Julius Baer has launched its first Wealth Report specifically focused on Europe and traces the evolution of wealth in the region showing that inequalities and complexity remain a challenge, Valentina Romeo reports.
After the two World Wars and financial depression(s), much of European wealth was significantly destroyed and changing its course. This was outlined by the new long-term datasets of the first Wealth Report Europe by the Swiss wealth management giant, suggesting that concentration of wealth in the old continent is on the rise again.
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In 2013, European wealth exceeded its pre-crisis peak, reaching a new all-time high of 56 trillion ($71trn), up 1.7% on the previous year. However, evolution of wealth across countries since the crisis in 2007 has differed substantially, with the likes of Switzerland and Germany adding over 1trn and 2trn in net wealth to their pre-crisis peaks, respectively, says the report.
On the other hand, wealth fell 28% in Spain and 23% in Greece, equating to a reduction of private wealth of 1.4 trillion and 169billion, respectively, in absolute terms.
Unlike most wealth reports making the headline today, the firm says it didn’t limit the analysis to gross financial assets (liquid assets like stocks, bonds or funds), but included estimates for debt and privately owned real assets like real estate.
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By GlobalDataTaking a larger slice of the wealth pie
Unsurprisingly, the report finds that over two-thirds of Europe’s wealth lies in the large core countries Germany, United Kingdom, France and Italy. This slice of Europe also has the largest number of wealthy households with Germany boasting 1.4 million millionaire households, France with 1.3m, Italy with 818,000, and the UK with 796,000.
However, the picture changes when considering average wealth-per-adult levels across Europe. The smaller core countries like Luxembourg and Switzerland exhibit the highest wealth-per-adult levels at 432,200 and 394,600 per adult, respectively. These levels are distinctly higher than the average European wealth per adult at 167,100, while average wealth per adult in Spain is estimated to amount to just 92,300 and 58,900 in Greece.
On the wealth distribution side, the report estimates that the wealthiest 10% of European households own over half of the continent’s wealth, while the bottom half of wealth holders own less than 10% of Europe’s total wealth. Concentration of wealth was highest in Austria and Germany (40% and 35% of total private wealth owned by the richest 1%) while the UK, Greece and the Netherlands had the lowest concentration (15% or less of total private wealth owned by the richest 1%), report’s figures also show.
Family businesses at the heart
Julius Baer’s study also stresses on the role family businesses play in building wealth.
"As long as capital returns exceed economic growth rates in Europe, European families owning capital are set to gain a larger slice of Europe’s consistently expanding wealth cake," says Robert Ruttmann, investment specialist at the bank and co-author of the report.
As Dimitri Bellas, investment specialist and other author of the report says, this trend should have a number of implications, ranging from the wealth effect driving up the demand for (and prices of) luxury goods, to the growing importance of intergenerational wealth transfers, both in terms of scope and complexity.
In fact, the report shows that the average prices of luxury goods – expensive wines, designer handbags and sports cars – are rising at least twice as fast as inflation, up 38% since 2004 compared to 18% for European inflation.
