Millions become millionaires during Covid pandemic

Rises in house prices were a big factor in people's wealth increases

More than five million people became millionaires across the world in 2020 despite economic damage from the Covid-19 pandemic.

While many poor people became poorer, the number of millionaires increased by 5.2 million to 56.1 million globally, Credit Suisse research found.

In 2020, more than 1% of adults worldwide were millionaires for the first time.

Recovering stock markets and soaring house prices helped boost their wealth.

Wealth creation appeared to be "completely detached" from the economic woes of the pandemic, the researchers said.

Lower interest rates and government support programmes had led to "a huge transfer" of wealth from the public sector to the household sector, they added.

This had prompted a surge in household saving, which had "inflated household financial assets and caused household debts to be lower than they would be otherwise".

The number of ultra-high net worth individuals, usually defined as those having investable assets of more than $30m, grew by 24% worldwide in 2020, the fastest rate of increase since 2003.

Credit Suisse said its total of the number of millionaires might be higher than other organisations' estimates because it included both investable and non-investable assets, such as owner-occupied homes.

Anthony Shorrocks, economist and author of the Global Wealth Report, said the pandemic had an "acute short-term impact on global markets", but added this was "largely reversed by the end of June 2020".

"Global wealth not only held steady in the face of such turmoil, but in fact rapidly increased in the second half of the year," he said.

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However, wealth differences between adults widened in 2020, and Mr Shorrocks said if asset price increases, such as house price rises, were removed from the analysis, "then global household wealth may well have fallen".

"In the lower wealth bands where financial assets are less prevalent, wealth has tended to stand still, or, in many cases, regressed," he said.

"Some of the underlying factors may self correct over time. For example, interest rates will begin to rise again at some point, and this will dampen asset prices."

Total global wealth grew by 7.4%, the report said.

Since the start of the 21st Century, the number of people with wealth between $10,000 and $100,000 had more than tripled in size from 507 million in 2000 to 1.7 billion in mid-2020.

They said the increase reflected the "growing prosperity of emerging economies, especially China, and the expansion of the middle class in the developing world".

Nannette Hechler-Fayd'herbe, chief investment officer at Credit Suisse, said: "There is no denying actions taken by governments and central banks to organise massive income transfer programmes to support the individuals and businesses most adversely affected by the pandemic, and by lowering interest rates, have successfully averted a full scale global crisis."

She added: "The lowering of interest rates by central banks has probably had the greatest impact.

"It is a major reason why share prices and house prices have flourished, and these translate directly into our valuations of household wealth."

But she added that these interventions "have come at a great cost".

"Public debt relative to GDP has risen throughout the world by 20 percentage points or more in many countries.

"Generous payments from the public sector to households have meant that disposable household income has been relatively stable and has even risen in some countries."

Ms Hechler-Fayd'herbe said a "major reason" why share prices and house prices had "flourished" was due to the lowering of interest rates by banks, which, she added, translated "directly into our valuations of household wealth".