Saudi Arabia, UAE control 74% of Gulf's private wealth

Private wealth has doubled in the past five years in the GCC with Saudi Arabia and the UAE controlling 74 percent of the region's wealth, according to a new report.

The Gulf's private wealth market has rocketed from $1.1 trillion in 2010 to $2.2 trillion last year, with a compound annual growth rate (CAGR) of 17.5 percent, according to a study by Strategy&, formerly known as Booz & Company.

The Strategy& study estimates that there are currently between 1.5 million and 1.6 million wealthy households in the GCC.

Most of the region's private wealth resides in Saudi Arabia (44 percent), but the UAE has made notable gains with its share of GCC's private wealth increasing from 24 percent to 30 percent from 2009 to 2013.

Dr Daniel Diemers, partner with Strategy& in Dubai, said: "High-net-worth individuals (HNWIs) continue to account for the largest chunk of the region's wealth at 41 percent, followed by ultra-high-net-worth individuals (UHNWIs) at 34 percent.

"However, the affluent segment has been growing the fastest over the last five years at 21 percent 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 percent, and UHNWIs, at 94 percent, was hardly anemic."

According to the study, the growth of affluent households - those with $100,000 to $1,000,000 of liquid financial assets - has been strong, with total households increasing about 50 percent between 2010-2013, from an estimated range of 850,000-880,000 to up to 1.325 million.

It said the UAE has created the most affluence in the GCC, growing its share of affluent households from 16 percent to 26 percent from 2009 to 2013.

Jihad K. Khalil, senior associate with Strategy& in Dubai, added: "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.

"From 2009 to 2013, global equities saw 50 percent 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 percent of that gain.

"The other 60 percent 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 percent 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 added.

The study revealed that geopolitical events also intensified the migration of new wealth to the region. Since the start of the Arab Spring and in its aftermath, many regional wealthy households migrated to the more stable countries like the UAE.

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 report added