When we last looked at the number of millionaires in August 2006, we estimated that there were then 376,000 millionaires (up from 230,000 in 2003) but that this would roughly double to 760,000 by 2010.
Our latest estimates suggest that there are now only 242,000 millionaires this year after the number peaked at 489,000 in 2007 – and shows that membership of the millionaires club was only fleeting for many.
The halving in the number of millionaires reflects the collapse in the property market, the fall in the values of shares and the 70% drop in city bonuses.
It looks as though the experience for millionaires is relatively similar to that chronicled by the Sunday Times for their Rich List, which showed a fall in the number of UK billionaires this year from 75 in 2008 to 43 this year. The Sunday Times estimated that the wealth of those on the Rich List had fallen by 38% in the past year. The wealth of the average UK millionaire has fallen by rather less than this – we estimate by 24%. The difference almost certainly reflects the much higher levels of borrowing in relation to assets for billionaires than for millionaires and the different pattern of asset holdings (billionaires have less than 10% of their assets in property whereas the average millionaire in 2007 had 42% of assets in property).
The reason why the drop in the number of millionaires is so large is because a very large number of people had just crept over the millionaire threshold in the period from 2003 to 2007 – when the number of millionaires rose from 230,000 to 489,000. This was mainly caused by the rise in house prices over that period. Having just crept over the threshold, most of these people have crept back under it again – many perhaps without ever knowing that they had become millionaires for a temporary period.
The decline in wealth for people in this category is reflected in sales of luxury products. Sales of Bentley cars are down this year to date by 66%; sales of BMWs are down by 35% against an overall decline in car sales of 29%.
With property prices near to bottoming out, we would expect the number of millionaires to start to rise again in 2011.