McKinsey: Two-thirds of global wealth stored in real estate

McKinsey & Company, a management consulting firm, says two-thirds of global net worth is stored in real estate — with only about 20 percent channelled toward other fixed assets.

The firm said this in its latest report titled “The rise and rise of the global balance sheet,” released on Monday.

The report explained that 68 percent of global net worth is stored in real estate — and the balance is held in such things as infrastructure, machinery, and equipment and, to a much lesser extent, so-called intangibles like intellectual property and patents.

According to McKinsey & Co, the report examines the national balance sheets of ten countries representing more than 60 percent of global income: Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States.

“The market value of the global balance sheet tripled in the first two decades of this century,” the report said.

“Each of its three components — real assets and net worth; financial assets and liabilities held by households, governments, and nonfinancial corporations; and financial assets and liabilities held by financial corporations — grew from about $150 trillion in 2000, or about four times GDP, to about $500 trillion, or about six times GDP in 2020.”

The report added that global net worth rose to $514 trillion in 2020 from $156 trillion in 2000. China accounted for almost one-third of the increase. Wealth in the Asian country skyrocketed to $120 trillion from a mere $7 trillion in 2000, the year before it joined the World Trade Organisation (WTO), speeding its economic ascent.

The US, held back by more muted increases in property prices, saw its net worth more than double over the period to $90 trillion.

The steep rise in net worth over the past two decades has outstripped the increase in global gross domestic product — fueled by ballooning property prices pumped up by declining interest rates, the firm said.