UAE private wealth is booming – are you any richer?

The number of the UAE’s wealthy households has doubled in the last five years, from 150,000 affluent households in 2010 to 335,000 in 2014, a new study has revealed.

In the same period, the GCC’s total private wealth has doubled from $1.1 trillion to $2.2 trillion (Dh8 trillion) for an overall compound annual growth rate (CAGR) of 17.5 per cent, according to a study by management consultancy Strategy&, formerly Booz & Company.

“The affluent in the GCC are mainly white-collar professionals, executives, households with dual incomes, and small business owners who tend to be younger and more tech savvy than most high net worth individuals,” says the report.

The report dissects the wealthy households into three segments – the affluent, high net worth and the ultra-rich – estimating a total of 416,000 of such households in the UAE in 2014. Together, they control $675 billion (Dh2.5 trillion) in private wealth, making the UAE the second largest private wealth pool in the GCC.

The largest, of course, is Saudi Arabia, with 857,000 wealthy households controlling $970 billion (Dh3.5 trillion) in private wealth.

However, while the UAE has made the most notable gains with its share of the GCC’s private wealth increasing from 24 to 30 per cent from 2010 to 2014, Saudi Arabia’s share in the same period has declined from 47 to 44 per cent. Together, Saudi Arabia and the UAE control 74 per cent of the region’s private wealth, up from 71 per cent in 2009.

The UAE has created the most affluence in the GCC, growing its share of affluent households from 16 to 26 per cent from 2010 to 2014. Among the UAE’s ‘affluent’ households, many are local and regional, but they also originate from outside the GCC, and include Arab, Asian, Indian subcontinent, and Western expatriates, the report states.

Even as a generally upbeat economy and rising asset prices are largely to be credited for this growth in affluence, the UAE has also benefitted from being a safe haven in the centre of a troubled region.

“Concurrent with this macroeconomic and socio-demographic growth have been geopolitical events that intensified the migration of new wealth to the region,” the report highlights.

“Since the start of the Arab Spring and in its aftermath, the security and economic situation in countries such as Egypt, Iraq, Libya, Syria, and Tunisia has deteriorated, and no change is expected in this challenging state of affairs in the foreseeable future. As a result, many wealthy households migrated to the more stable UAE, Kuwait, and Qatar,” it notes.

“These households also moved a significant portion of their wealth to either regional or foreign banks based in the GCC countries to which they relocated. The UAE has benefited from this regional phenomenon the most and seen the largest inflows from the wider Middle East and North Africa region,” it adds.

In addition, sluggish macroeconomic growth in the Western hemisphere, paired with turmoil in the international financial services industry has contributed to some degree of capital being reallocated to its countries of origin, including the GCC.

The Strategy& study estimates that, at present, there are between 1.5 million and 1.6 million wealthy households in the GCC, with total investable assets of around $2.2 trillion.

“High-net-worth individuals (HNWIs) continue to account for the largest chunk of the region’s wealth at 41 per cent, followed by ultra-high-net-worth individuals (UHNWIs) at 34 per cent,” says Dr. Daniel Diemers, Partner with Strategy& in Dubai.

“However, the affluent segment has been growing the fastest over the last five years at 21 per cent CAGR, more than doubling in absolute dollar terms from $261 billion in 2009 to $560 billion in 2013. However, during the same time frame, wealth creation for the region’s HNWIs, at 76 per cent, and UHNWIs, at 94 per cent, was hardly anaemic,” he adds.

According to the study, the growth of affluent households from 2010 to 2013 was strong, with total households increasing about 50 per cent, from an estimated range of 850,000 to 880,000 in 2010, to a range of 1.25 million to 1.325 million.

“Powerful macroeconomic and socio-demographic forces are propelling the growth of wealthy households in the GCC. One key driver has been the strong rebound in global equity markets as increasingly aggressive allocations among the region’s wealthiest helped them recapture value destroyed during the crisis,” says Jihad K. Khalil, Senior Associate with Strategy& in Dubai.

“From 2009 to 2013, global equities saw 50 per cent gains. Of the $1 trillion net increase in wealth during the period, we estimate that the global equity rally’s impact on existing wealth accounted for around 40 per cent of that gain,” he adds.

“The other 60 per cent of the $1 trillion in net new wealth was driven by the GCC regional GDP growth, which rose steadily at an average rate of 10 per cent per annum as the oil price rose and then was sustained at near-record levels through 2014.

"Governments have used this windfall to spend generously on megaprojects, infrastructure, and job creation — all of which helps to produce more income for wealthy individuals and create a generation of newly affluent citizens and expatriates,” he adds.

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