_Private jets, NFTs, wine and watches; the hottest luxury investments of the year
Not only are there more ultra-high-net-worth individuals (UHNWI) in Australia than ever before, but these individuals are spending significantly more on investments of passion, according to 16th edition of the global flagship report, The Wealth Report 2022.
Image: Investments of passion encompass collectible items from luxury jewellery, coloured diamonds, timepieces, fine wine, rare whisky, art, automobiles, handbags, furniture and coins
These purchases, motivated by the joy of ownership rather than simply return on investment, are one in which Australia’s UHNWI growing population (now at 20,874 people) allocates 16% of their wealth towards, the equivalent of at least $5 million per year. In the last year, these individuals attributed more money towards private jet travel and luxury collectables but also invested more in philanthropic activities, with Australia’s UHNWIs leading the global average on their philanthropic engagement.
Private jets take off
Global private jet activity took off in 2021, surpassing pre-COVID levels, with many UHNWIs entering the private aviation sector for the first time as the convenience of flying privately drew them away from the depleted airline networks and difficulties of travelling commercially. As the leading hub for private flights in the Australasian region, Sydney’s total private flights increased by 21% in 2021 with a total of 2,481 flights. In comparison to global data, Sydney also ended the year slightly up (5%) from 2019, whereas the likes of Beijing, Singapore and Hong Kong were lagging in the use of private jets.
Following the most popular route, the fastest growing route is Sydney-Newcastle, with the Newcastle Airport convenient to the wine, food and tourism region of the Hunter Valley and central coast beaches. Transforming Newcastle into a global ‘smart city’, the Hunter region has the largest economy in Regional NSW with strong local defense, education, health and advanced manufacturing industries.
Considered some of the world’s most passionate collectors, 51% of Australian UHNWIs indicated spending on these investments of passion had increased, with wine, watches and art the best performing in 2021. Knight Frank’s The Wealth Report 2022 also reveals passion investments have seen the strongest annual performance globally since 2018.
Image: Australian wine from Penfolds remains highly sought after around the world
Michelle comments: “During the pandemic, restrictions stunted auction sales of goods with limitations to gatherings impacting the growth of the industry. However, in 2021 the worldwide total sales of watches recorded an increase of 54% on the previous year – proving that public sales are back with a vengeance since the lifting of many pandemic restrictions. This year, the appetite for the finest watch examples remains insatiable and whilst supply chain issues still linger, the ultra-wealthy are also ramping up their collections of premium alcohol brands.”
Over the past 10 years, the strongest growth in value was seen in rare whisky (428% increase), cars (164%) and wine (137%). As a result of expensive wine consumption at home alongside COVID-19 restrictions, the wine market performed well rising approximately 1% per month, in conjunction with a 31% rise in Champagne and a 25% increase in Burgundy. These statistics are expected to remain strong in 2022, with inflation and supply chain concerns continuing to fuel demand.
One of the burgeoning trends in collectables is the surge in non-fungible tokens (NFTs) or cryptocurrency art. The sale of non-fungible tokens (NFTs) linked to digital artworks encouraged a fresh wave of buyers through the portals of the major auction houses last year. According to Miles Davis, Wine Owners, “Australia’s Penfolds is the first (and so far, only) producer to make an NFT announcement; but no doubt more will come.”
Ultra-wealthy give back
Surpassing the increase in passion investment activity in 2021, Australia’s ultra-high-net-worth individuals are also choosing to give back more than the previous year, with 57% of Australia’s ultra-wealthy increasing their philanthropic activities compared to only 37% of the rest of the world. As expected during the pandemic, Knight Frank’s Attitudes Survey in 2021 depicted a lull in philanthropic activity in 2020 with only 29% of UHNWIs reporting an increase in these investments. However, encouragingly in the 2022 Attitudes Survey, Australia’s ultra-high population are back growing their philanthropical investments with an increased interest in healthcare and disease prevention causes (78%) and conservation, the environment and climate change (75%).
“Australia’s UHNWIs are certainly becoming more interested in causes concerning healthcare and disease prevention, conservation, social issues and the arts. The greater increase in philanthropic giving, in comparison to the increase in spending on investments of passion, reinforces a growing a commitment to ESG investments as UHNWIs seek long term value and alignment with sustainability and climate-related objectives,” Michelle explains.
Passionate collectors overtake prime property players
At the end of 2021, Australia’s most desirable and expensive property (generally considered the top 5% of each market by value) experienced significant growth following the reopening of borders, the return of investors and the growing appetite amongst domestic buyers for second homes on Australian soil.
Image: Australian prestige properties whether located in the CBD or beachfront like this Mona Vale, Sydney property have been in great demand thanks to a growing affluent population and surging wealth
Consequentially, the Australian Prime Residential Index rose by 12% ahead of the Knight Frank Luxury Investment Index at 9%. During this time combining prime property and luxury investments, Gold Coast prime property performed the strongest with 17% growth, followed by 16% annual growth in Sydney prime property, wine then watches.
However, trends presented through Knight Frank’s year-on-year reports demonstrate over the past decade, the Knight Frank Luxury Investment Index increase of 123% outperformed the Australian Prime Residential Index at 51%. Tracking the relative capital value of selected collectable assets, the 123% growth figure reflects the gradual but substantial rise in passion purchases, such as furniture, coloured diamonds, coins, art, luxury handbags and rare whisky, in addition to fine wine, watches, cars and jewellery.