A $10 million purse? Believe it. A Hermès handbag owned by the late fashion icon Jane Birkin sold for that eye-popping, record-setting sum last summer at Sotheby’s in Paris.
Now, if you can afford a $10 million pocketbook, there’s no doubt you have plenty of dough. And the world is awash in money.
“The rich are getting richer, faster than everyone else, and they are shaping the economy,” Liam Bailey of Knight Frank, the global real estate consultancy and estate agency, told Barron’s.
Knight Frank just published its 20th annual wealth report—and the number of superrich is ballooning, especially in the U.S.
Of 713,626 individuals around the globe with a net worth of more than $30 million, 35% live in the U.S. Knight Frank forecasts the U.S. will be home to 41% of the world’s ultrawealthy by 2031.
China and India are doing their part to reshape the global economy, too. China’s ultrawealthy population has climbed 23% in the past five years; India’s share is expected to grow by 27% in the next five years, the report said.
A big reason for all this green is the digital economy—from the internet to artificial intelligence, says Bailey, who is Knight Frank’s global head of research.
“The ability to scale businesses rapidly, and ideas quickly, is so much faster than we’ve ever seen,” he says. “And the rapid creation of fortunes is happening in a way that never has happened historically.”
Access to credit at low interest rates certainly hasn’t hurt either.
The rich heavily leverage their assets, amassing even more wealth against what the report describes as “a backdrop of steady asset inflation.”
“Banks readily facilitated this, effectively lending their balance sheets at low single-digit rates while clients generated double-digit returns through investments and commercial projects,” the report said.
All that money was funneled into luxury properties all over the world. Americans are the exception, though they are buying more properties abroad. In London, they are the biggest single buyers of posh digs these days, Bailey says. The pandemic spurred the change, making families realize they didn’t need to stay put.
Having boatloads of cash does come with political price, Bailey told Barron’s. In New York City, for example, Mayor Zohran Mamdami wants to levy higher taxes on the city’s richest residents. In California, a ballot initiative aims to impose a one-time 5% tax on the state’s billionaires.
And in Washington, Democratic lawmakers have introduced bills aimed at raising federal taxes on the wealthy and ending tax strategies used by the rich.
Consequently, the superrich are staying nimble, “taking a much more temporary view of where they are going to be based,” Bailey says. They “are hedging against these changes.”
They are also being even more discreet about what they buy—fewer luxury purchases but more experience like travel to exotic places. And when they do splurge, they are looking for items that convey a story.
A case in point is Lee Bofkin, CEO of Global Street Art, a hand-painted advertising company in London. He’s what Knight Frank describes as a “prolific collector.”
Bofkin’s most treasured object is a small Limoges brooch he recovered in the banks of Thames. It’s an example, according to the report, of how collecting “has increasingly shifted toward more esoteric objects whose value lies in knowledge, rarity and personal meaning.”
Write to Abby Schultz at abby.schultz@barrons.com