Property Secrets Community Blogs - Written By Property Experts

Home > Blogs > Max Growth

Getting rich (at least fairly) quick – where in the world are the property buying middle classes being created the fastest?

New research from the Boston Consulting Group – Tapping Human Assets to Sustain Growth, Global Wealth 2007 – is a fascinating source of insights for property investors.

Beneath the chapter headlines about breathtaking growth in China - which are hardly surprising - lies some data that reveals a huge amount about CEE markets - and, to my mind, provides very strong supporting evidence for anyone already invested or who is planning to invest in property in this part of the world.

Why?

Because what is revealed is just how fast the middle classes are being created.

And, it is the middle classes with their aspirations and their increased salaries and their increased access to credit, that are the real long-term drivers of property markets.

The BCG report also says a lot about the UK, in case anyone thinks its time is up for the time being as a property investment market.

State of wealth

The report essentially sets out to measure the current state of wealth and the growth of wealth.

And to do this the researchers measured ‘assets under management’, which are – and it’s worth listing this in full to note afterwards what they DON’T include.

Here’s what was counted: listed securities, cash deposits, money market funds, offshore and onshore assets.

And here’s what wasn’t included: own homes and personal businesses.

First, a few facts about the UK, which to me speak volumes and, frankly, I was surprised by.

Millionaires' row

Question, which country in the world has the highest number of US$ millionaires and the highest percentage of millionaires as a proportion of the population?

No prizes for guessing that one. The US, by a long way.

And number two? Again – easy – the second biggest economy in the world. Japan.

And number three?

That’s right! The UK.

That’s the third highest number (not just as a proportion), but the third highest number in absolute terms.

So, that is households with around £500,000 at today’s exchange rate in assets EXCLUDING the worth of their house.

And, just to underline how surprising I find this (surprising because it doesn’t include the worth of the family home) – it’s worth repeating the numbers to show how far ahead of everyone else the top three countries are:

USA – 4,585,000
Japan - 830,000
UK - 610,000
Germany – 350,000
China – 310,000
Italy – 270,000
France – 265,000
Taiwan – 220,000
Switzerland – 205,000
Brazil – 190,000
Netherlands – 145,000
Belgium – 135,000
Australia – 135,000
Spain - 125,000
Canada – 110,000

Obviously, China is catching up fast.

Here’s another interesting list – the top 5 cities in the world ranked by number of millionaires:

New York
London
Tokyo
Los Angeles
Chicago

Paris and Milan were the only other two European cities in the top 15 and they were placed in 13 and 14th position.

Growth not absolute wealth

Interesting? I think it speaks volumes. But, does it actually matter to property investors who are concerned not with wealth, but with growth?

Well, I think it probably says a lot about an economy and that matters to property investors. It is a good measure of a depth of wealth, if nothing else. It’s possibly also a good measure of the resilience of an economy to downturns.

But what does the fact that no city in Germany - the world’s third biggest economy - appears in the top 15 cities ranked by number of millionaires say about Germany?

Maybe this is all just a measure of uneven or more even wealth distribution? Unfairness, in other words?

CEE market insight

What the research tells us about selected CEE markets is much less equivocal.

The report also seeks to measure the growth of Assets Under Management (AuM) – again, excluding private homes and businesses.

Between 2001 and 2006 (the period covered by the report), four of the the top six countries with the fastest growing rates of AuM were in CEE.

And in 2006 the country with the fastest growing rate wasn’t India or Brazil or China – it was Poland!

The AuM growth rate in Poland was 38.2%

Overall, though, China tops the growth rate between 2001 and 2006, which is hardly surprising. It’s annual growth rate was 23.4%.

Brazil was second with 22.4% - despite its less impressive GDP growth performance.

But of those more stable, EU markets, it is the next four markets that really stand out - Poland, Hungary, Slovakia and Czech Republic that stand out.

AuM growth rates 2001 – 2006

Hungary 22.3%
Poland 22.1%
Slovakia 22%
Czech 19.9%

Last year, Czech was again the slowest growing country for assets under management – but it still grew at 21.3%! The average compounded annual growth rate in these four countries was 20%

Middle class creation

Even more telling for the property investor is how evenly these assets are spread and also where they are placed.

In the more developed markets, assets tend to be clustered among fewer people.

What is interesting in the CEE markets is that the growth in wealth is more evenly spread.

‘The distribution of wealth in these four countries by household was….. distinct. In each country, the share of AuM owned by non-wealthy households (those with less than $100,000 in assets exc homes and businesses), was exceptional; in Poland, for example, non-wealthy households owned two thirds of AuM, compared with a global average, which was less than 14%.

‘Still, we expect AuM to grow faster among wealthy households in those four countries, ‘ says the report.

This is a description of the middle classes!

What people in these countries do with their money is interesting too.

Perhaps, unsurprisingly, given its recent turmoil, people in Hungary have the highest propensity to keep their assests in cash. Those in Poland the lowest tendency. That says a lot about trust and confidence in institutions and the future, e a great deal more trust in Poland.

The future

Finally, what does the report conclude about these markets going forward?

‘We expect these four countries to maintain above-average growth in AuM – about 10 per cent per year over the next five years- even though each had an extremely high proportion of wealth held in cash in 2006, all well above the global average of 41.3% - ranging from 72% in Hungary to 62.3% in Poland.’

So, what this is saying is that growth will still be well above average – more people getting richer – even though current assets are not being made to work especially hard because they’re predominantly held in cash.

That will inevitably change and the already turbo-charged rate of growth of wealth in these CEE markets with it.

POSTED BY ROBIN BOWMAN ON TUE 13TH NOVEMBER AT 22:20 GMT

[ Back To Blog Home ]

GETTING RICH (AT LEAST FAIRLY) QUICK – WHERE IN THE WORLD ARE THE PROPERTY BUYING MIDDLE CLASSES B

CASH Hi Robin - great piece of research. I wonder - does this also answer the question 'how come every one in Warsaw or Bucharest is driving around in a new Mercedes or Audi Q7 if the average wage is 1,200 Euros (or 800 Euros) per month? I've always felt there was a big 'cash under the matress' element to these countries? Cheers Neil Cheers Neil

POSTED BY NEIL LEWIS ON WED 14TH NOVEMBER AT 23:08

GETTING RICH.....

Excellent, interesting article. It is so true that central, and especially the Eastern European countries are suspicious and do not trust the banks at all.Similar to the UK in the 30's when the working class would hide their cash in the mattress,or old socks and then get forgotton and it would only be discovered after death that the deceased had been very rich indeed!(This was the case with one of my uncle's) Lynn R

POSTED BY LYNN R ON THU 15TH NOVEMBER AT 17:27

ONE OF YOUR UNCLE'S WHAT?

Joke! Sorry! Very interesting article indeed. Also explains why some of the debt figures trotted out in the UK are pretty irrelevant. Huw

POSTED BY HUW ON THU 15TH NOVEMBER AT 21:47

RESEARCH

Great piece of research ! Whole point of looking at PS's web pages with millions to choose from !

POSTED BY IAN SAVAGE ON SAT 24TH NOVEMBER AT 12:42

[ Back To Blog Home ]

CONTRIBUTORS

Neil Lewis
Robin Bowman
Ben Greenwood
Noreen Lucey
Stanislaw Staromlynski
Brett Tudor
Panos Tsigaras

BLOG POSTS
Aug 2008
Jul 2008
Jun 2008
May 2008
Apr 2008
Mar 2008
Feb 2008
Jan 2008
Dec 2007
Nov 2007

Oct 2007
Sep 2007
Aug 2007
Jul 2007

DISCUSS

BOOKMARK THIS