Britain’s referendum decision to leave the European Union on the 24th June 2016 has created huge uncertainty in the UK and beyond, with the FTSE100 index opening to losses of 8% and sterling falling 10% against the US dollar (although some of these losses have since been recovered). The market has clearly reacted negatively to the economic prospects of Britain after Brexit, but despite the initial pessimism we believe that London will still remain one of the most desirable cities in the world for ultra high net worth (UHNW) individuals.
According to the Wealth-X World Ultra Wealth Report, the UK is the 4th largest UHNW country in the world, home to 11,510 individuals with a net worth of at least US$30 million. It is home to more UHNW individuals than China, despite its population being 20 times smaller. London fares even better globally, as the second largest UHNW city in the world with 6,815 individuals, behind only New York which is home to 8,655 individuals.
Not only is London home to a significant number of UHNW individuals, but they are also from all over the world. Wealth-X analysis shows that nearly 40% of London’s UHNW population grew up outside of the UK, from over 90 different countries. Whilst there will be some uncertainty over their status in the UK, London’s attractiveness to the world’s ultra wealthy extends beyond its inclusion in the European Union.
London is the centre of global finance, and its business friendly environment and transparent legal system are also highly valued by the world’s UHNW individuals. Coupled with excellent public schools, world class museums and fine dining, London represents an attractive combination of business and lifestyle interests generally important to UHNW individuals.
In the 2016 Knight Frank Wealth Report, London and New York were ranked as the #1 and #2 cities respectively, with no other city coming close to their appeal. Even more importantly, the report notes that the majority of European and North American respondents felt no other city would catch up with these two in the next decade, and we do not believe Brexit will change this.
Although future investment decisions are likely to be affected by uncertainty in the next few years, super prime London property may not suffer as much. For international buyers, the fall in sterling makes UK investments appear more attractively priced, and this could help demand for super prime properties in London and cushion the blow of what was recently a weakening market. A similar scenario occurred in 2008, following the global financial crisis, where a weak pound increased international demand for London properties. Since 2008 the average London property has increased in value by over 60%, and the super prime sector has acted as a safe haven for the world’s ultra wealthy.
The reasons London is attractive to the world’s wealthiest have taken decades and centuries to create – in a post-Brexit world, this is likely to remain just as true today for the world’s UHNW individuals as it has ever been.
Credits : Wealth-X