Big rise in the number of Australia's mega-rich

Big rise in the number of Australia's mega-rich

JARED LYNCH
June 24, 2010

AUSTRALIA'S mega-rich are shunning the real estate market for equities, believing property prices are too high and no longer have much bang for buck, a study shows.

The World Wealth Report, released by Capgemini and Merrill Lynch yesterday, revealed that the number of millionaires in Australia surged by 34.4 per cent last year to 174,000, with most recouping losses sustained in the financial crisis.

And the combined wealth of high-net-worth individuals in the Asia-Pacific region climbed 30.9 per cent to $9.7 trillion, overtaking Europe for the first time, which was $9.5 trillion.

The shift in rankings came because gains in Europe, while sizeable, were far less than those in the Asia-Pacific region, which saw continued robust growth in both economic and market drivers of wealth, the report said.

Merrill Lynch senior vice-president for investments Peter Opie said high-net-worth individuals, defined in the report as people holding investable assets of more than $US1 million ($A1.14 million), were putting money back into the sharemarket rather than property.

''Real estate is forecast to be a big loser,'' Mr Opie said.

''In Australia there is a concern that property valuation is too high.

''The equity markets had a big hit in 2008 and early 2009 and then people came back … because they were cheap again. Whereas perhaps with real estate you did not see as great a degree of movement down and therefore a greater degree of interest from investors.''

The report forecast that equity markets would account for 35 per cent of millionaire assets in the Asia-Pacific region by next year - an increase of 6 percentage points on last year - while real estate would drop from 18 per cent to 14 per cent.

Mr Opie said it was difficult to gauge what impact the forecast change in asset base would have on the real estate sector, particularly large-scale commercial projects.

''It's probably going to have an impact, sure,'' he said.

''But I'm probably not able to answer the question to the extent that the millionaire investors drive residential, commercial and industrial real estate. Much of that is held at the institutional level.''

The rich-list surge catapulted Australia to No. 10 for the number of millionaires after slipping to No. 11 in 2008.

The average individual worth was $2.99 million.

The US, Japan and Germany head the list, having 2.8 million, 1.65 million and 861,000 millionaires respectively.

Worldwide, the wealthy have nearly recouped the losses of 2008 and total assets are approaching levels last seen in 2007, before a US housing crisis triggered the global recession.

With AAP