Defying the credit crunch, the Middle East’s rich have got richer with only the UAE notching up a decline in its wealthy population, Merrill Lynch’s World Wealth Report 2011 said Wednesday.
The number of dollar millionaires in the region swelled by 10.4 percent in 2010, reflecting the fastest growth rate worldwide, to represent 400,000 people sitting on a cash pile of $1.7 trillion.
Among the Gulf states, only the UAE saw a slump in its millionaires’ club, a decline attributed to the collapse of Dubai’s real estate market, which wiped more than 60 percent off house prices.
Across the Middle East, holdings of real estate among high-net-worth players fell to 18 percent of all investments from 23 percent in 2009 as property markets saw a slump in demand.
Tamer Rashad, head of Middle East at Merrill Lynch Wealth Management, said the region’s growth had been driven by rising oil prices and a rise in global equity market capitalization.
“One key differentiating factor for the Middle East economy is the significantly high ratio of savings to GDP,” he told Arabian Business.
The ratio was as high as 54 percent in Bahrain and 40 percent in Saudi Arabia, compared to single-digit rates in developed countries such as the United States, he added.
High levels of disposable cash also meant the region’s rich invested in the global equities markets, which produced strong returns last year.
“Rising oil prices have led to more reserves for investment. These savings… go into assets classes and many asset glasses have been increasing at a global level,” Rashad said.
“A recovery in equity markets, as well private equity commodities and an increase of allocation to these asset classes away from real estate, cash and fixed income,” had grown revenues.
Private equity investments, which grew by an average of 18 percent in 2010, comprised 17 percent of overall investment by Middle East millionaires compared to 10 percent globally.
Globally, the number of dollar millionaires rose 8.3 percent year-on-year to 10.9 million with a hefty combined wealth of $42.7 trillion. Breaking down the spending habits of the wealthy, the report found luxury trophy assets such as cars, boats and jets made up 29 percent of investments by the world’s rich.
Art made up some 22 percent of investments – underpinning the booming global art market – while 22 percent of cash goes on jewellery, gems and watches. Wine, antiques, coins and other collectibles attract around 15 percent of spending.
Sports investments, while only accounting for eight percent of investments globally, were popular for 13 percent of Middle East millionaires. However, the region’s rich cut their spending on jewellery, gems and watches to 29 percent last year, down from 35 percent in 2009.
Kuwait and Bahrain saw their share of high-net-worth players jump by 25 and 24 percent respectively, placing them sixth and seventh in the rankings of 71 countries, the report said.
Neighbouring Gulf state the UAE saw a 3.5 percent decline in dollar millionaires.
GDP in the OPEC member grew at 2.1 percent in 2010, compared to 4.2 percent in Bahrain and 3.8 percent in Saudi Arabia. Saving levels in the UAE hit 32.3 percent, the report found: high by global standards, but still below Bahrain (54 percent) and Saudi Arabia (40.1 percent).