Your Money

An enormous global wealth transfer from boomers to younger generations is on the way, report predicts

Knight Frank report says 2023 was a mixed year for the fortunes of high net worth individuals worldwide and in Ireland

To be in the top 1 per cent in Ireland you need wealth in excess of €4 million but that pales next to the €11.8 million required to join the 1 per cent club in Monaco. Photograph: Ryan Pierse/Getty Images

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Fiona Reddan
Tue Mar 12 2024 - 05:00

While a reputed fondness for avocados is oft cited as a reason why millennials have been locked out of the housing market – not to mind uncertain careers and ever-rising property prices – a new report suggests their time will come.

Knight Frank’s wealth report finds that as older generations age, their wealth and assets transfers to younger generations, creating greater balance in terms of wealth disparities.

But, if you want to be among the top 1 per cent of people in Ireland, the reports says you will now need wealth of at least €4 million. It also notes that prices for prime property stagnated in Dublin last year.

The report finds that, over the next 20 years, an enormous transfer of wealth is set to occur as those aged 60 and over start to hand over their assets to younger generations. It is expected that this generational transfer could be worth as much as $90 trillion (€82 trillion) in the US alone, and will make “affluent millennials the richest generation in history”.

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Knight Frank says that as older generations die and pass on their wealth, younger people will end up much more wealthy than they have ever dreamed of. This will mean ‘seismic changes’ in how wealth is put to use

The so-called silent generation (age 79 and over) and baby boomers (aged 60-78) have benefited from a rapid rise in asset values, particularly in property. This has regularly been cited as happening at the expense of younger generations, such as millennials (aged 30-44) and Gen Z (under 30), who have found it more difficult to get on the property ladder due to the disparity in growth of their incomes compared to the increase in house prices.

Knight Frank says that as older generations die and pass on their wealth, younger people will end up much more wealthy than they have ever dreamed of. This will mean “seismic changes” in how wealth is put to use, given the difference in outlook between older and younger generations.

“The generational differences in investing strategies will vary, but climate change is just one example through which capital will be redirected,” global research head Liam Bailey writes in the report.

[ Wealthier families in Ireland four times more likely to benefit from inheritance ]

Younger generations are more optimistic about wealth creation than their older counterparts; the research found that 69 per cent of millennials and 75 per cent of Gen Z respondents to a survey expect their wealth to increase in 2024, compared with 52 per cent of boomers and 56 per cent of those in Generation X.

Of course, this wealth transfer will only occur from those with sizeable inheritances to leave behind; and there is no research on what the experience in Ireland might be.

Want to be in the top 1 per cent club?

Elsewhere, the report considers overall trends in wealth creation globally, noting that a “shift in outlook for interest rates, the robust performance of the US economy and a sharp uptick in equity markets” helped wealth creation globally.

At the end of 2023, for example, there were 4.2 per cent more ultra high net worth individuals – with wealth of at least $30 million – than a year earlier. Nearly 70 new very wealthy investors were created every day, taking the global total to just over 626,600.

If you’ve ever wondered whether you could be in Ireland’s top 1 per cent of the population, the report has the details. It indicates that you’ll need wealth of least $4.3 million (€4 million) to make the grade.

Despite slower growth this year, Knight Frank expects the number of wealthy individuals globally to rise by 28.1 per cent over the five years to 2028, driven by outperformance in Asia.

And what about Ireland?

Well, if you’ve ever wondered whether you could be in Ireland’s top 1 per cent of the population, the report has the details. It indicates that you’ll need wealth of least $4.3 million (€4 million) to make the grade.

[ Number of Irish ‘super rich’ more than doubled in past decade, Oxfam says ]

Unsurprisingly, this is less than the $12.9 million you’ll need to join the club in uber-wealthy Monaco, or the $8.5 million needed in swish Switzerland. It is also less than the US ($5.8 million), but more than either France ($3.3 million) or the UK ($3 million).

Of course, to be considered an ultra high net worth individual, you’ll need wealth of $30 million. And the survey shows that growth in the number of Irish people joining this club of the extremely wealthy paused last year, with just eight people crossing the threshold, representing growth of just 0.4 per cent.

This compares with growth of 1.8 per cent across Europe, 2.6 per cent in Asia, and 7.2 per cent in North America.

Over the next five years however, the numbers are expected to pick up again, going from 1,890 in 2023 to 2,346 by 2028, growth of some 24 per cent.

Prime property

On the residential property side, the agent’s Prime International Residential Index (PIRI 100), which tracks “prime” markets across the world – typically those properties in the top 5 per cent of each market by value – reported a surprise “on the upside”.

Of the 100 markets tracked, 80 recorded flat or positive annual price growth despite expectations for a much weaker outcome “as the pandemic-fuelled property boom was set to end in tears as borrowing costs hit 15-year highs in some markets”.

Across these markets there was more of a soft landing, the report notes, with the index growing by 3.1 per cent overall. This compares with growth of 5.2 per cent in 2022 and 8.4 per cent in 2021.

[ Richest 10% of Irish households have almost half of all wealth ]

Manila in the Philippines leads the index, with annual growth of some 26 per cent in 2023, followed by Dubai (+16 per cent); the Bahamas (+15 per cent); and the Algarve (+12.3 per cent).

Sun locations continued to outperform, up 4.7 per cent on average, with ski resorts close behind (3.3 per cent) and cities on 2.7 per cent.

However, while some markets – notably Auckland in New Zealand, where prices had started to dip on the back of rising financing costs – recovered, other major markets were hit during the year. Prices in both New York and London dipped around 2 per cent in 2023 and according to Knight Frank, are now about 8 and 17 per cent below their most recent market peaks respectively.

And while prices may have largely held up, sales took a bigger hit than prices. According to the survey luxury sales in London, New York, Dubai, Singapore, Hong Kong and Sydney declined by 37 per cent on average year-on-year.

The report notes that Dublin posted weaker growth than predicted on the back of higher mortgage costs which resulted in weaker sales volumes

And what about Dublin? Well, while property prices overall rose by 2.7 per cent, according to the Central Statistics Office, price growth among “prime” properties was largely stagnant during the year, rising by just 0.6 per cent in 2023. This put Dublin in joint 73rd position in the index, alongside Bucharest, Jakarta and Monaco.

Still, better than the Hamptons, however, where prices at the top end fell by 2.7 per cent, or Amsterdam (-5.6 per cent), or Cannes (-7 per cent).

The report notes that Dublin posted weaker growth than predicted on the back of higher mortgage costs which resulted in weaker sales volumes. In November 2022, the agent had predicted annual growth of 4 per cent for Dublin prime property last year.

Joan Henry, chief economist and director of research with Knight Frank in Dublin, says rising interest rates had less of an impact on the higher end of the market in Ireland last year than it did elsewhere, noting that 90 per cent of buyers in the €1.5 million plus market are cash buyers.

Looking ahead to 2024, Knight Frank doesn’t expect any great shifts for Dublin, with price growth of just 0.5 per cent forecast. This compares with growth of 10 per cent for Auckland, 5 per cent for Dubai and 1 per cent for London.

And it’s not just homes that the rich are buying in Ireland. Henry notes that while institutional buyers have been the main investors in Irish commercial property in recent years, private investors are increasingly moving into this space.

“The high new worth individuals are doing it themselves,” she says, adding that they expect to see more of this trend this year.

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