More marketing to the ultra-rich

Credit: thefinancialphilosopher.com

“The launch of sub-orbital space travel presents the opportunity to radically shift global property markets,” according to the London-based real estate firm Knight Frank.

Knight Frank – which describes itself as “the world’s leading independent real estate consultancy” – prompted a flurry of media coverage in the U.K. by posting a “news headline” on its web site, “To infinity and beyond for property,” atop a blog post about the company’s 2014 Global Wealth Report. This report “highlights the rising trend for private wealth investment in space…from asteroid mining to sub-orbital space travel.”

Knight Frank is not interested in developing space-based real estate. It’s interested in the prospect of selling more luxury properties to the world’s ultra-rich once they gain faster access to distant terrestrial locales by means of suborbital space travel.

Really.

The market that Knight Frank is interested in exploiting is UHNWIs.

I had to look it up.

In the world of business, ultra high net worth individuals (UHNWIs) are people with investable assets of at least $30 million (U.S.), excluding personal assets such as primary residence, collectibles and consumer durable goods. Knight Frank apparently looks forward to the day when it can sell more third, fourth, and fifth luxury properties in far-flung places to UHNWIs who can fly anywhere in the world in just an hour or two by suborbital space flight.

Apparently, Virgin Galactic’s Richard Branson has convinced Knight Frank that this vision will materialize. “Talking to The Wealth Report, …Branson said: ‘New commercial space will be one of the most exciting investment sectors in the next 20 years, driven by the initial successes of companies like Virgin Galactic. There is already some good evidence that the leading players are receiving high levels of interest from the mainstream investment community and attracting valuations that reflect confidence in future growth and opportunity’.”

I’d like to see that evidence.

“Although sub-orbital trips for wealthy tourists will keep Virgin Galactic busy in the short term,” Knight Frank reports, “Branson says the next step for the technology will be to slash travel times around the world. ‘I’m very excited about a future version of our current spaceship which will make transcontinental travel clean and fast – London to Sydney in a couple of hours with minimal environmental impact.’

Ticket price will be critical.”

No kidding.

“If this is a technology for billionaires only,” Knight Frank says, “then property market disruption might be limited to a wider choice of global lunch options. But if the price drops to allow the merely very wealthy to access sub-orbital flights, then every assumption about current property prices will have to be reconsidered.”

Knight Frank’s Liam Bailey explains. “Take second homes in Europe. Right now, demand is mainly restricted to European investors, who try to limit their travel to less than two hours. In future, that same time limit could allow Chinese or Indian investors to pop over for the weekend to visit their Tuscan farmhouse.”

Alas, I’m not making this up. As the rich grow richer and, consequently, the poor grow poorer, this disturbing vision might, indeed, become real. For me, this vision is a nightmare.

And lest you call me “socialist,” let me note that even from a pro-development perspective, economic inequality is seen as a hindrance to economic growth.

Last October, Shamshad Akhtar, United Nations Assistant Secretary-General for Economic Affairs, reported at a U.N. meeting that “both global inequality and inequality within countries have been on the rise during the past two decades…. According to an estimate by UNICEF, the richest and poorest population quintiles earned 83 per cent and 1 per cent of global income, respectively…. Importantly, key evidence shows that income inequality hurts economic growth.”

“In developing countries,” she continued, “concentration of assets has been found to inhibit productive investment and restrict growth potential and thereby hinder the development process…. In both developed and developing economies, rising inequalities have been associated with excessively debt-financed consumption and investment patterns that have then contributed to financial and economic crises.” The assumption that “rising inequality [is] a price that has to be paid for development at lower levels of per capita income does not hold ground in recent empirical studies.”

Larry Ellison, an UHNWI rated by Forbes magazine as the third richest person in the U.S. and the fifth richest person in the world (net worth, $48 billion), already “collects houses on Malibu’s Carbon Beach and also owns of 98% of Hawaii’s Lanai Island.”

With first-class tickets on the Virgin Galactic shuttle (I suppose that all seats will be first-class), an UHNWI could buy up the nation of Yemen and turn it into a luxury resort, a la Dubai.

Knight Frank says it “has identified more than 70 wealthy individuals, with a combined wealth of over US$200 billion, who are targeting” the space-development sector. I guess the company is keeping an eye on investors in asteroid mining, in hopes that they will get rich, or richer. Its 2014 Wealth Report includes an “Asteroid Index,” identifying five allegedly high-value NEOs that will come within 0.2 astronomical units of Earth between January 2015 and October 2017.

Here they are: 1999 JV6 (approximate value, $1.5 trillion; estimated profit $218 billion; 2000 AC6, $2 billion/$247 million; 2000 BM19, $36 trillion/$3 trillion; 2000 CE59, $5 trillion/$923 billion; and 1989 UQ, $13 billion/$2 trillion.

These estimates come from Asterank, an Internet database originally compiled by Ian Webster and purchased by Planetary Resources – an asteroid-mining company! – in 2013. Ian Webster is now a software engineer at Planetary Resources.

Did I miss something? Is it April? Is this whole thing a joke? Or maybe a really weird advertising initiative?

This vision of a future world in which today’s ultra-rich become ultra-ultra-rich and own an even larger swath of Earth (what’s next? The oceans?) reinforces my view that humankind is not (yet) fit to expand its presence into space.