The Wealth Effect: global billionaires affect on prime London’s house prices


London is a global city and prime London homes are a global commodity. Every billionaire worth their salt wants a slice of prime London real estate. So it would make sense, in years when the numbers of global billionaires grows, that this flows through to higher prime London property prices. In years - like those through the financial crisis - when the numbers of billionaires fell, so too did prime London property prices.

Our analysis highlights just how correlated these are - house prices in Kensington and Chelsea move very closely with the number of billionaires globally.

According to Forbes there are now 1,810 billionaires globally. Since the financial crisis, when the number of billionaires shrunk to 793 globally, there has been a strong recovery, with the current numbers of billionaires now well over double that 2008 low. Interestingly though, the latest data to March 2016 shows for the first time since 2008 that the world’s population of billionaires has fallen, albeit just 1% lower than the previous year.

The drop in oil prices, strength of the dollar and volatile stock markets are some factors behind the fall in wealth of the world’s richest people. The global economy has also slowed.

  • The country with the largest number of billionaires is the US (540 billionaires) with China (251) and Germany (120) taking second and third place.
  • The most significant falls in billionaire populations over the last year have been in the smaller markets of Africa (-33%), South America (-31%) and the Middle East (-12%). Billionaires in Russian-speaking countries were also down by 11%. This appears an entrenched trend for Russian-speaking countries, with the number of billionaires now down 43% compared to the years 2012–2014.
  • While the economic backdrop in Europe has been slow, the number of billionaires has still grown, up by 4% to 436 individuals over the last year. Asia- Pacific has been the fastest growing region, overtaking North America for the first time for the first time with the highest global share of billionaires.

We can see prime central London prices have followed a very similar trajectory. There was a strong recovery following the financial crisis (prices have almost doubled over this time) but price growth in the market has now slowed in the last year and price falls have been evident for some parts of the market.

INFORM_Billionaires_K_C_Property_rect
INFORM_Billionaires_K_C_Property_rect

For the prime residential market, there are a number of other factors at play of course. These are factors that we regularly analyse, like the health of the global economy, stamp duty changes, the health of the financial service sector and political risks. Despite this, there is a clear and simple relationship between global wealth and the London prime market.

Reassuringly, to date, no matter where that wealth was created, London remains a chosen destination for the wealthy to reside. However, billionaire spending patterns remain a critical factor to watch and understand.

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