The investment landscape can often be characterised as one of volatility and risk, and the first two months of 2025 have been no exception. The promised model of AI disruption has itself been disrupted, geopolitical power seems to be shifting more rapidly than ever, and investor allocations are moving at a record pace in reaction to the risks of bubbles forming in financial markets.
However, despite tariffs risk denting economic expansion and complicating the inflation narrative, most economists predict another year of relatively healthy global GDP growth, potentially exceeding growth over the past two years. Inflation has not yet been subdued in the developed world, but the consensus is that rates will gradually fall from here.
Any easing of rates will be welcomed in the real estate world. Higher debt costs and a sharp rise in fixed income returns have contributed to a near 60% drop in investment volumes across global property markets since the market peak in 2021. The most recent data indicates a significant slowdown in the pace of this decline, with investment volumes in the second half of last year rising year on year. This recovery underscores one of the key findings from this year’s report – the huge interest in real estate investment from private capital, with 44% of global family offices indicating they are looking to increase allocations to the sector. Trends within two key property markets confirm the extent of the need for this investment:
- London offices: Demand for central London office space is high. With potential waits of up to three years to occupy space, a growing number of occupiers are bringing forward their requirements, well ahead of lease expiry, to be assured of the right space.
- Residential property: Every G20 nation has failed to meet its annual housing target for the past five years, resulting in increased house prices and rents. The opportunity for investment in living sectors is huge - and growing.
Even with elevated global risks, the standout takeaway from this year’s report is the breadth of investor opportunities. From growing luxury residential markets, to commercial property opportunities and the next big collectible sectors, the prospects for growth are compelling for those willing and able to look beyond the risks.
The big themes from The Wealth Report 2025…
The US remains a key player
Our Wealth Sizing Model confirms that nearly 40% of the world’s wealthy reside in the US. No other country is as successful at creating homegrown wealth or attracting migrant UHNWIs. For luxury homes, private jets and superyachts, what happens in the US shapes global markets.
Africa’s rising wealth: A future hub for HNWIs?
Africa is emerging as a growth hub for wealth creation, with an increasing number of individuals joining the US$10 million-plus wealth club. Although North America and Asia remain central to global affluence, Africa’s young population, rich natural resources and improving infrastructure position it as a future leader in wealth generation.
Wealth mobility is transforming housing markets
The mobility of wealth is only set to increase, fuelling supercharged growth in housing markets such as Miami, Palm Beach and Aspen in the US. The ease with which wealth can move is driving efforts to attract it and attempts to control it. While private jets and yachts should promote mobility, the report explores some surprising limitations.
Younger generations are shaping the future of global wealth
Baby boomers still control most global wealth, but the transfer to younger generations is well underway. This year’s Next Generation Survey and the Knight Frank 150 survey of family offices both highlight future wealth and investment priorities. Despite the US administration’s pivot away from ESG, we expect the focus on purposeful and sustainable investment will continue to grow as younger generations make their mark.
Environmental concerns and sustainability will reshape wealth
Concerns about climate change are increasingly influencing the decisions of the wealthy, impacting everything from real estate to luxury investments. Vineyards, yachts, and prime residential markets are being reshaped by changing weather patterns and environmental concerns. Sustainability and climate resilience are defining the future of luxury markets and commercial real estate.
Rising demand for real estate
Despite a fall in investment volumes from the 2021 peak, there is an ongoing desire for property from private capital. While direct real estate ownership already accounts for 22.5% of the typical family office’s portfolio, more than four in 10 are looking to grow this allocation over the next 18 months, led by the living, logistics and luxury residential sectors. In addition to this desired expansion of investment portfolios, nearly a quarter of family offices that manage private residential portfolios are considering new acquisitions. These requirements are set to feed through to positive price growth in key luxury residential markets in 2025.
Buying power is shifting
Moves in market pricing and currencies have shifted the landscape of luxury property. The Wealth Report confirms that while London offers savings of 43% for dollar-based buyers compared with pricing in 2014, other markets have seen equally dramatic falls in relative buying power, with some weakening by more than 50% over the period.
Luxury collectibles markets underperformed in 2024
Our roundup of luxury collectible performance reveals that values for a basket of 10 leading assets fell by an average of 3.3% in 2024. The art market underperformed, with values down by 18.3%, while wine and whisky also contributed to pulling our overall luxury index into negative territory.
