Dubai: Over the next five years, private wealth in the UAE is projected to post a compound annual growth rate of 10.7 per cent to reach an estimated $1 trillion (Dh3.67 trillion) in 2019, according to the BCG Global Wealth Report 2015.
The study which measures the growth dynamics of global financial wealth of households showed that private wealth in UAE showed solid growth or 8.4 per cent in 2014. In the UAE, the growth of private wealth was driven mainly by equities. Between 2013 and 2014, the amount of wealth held in equities rose by 13.8 per cent across the nation, compared with 1.6 per cent for bonds, and 6.9 per cent for cash and deposits.
Based on BCG’s comprehensive study, the UAE is poised for further growth in the next five years, with the wealth breakdown anticipated to be 43 per cent in cash and deposits, 9 per cent in bonds, and 47 per cent in equities.
Over the next five years, across the UAE, private wealth held in equities is expected to increase at a CAGR [compounded annual growth rate] of 18.5 per cent. In parallel, bonds as well as cash and deposits will grow by 3.8 per cent and 6.2 per cent, respectively.
“In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households [those with above $100 million] in the UAE grew by 9 per cent in 2014, on the back of dynamic equity markets and a growing economy,” said Markus Massi, a Partner & Managing Director at BCG Middle East.
The BCG study showed the upper bracket of the wealthy households in the country is expected show a strong growth over the next five years on the back of strong economic growth and surge in asset prices, particularly equity values.
“Private wealth held by the UHNW segment is set to soar by an impressive 21.1 per cent by 2019. Interestingly, in the UAE, the upper high-net-worth [HNW] segment [those with between $20 million and $100 million)] witnessed the highest growth in 2014,” said Massi.
Private wealth in that segment rose by a healthy 16.1 per cent in 2014. With a projected CAGR of 12 per cent over the next five years, this segment is expected to see continued growth. This will be triggered by both a large number of new households entering the segment and growth in average wealth per household.
The sharp fall in oil prices over the last one year is yet to show any major impact on private wealth in the country. Even if low oil prices are to persist over a longer period, the impact on existing private wealth is negligible while creation of new wealth could be impacted to some extent.
In the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) grew at a slightly lower rate of 9.1 per cent in 2014. It is forecasted to grow by 12.9 per cent over the next five years.
“The total number of millionaire households [those with more than $1 million in private wealth] in the UAE increased by 5.5 per cent in 2014. Looking ahead, it is set to grow another 5.3 per cent by 2019,” said Massi.
