japan will likely remain the second wealthiest economy in the world until China overtakes it, probably at some point in 2016. By 2018, Chinese wealth is expected to approximate the level of US wealth in 1993. The Eurozone, currently accounting for 24% of global wealth, will likely see its share decline a little to 23%. In absolute terms, however, its wealth will rise by more than 29% over the 5-year period, putting the Eurozone where the US was in 2011.
  • The USA is looking strong:  It has a larger number of active shareholders than most other countries. Compared with many other OECD countries, it has more economic activity in the private sector than the public sector, and more outward foreign investment – both of which rely partly on financing by households through their ownership of bonds, stocks and other financial instruments. Debts of $56,800 per adult are not extreme by international standards. Compared to the rest of the world, the USA has a high proportion of the population with wealth above $100,000, and the percentage becomes even more disproportionate at higher wealth levels. The USA has by far the greatest number of members of the top 1% global wealth group, and accounts for 42% of the world’s millionaires. The number of UHNW individuals with wealth above USD 50 million is nearly eight times that of the next country, China.

If things in the USA are progressing at a healthy rate, it comes as good news today that President Barack Obama will nominate Fed number two Janet Yellen on to run the world’s most influential central bank, providing some relief to markets that would expect her to tread carefully in winding down economic stimulus. Continuity may be the best thing for this economy.