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The millionaires’ club has just got bigger

The number of dollar millionaires around the world increased by 6 per cent last year, defying the impact of the credit crunch, with the fastest growth in the emerging economies of India, China and Brazil.

There are now 10.1 million people worth more than $1m excluding the value of their main homes, according to the latest World Wealth Report from Merrill Lynch and the consultancy Capgemini. Developed economies in Europe and North America continued to create millionaires, though the rate of growth slowed significantly from 2006 as the credit crunch and inflationary pressures caused the world economy to falter.

But developing markets, driven by thriving exports of commodities and booming domestic markets, proved to be far more resilient. The number of dollar millionaires in India’s economy grew by 22.7 per cent, China followed with growth of 20.3 per cent and Brazil came next with 19.1 per cent.

As an illustration of the growing buying power of emerging markets and the shifting world order, the report cites General Dynamics, the U.S. engineering group, which sold more Gulfstream jets to overseas buyers than in North America for the first time last year. Ferrari also experienced unprecedented sales to emerging markets. The luxury carmakers’ sales in the Asia-Pacific region increased by 47.2 per cent last year, while sales to West Asia grew by 32.3 per cent. That compared with single-digit growth in Ferrari’s traditional markets of the U.S. and Germany.

The combined wealth of the millionaires, defined by Merrill Lynch as “high net-worth individuals,” grew by 9.4 per cent to $40.7 trillion, demonstrating once again the truism that the wealthy get wealthier. The average assets held by high net-worth individuals now exceeds $4m.

The number of super-rich — defined as people with more than $30m — increased by 8.8 per cent to 1,03,320.

The report also detailed the different tastes of the wealthy in different parts of the world. In Europe, they spend 22 per cent of their spare cash on art; 17 per cent on “luxury collectibles,” including cars, jets and boats; 12 per cent on luxury travel; and 6 per cent on sport, including buying teams and racehorses. In Asia, their most popular items are jewellery, gems and watches, accounting for 19 per cent of their spare money, followed by “luxury consumables” such as designer clothes.

“This year’s report found that the number of high net-worth individuals, and the amount of wealth they control, continued to increase in 2007,” said Nick Tucker, executive director at Merrill Lynch’s global private client group. “We expect the environment to remain challenging over the next six to 12 months, but over the long term, the trends remain intact,” he said.

In Britain, there are 4,94,500 dollar millionaires, the number advancing by 2.1 per cent last year, far slower than the European average of 3.7 per cent, but still faster than France and Germany. The U.K. remains home to about 5 per cent of the world’s dollar millionaires, ranking it fourth in the world, though that could change if threats to quit Britain made by “non-doms” angered by changes to the tax laws are carried out.

Mr. Tucker said much of the high wealth in Britain is now entrepreneurial, in contrast with 10-15 years ago when it was largely inherited. However, he said the number could slip into reverse in 2008 if the economic conditions persist.

The growth in new millionaires in 2007 had slowed significantly from 8.1 per cent in 2006. According to Merrill Lynch forecasts, there will be more millionaires in China than in Britain by the end of next year.

Ireland was one of the few countries last year in which the number of dollar millionaires fell — by 4 per cent to 20,000 — reflecting a slide in the Dublin stock market, inflationary pressures and a downturn in the property market. “I’m not predicting that will happen in the U.K. yet but it is quite possible,” said Mr. Tucker. “If the property market and the stock market conspired against it then the U.K. could possibly see the same thing happen.”

He said that if conditions in the second half mirrored the first then the U.S., which has suffered a collapse in its property market, could also see a decline in the number of millionaires this year. The number of millionaires in North America expanded by 4.2 per cent last year, down from 9.2 per cent in 2006. — © Guardian Newspapers Limited, 2008

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