Australia is Set to Witness a Growth in Both HNWI Volumes and Wealth over the Next Few Years

Thursday 22 August 2013, Amsterdam

There were just over 302,000 HNWIs in Australia in 2012 collectively holding US$899 bn in wealth, which equated to 15.5% of the total individual wealth held in the country. Over the last few years, Australian HNWIs overperformed compared to the global average, worldwide HNWI volumes decreased by 0.3% while Australian HNWI numbers increased by 19.7%. In fact, in 2011 Australian HNWI numbers dropped by 2.7% but immediately rose by 9.9% in 2012. The volume and wealth of HNWIs in Australia is expected to see further growth over the next 5 years. The total number of Australian HNWIs is forecast to grow by around 33% to reach 401,887 in 2017. HNWI wealth is projected to grow by around 58% to reach US$1,418 billion by 2017.

Geographic distribution of HNWI investments

At the end of 2012, Australian HNWIs held 22% (US$198 bn) of their wealth outside their home country, in line with the global average of 20-30%. Meanwhile, it is expected that foreign asset holdings will reach US$294 bn by 2017, when they will account for nearly 21% of total HNWI assets. In 2012, North America made up the major contribution of foreign assets of Australian HNWIs with 79%. This was followed by South America with 9.6%, Europe with 7.7%, Africa with 2.8% and the Middle East with 1.7%.

Following the eurozone debt crisis and a movement of funds onshore, the share of foreign assets that Australian HNWIs allocated to the region decreased from 30% in 2007 to just 7.7% in 2012. Due to the ongoing eurozone crisis and economic instability in the region, most of the European countries’ ratings were low, leading to a loss of trust among investors.

HNWI volumes in Australia’s largest city, Sydney, increased by 18% over the last 5 years, slightly above the country average. It accounted for a 27% share of the country HNWIs (81,400 individuals) and was followed by Melbourne with 16.6%. There were also sizable HNWI populations in Brisbane, Perth, Adelaide, the Gold Coast and Canberra.

Asset allocation of HNWI investments

In 2012, real estate was the largest asset class for HNWIs in Australia and accounted for 28.8% of total HNWI assets. This was followed by business interests, equities, cash, fixed income and alternatives. Over the last 5 years, fixed income and cash products recorded the strongest growth, driven by a movement into safer assets during the financial crisis. During the same period, the value of business interests decreased slightly, from 22.5% of assets in 2007 to 22.3% in 2012. Equities and real estate are expected to recover as an asset class for HNWIs over the next few years and, as of 2012, HNWI liquid assets amounted to US$182 billion, representing 20.3% of the wealth holdings of Australian HNWIs.