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  1. Wealth
April 6, 2011

Wealth Report: Tax and Kidnapping Send HNWs Fleeing

By Spear's

HNWs relocating around the world are driven by factors as diverse as escaping from tax and avoiding kidnapping, according to the 2011 Knight Frank/Citi Private Bank Wealth Report

by Mark Nayler

HNWs relocating around the world are driven by factors as diverse as escaping from tax and avoiding kidnapping, according to the 2011 Knight Frank/Citi Private Bank Wealth Report.

Eighty per cent of Latin American HNWs looking to relocate their primary residence cited worries about personal safety as their main motivation. Their destination of choice is the US, with 47% of respondents heading there. For European HNWs, the main reason is tax: the destination of choice for those looking to change their residency is Switzerland (for more on Switzerland’s status as a leading IFC click here). In third place is Monaco, a country whose tax regime is obviously attractive enough to obscure or justify its price tag: $1m buys you just 15 sq metres.

Schooling is particularly important as a motivator for East Asian HNWs, 29% per cent of whom said that their children’s education was the most important consideration when looking for a base in another country. US investor Jim Rogers, interviewed in the report, cites his daughter’s education as being the determining factor in his relocation to Singapore. This is in line with an opinion he shares with many HNWs – namely that China, as he puts it, ‘is going to be the most important country of the 21st century’.

For hedonists in the global UHNW community, New York is still the number one city, while entrepreneurs prefer Shanghai and romantics Paris. The usual suspects hang around the top of the rankings when it comes to the general cities of choice for UHNWs. Overall, New York, London, Hong Kong and Singapore currently occupy the top four spots. More attention-grabbing, however, are the up-and-coming rivals to these staple destinations. Over the next ten years, HNWs and their advisers see Rio, Jakarta and Doha entering the top 40.

Those HNWs wishing to fuse hedonism and entrepreneurial spirit might be tempted to invest in a vineyard – and in this respect the report featured some intriguing figures. In Bordeaux and the Dordogne, where vineyard values can reach $642,000 per hectare, although this has declined by 14% since 2010. Eleven of the top 15 vineyard locations declined in price, two stayed the same and only two – Chile and Argentina – rose (8% and 13% respectively).

With the OECD estimating that food production will need to increase by 70% by 2050 to cope with population growth, investing in farmland is becoming an increasingly attractive option for the world’s HNWs. According to the report, England is the most expensive country in which to invest, with prices averaging $22,000 per hectare; investors might be more tempted by some top sugar cane land in Sao Paolo ($12,000 per hectare) or dryland in a cornbelt US state ($16,000 per hectare).

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With regard to the spending habits of UHNWs, it looks like both indulgence and philanthropy have seen the most substantial increases over the last five years. Thirty two per cent of respondents said their philanthropic giving had increased, and 26% have invested more in art and other collectables. These preferences look unlikely to change: 37% and 38% of UHNWs are intending to increase their giving to charities and investment in art and collectables respectively over the next five years.

UHNWs cite understandable concerns when looking to the future, with 55% saying that they are more concerned about the state of the global economy than they were five years ago, and 49% expressing increased concern over their local and regional economies. But that’s not to say that they’re averse to a punt and a bit of fun amid the uncertainty: 72% of UHNWs said that they would like to be presented with more unusual spending opportunities. Perhaps their wealth advisers, only 32% of whom thought their clients wanted more such  suggestions thrown their way, should take note.

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