The UAE will lead the growth in regional private wealth over the next five years, according to a report from The Boston Consulting Group (BCG).
Private wealth in the UAE is projected to grow at a compound annual growth rate of 10.7 per cent to US$1 trillion, followed by Kuwait at 6.7 per cent and Saudi Arabia at 5.3 per cent.
The UAE’s growth of private wealth has mainly been driven by equities. According to the report, between 2013-14, the amount of wealth held in equities rose 13.8 per cent compared with 6 per cent in bonds and 6.9 per cent for cash and deposits.
Those figures are set to change by 2019, with the wealth breakdown anticipated to be 47 per cent in equities, 43 per cent growth in cash and deposits and 9 per cent in bonds.
BCG said the increasing wealth of high net worth households in the country, which will be created mainly because of strong economic growth, a surge in asset prices and equity values will be a boon to the country and the region as the money will mainly be reinvested locally.
“The UAE and Gulf investors like to be able to see their money, so hotels, hospitals and other real estate will always be attractive,” said Markus Massi, a partner and managing director at BCG Middle East.
“The investment patterns of the globe’s wealth are repeated over and over again regardless of the region. In the Asia-Pacific region, 80 per cent of the money that goes offshore goes to Singapore and 60 per cent of that money is reinvested in the Asia-Pacific region. That same pattern will be true of the Middle East’s wealth and North America’s wealth. People like to invest where they are comfortable with the practices, people and politics. This growth in private wealth will see a growth in the region’s richness.”
The growth of talent in the UAE, along with the burgeoning opportunities for investment, is another factor that private wealth is more likely to stay onshore in the future.
The BCG report found that the increase in private liquid wealth was experienced from millionaire households to ultra-high net worth (UHNW) households.
“The total number of millionaire households – those with US$1 million in liquid wealth – in the UAE increased by 5.5 per cent in 2014 with that number set to grow another 5.3 per cent by 2019,” said Mr Massi.
“Private wealth held by UHNW households – those above $100m – grew by 9 per cent last year, and that wealth is set to grow 21.1 per cent in the next five years. The biggest winners in 2014 were the those with a liquid wealth of $20m to $100m.That segment saw a 16.1 per cent increase and is set to grow another 12.9 per cent by 2019.”
From a global perspective, the report stated, 1 per cent of the households represented 42 per cent of the global wealth last year.
North America remains the wealthiest region, however the Asia-Pacific region – including India and China – will overtake it soon.
The region grew at 29.4 per cent in 2013-14 and will account for about half of global growth over the next five years.
ascott@thenational.ae
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