Tag Archives: wealthy

The cities where the super-rich live

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Richard Florida has the rankings of where the super-rich around the world live:

London is the world’s top location for the super-rich, with 4,364 people with $30 million or more in assets. Tokyo is second with 3,575, followed by Singapore (3,227), New York (3,008) and Hong Kong (2,690). The table below shows the top 20 cities with the most ultra-high-net-worth individuals.

Rank

City

Number of Super-Rich

Percentage of Total

Global Super-Rich

1

London

4,364

2.5%

2

Tokyo

3,575

2.1%

3

Singapore

3,227

1.9%

4

New York

3,008

1.7%

5

Hong Kong

2,690

1.6%

6

Frankfurt

1,909

1.1%

7

Paris

1,521

0.9%

8

Osaka

1,471

0.9%

9

Beijing

1,408

0.8%

10

Zurich

1,362

0.8%

11

Seoul

1,356

0.8%

12

Sao Paulo

1,344

0.8%

13

Taipei

1,317

0.8%

14

Toronto

1,216

0.7%

15

Geneva

1,198

0.7%

16

Istanbul

1,153

0.7%

17

Munich

1,138

0.7%

18

Mexico City

1,116

0.6%

19

Shanghai

1,095

0.6%

20

Los Angeles

969

0.6%

And if you control for population size, the list changes:

Rank

City

Super-Rich per

100k Population

1

Geneva

143.7

2

Zurich

70.8

3

Singapore

60.0

4

Frankfurt

42.9

5

Hong Kong

37.0

6

Auckland

35.7

7

Oslo

34.4

8

London

29.9

9

Munich

29.1

10

Hamburg

26.6

11

Rome

22.3

12

Dublin

21.0

13

Toronto

20.1

14

Edinburgh

20.0

15

Stockholm

18.9

16

Taipei

18.6

17

Sydney

15.9

18

Monaco

15.8

19

New York

15.0

20

Tel Aviv-Yafo

14.3

These lists have some overlap with the top global cities but there are some differences. For example, on the first list: Chicago and Los Angeles are typically in the top 10 for global cities but they don’t rate highly here. In other words, there are some different social forces at work as to where the rich live versus which cities are most influential. Some possible forces at work:

1. Perhaps the super-rich in a single country tend to all go to one place. In the United States, perhaps this is New York City which is heads and shoulders above anyone else. Super-rich people want to be where all the other super-rich people are.

2. Certain industries might be important here, particularly ones like global banks or the oil industry.

3. Certain cities have amenities that appeal to the super-rich. This could range from certain cultural opportunities or tax breaks or high-status (and expensive) properties.

The per capita list has even more differences. Auckland? Hamburg? Edinburgh? I’m guessing there are some interesting stories behind these conglomerations.

The declining “McMansion to Multi-Millionaire ratio”

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One analysis looks at the popularity of McMansions (amidst articles claiming they have returned) via a ratio of McMansions to multi-millionaires in the United States:

We can get a good contemporaneous gauge of the popularity of McMansions by dividing the number of new 4,000 plus square foot homes sold by the number of households with a net worth of $5 million or more: call it the McMansion/Multi-Millionaire ratio. (There’s no universally accepted definition of McMansion, but since the Census Bureau reports the number of newly completed single-family homes of 4,000 square feet or larger, most researchers take this as a proxy for these over-sized homes.)

The McMansion to Multi-Millionaire ratio started at about 12.5 in 2001 (the oldest year in the current Census home size series)—meaning that the market built 12 new 4,000 square foot-plus homes for every 1,000 households with a net worth of $5 million or more. The ratio fluctuated over the following few years, and was at 12.0 in 2006—the height of the housing bubble. The ratio declined sharply thereafter as housing and financial markets crashed.

McMansiontoMultiMillionaireRatioEven though the number of high-net-worth households has been increasing briskly in recent years (it’s now at a new high), the rebound in McMansions has been tepid (still down 59 percent from the peak, as noted earlier). The result is that the McMansion/Multi-Millionaire ratio is still at 4.5–very near its lowest point. Relative to the number of high-net-worth households, we’re building only about a third as many McMansions as we did 5 or 10 years ago. These data suggest that even among the top one or two percent, there’s a much-reduced interest in super-large houses.

An interesting measure that tries to put together how many wealthy people there are (the ones who can build and purchase McMansions) with how many new large homes were constructed (with the rough proxy of square footage – not all homes over 4,000 square feet would be considered McMansions). The conclusion is interesting: the number of McMansions being built today is quite lower than the peak ten years ago or so. So, when journalists write that the McMansion is back (usually with a negative tone – our wild spending and consumeristic days of the early 2000s are set to return!), it is not at the same scale as we are still in the middle of a depressed housing market.

For Americans, someone else is always a rich person

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Perhaps this is not surprising in a country where almost all claim to be middle class: Americans suggest someone else is the one who is truly rich.

Richard Reeves of the Brookings Institution, who has made this quirk of our class identities into a hobby horse of sorts, recently put together a nice illustration of what he calls our national, “Me? I’m not rich!” problem. In 2011, Gallup asked Americans how much income they needed to be “rich.” In general, they answered some amount that was higher than whatever they made. Most people who earned $30,000 a year or less thought you could be rich making under six figures. A majority of those who earned between $30,000 and $99,000 thought you needed to cross the $100,000 threshold. You get the idea.

reeves_rich

Brookings

None of this is especially surprising. People don’t generally think about living standards in absolute terms. They think about them relatively, and tend to compare themselves with their peer group. And because most of us know at least a few jerks with a bigger house, nicer car, and more interesting-looking vacation photos, it’s easy to conclude that, no, we ourselves are not truly rich. I’m making fun of Americans for it, but my guess is it’s near universal. It just happens to be a problem in the U.S. because, as Reeves writes, those of us who think we should be paying taxes at all tend to believe the rich should be the ones shelling out. That’s a political problem when there are apparently no rich people to be found.

I’ve seen this at work in numerous settings where Americans fall over themselves to claim that they don’t have as many resources as it appears they might. This could involve a discussion of McMansions and how everyone knows someone else who lives in such a garish house while they would never consider such a thing. Or it could be in a discussion of students or staff at a private college where everyone acts like they don’t have any spending money. There are powerful social incentives to not declare oneself rich even when objective measures put people at the higher ends of the social class ladder.

I wonder how much particular actions of the wealthy could mitigate their own admittance at being rich. Take Bill Gates. Fabulously wealthy and well known for this but he has also spent a lot of money on philanthropic ends. Does this take away the negatives of being rich? Warren Buffett is cited in this article as someone who claims to be rich. Does he do anything to offset that image or is it okay if you became rich through building your own financial empire (just American hard work)?

Debate the data: are millionaires leaving New Jersey in large numbers?

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A new report suggests some millionaires have left New Jersey:

New Jersey lost roughly 10,000 millionaire households, but those affluent families who remain still account for 7 percent of the whole state, the researchers said…

A high tax rate for top earners may have led to some migration out of the state, according to David Thompson, the lead researcher.

By losing those 10,000 millionaire households, the Garden State returns to third, where it was ranked from 2010 through 2012. Since the last report, Connecticut lost only 1,000 millionaire households, as it vaulted to the second spot, the group said.

And alternative interpretations:

“If millionaires were truly trying to flee NJ’s top income tax rate, we probably would have lost a lot more when the rates were higher,” Whiten said. “But during the 2000s NJ almost doubled the number of tax filers above $500K at a time when the tax rate was increased on them, twice.”Wealth has been reported leaving the Garden State before, however. In 2010, a Boston College team found that in a five-year period some $70 billion in total wealth left for other parts of the U.S.

Last year, a report by the Morristown-based Regent Atlantic wealth management firm released a report entitled “Exodus on the Parkway” that claimed so-called “tax migration” began in 2004, with the state’s passage of the “millionaire’s tax.” The report found that a couple with an income of $650,000 who moved to Pennsylvania would save some $21,000 per year in taxes, adding up to $1.65 million over 25 years, if invested. Most families with incomes of $500,000 per year or more were departing New Jersey for either the Keystone State or Florida, the Regent Atlantic authors added.

“The phenomena is there, that people are leaving – but people in New Jersey have high incomes,” said Joseph Seneca, professor of economics at the Edward Bloustein School of Planning and Public Policy at Rutgers University.

My interpretation: no one really knows whether 10,000 millionaire households leaving is a big number or not. If the true figure was 5,000, might those who oppose higher taxes still argue that taxes are pushing a large number to leave? And if the true number was 15,000, would this be enough evidence that taxes really are making a difference? Because this appears to be an ideologically laden debate, each side can look at the 10,000 figure and make a reasonable interpretation.

Here are two ways around the issue that both make use of comparisons. The first way would be to compare the New Jersey leavings over the years. Is the 10,000 figure more or less than years past? The second would involve comparing the leaving rate across states. This new report looks at millionaires per capita across states but why not compare the leaving rate per capita across states? Then, people in New Jersey could decide whether they are concerned with having similar or different rates compared to states with other policies.

“War Over Hollywood Sign Pits Wealthy Residents Against Urinating Tourists”

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GPS hasn’t just altered the lives of LA residents living on formerly quiet streets near the freeways – now, neighbors of the famous Hollywood sign have convinced Google and Garmin to remove their street off their maps due to an influx of visitors.

Everyone involved agrees that the situation has become a powder keg. “Neighbors have been yelling,” says Tamer Riad of Rockin’ Hollywood Tours. Homeowner Heather Hamza, whose husband, Karim, runs a diving company servicing film productions, claims she’s experienced “aggressive” tourists “cursing and spitting at me.” She adds that, after the recent holiday period, “There is rising, palpable tension between the residents and visitors. Everybody is infuriated. I shudder to think if any of these people coming up here have weapons in their cars. One of these days someone will get shot — it is that bad.“…

A sign originally erected to advertise a neighborhood to the world has become that neighborhood’s deepest frustration, and affluent residents have been fighting back. Although several thousand houses lie in Beachwood Canyon and neighborhoods adjoining the nearby Lake Hollywood Reservoir, most of the clamor comes from a few dozen activists in the area. They have lassoed various government and commercial entities into doing their bidding. They’ve persuaded Google, Garmin and other tech giants to literally take their exclusive neighborhood, where the average home costs $1.5 million, off the map for people searching for the sign. They’ve pushed City Hall to enact strict new parking regulations and to go after tour-bus operators. They’re fighting for the closure of a trailhead gate to Griffith Park and the removal of one popular viewing spot. And they’re not done.

Some residents say that a key element in winning the hearts and minds of city officials is a 30-minute advocacy film that, according to its producer, former actress and onetime Hollywoodland Homeowners Association president Sarajane Schwartz, required “thousands of hours” of collective labor and the expertise of “professional editors who live in the neighborhood and donated their time.” The wry narrative includes an overlaying of Stravinsky’s The Rite of Spring as doofusy tourists ride Segways, light up in hazardous areas and take nude pictures or pose with liquor bottles. THR was offered a rare screening of the closely guarded documentary: “We thought it would attract more people [if posted online] because it would just tell people where to go,” says Schwartz. “And we didn’t want it to end up on The Tonight Show — you know, making fun of us.”…

“There’s this privatization of public spaces in L.A., where people who are affluent expect to be insulated from the public,” says urban design professor Jenny Price, a visiting lecturer at Princeton and veteran of the Southern California coastal-access wars (she created the popular Our Malibu Beaches app, to David Geffen’s chagrin). “But the scandal here isn’t the wealthy homeowners. It’s the city’s complicity. Not just in getting permitted parking but in intentionally disseminating misinformation about a park they own. That’s the scandal.”

A fascinating story that raises important questions for cities: who gets to control access to public spaces? The sign is on public land (Griffith Park), streets are for the public, and yet wealthier residents want to control access and even knowledge disseminated on maps.

The article suggests the city needs a coherent plan:

Absent amid all the long-shot concepts are coherent, actionable steps to oversee access and shape tourism around a landmark. The city never has moved forward with clear plans to build a visitor center, properly control parking, manage trail access, strictly enforce rules (about smoking and alcohol, for instance) and inform visitors how to interact with the sign in a way that is satisfying and sensitive to residents. Imagine this type of chaos at the Statue of Liberty or Mount Rushmore (both are managed by the National Park Service).

Sounds like there is work to do to divert visitors, particularly if the city wants to respond to the wealthier residents while also keeping areas near the sign public (a visitor center just means people won’t really need to get that close).

$1 million plus homes continue to sell well

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The top end of the real estate market is still going strong:

Across the map, the strongest growth in the residential real estate market lately is in high-end homes, according to the National Association of Realtors. In October, sales of homes at $1 million and above surged by 16.2 percent from the year before, while overall sales of homes were up by just 4.7 percent, the trade group said…

In the Chicago area, home sales in the million-and-up category were up 8 percent from January through September, with a median price (in that bracket) of $1.35 million, according to Re/Max Northern Illinois.

In Manatee and Sarasota counties in Florida (one of the leaders of the Bubble Country pack during the boom), 485 homes in the $1 million-plus category sold from January to the end of November, according to the Bradenton Herald…

His theory, apparently, is that the surging Dow has inspired confidence in average investors and has made them comfortable about putting their (other) money in real estate again, given that their savings are growing only incrementally within traditional investments.

The wealthy are still doing well in the real estate market while the rest of the market is still sluggish. How long can this trend last? In other words, could the top end of the market do well for years or longer while the bottom and middle struggle along?

McMansions in the Kurdish capital in northern Iraq

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McMansions pop up all over the world, including in new developments in Erbil, Iraq:

Imagine this: Marble courtyards, lush palm trees and exclusive gated communities a drive away from ISIS aggression. Malibu has come to Iraq.

A robust real estate market has made Erbil, the Kurdish capital in northern Iraq, home to the country’s wealthy elite and the site of their palatial mansions.

Iraqi and Kurdish millionaires, politicians, oil tycoons and wealthy Iraqi refugees have flocked to Kurdistan, according to Shwan Zulal, managing director of Carduchi Consulting, a firm based in London and Erbil…

A broken banking industry and lack of faith in Iraq’s government have forced the country’s rich to find other places to put their money…

The increased demand for luxury homes like the ones in Erbil are attributed to several factors, including an increase in oil money, a sense of security from terrorist threats and an increase in the size of an Iraqi middle class…

Meanwhile, ISIS hasn’t scared off investors or homeowners, Zulal said, adding that buyers have been assured protection by the U.S.-led coalition.

Several quick thoughts:

1. Such mainstream media stories about McMansions in foreign lands interestingly don’t often contain much commentary about American-style large houses in other places. Perhaps the goal is to simply show that American housing styles are used around the world? While the term McMansion is generally negative, the news stories are often pretty neutral.

2. It is hard to tell the motivations behind the construction of these McMansions. For American McMansions, critics suggest people want to show off their wealth and live private lives in their big homes. This may be the case in Iraq as well though a limited financial industry changes things a bit. Are wealthier Kurds also all about aspirational homes that attempt to impress others?

3. I assume the last line quoted above means that the coalition is protecting a larger area of land beyond just these developments of McMansions. However, I could imagine some odd futuristic book or movie that involves American troops or security groups defending outposts of American McMansions throughout the world, perhaps as the last vestiges of a crumbled American empire.

Is the Biltmore Estate “the original McMansion”? No

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One TripAdvisor reviewer suggests the Biltmore Estate in Asheville, North Caroline was “the original McMansion”:

At first we were a little surprised at the price of admission but after all was said and done, definitely worth it. It is really an all day project. The tour through the house itself is kind of a slow line through but you do get to see a significant portion of the house, actually you see rooms on all 4 floors. It took us about 90 minutes to go through. Then there are the gardens which are very extensive. There were other tours one could take like a ‘behind the scenes tour’ which seemed really interesting but alas we had run out of time. Our lunch at the Stable Cafe was superb. At the height of the lunch rush we had a 45 minute wait so we went off to some of the nearer gardens for a half hour or so. The setting is literally what used to be the stable and the old horse stalls are booths now. The rotisserie chicken that I ordered is about the best chicken I can ever remember. Juicy, flavorful, cooked to perfection. Sometimes simple is best. And served quickly no less. We commented on that to the waiter who said, We know you have better things to do.

Visited October 2014

From all accounts, this sounds like a flashy and impressive house. Here is the opening description from Wikipedia:

Biltmore Estate is a large private estate and tourist attraction in Asheville, North Carolina. Biltmore House, the main house on the estate, is a Châteauesque-styled mansion built by George Washington Vanderbilt II between 1889 and 1895 and is the largest privately owned house in the United States, at 178,926 square feet (16,622.8 m2) of floor space (135,280 square feet (12,568 m2) of living area) and featuring 250 rooms. Still owned by one of Vanderbilt’s descendants, it stands today as one of the most prominent remaining examples of the Gilded Age, and of significant gardens in the jardin à la française and English Landscape garden styles in the United States. In 2007, it was ranked eighth in America’s Favorite Architecture by the American Institute of Architects.

This sounds like a classic case of (1) an anachronistic application of the term McMansion as well as (2) an instance where this is clearly a mansion. When it was built or today, the home is simply large – McMansions are often roughly 3,000 to 8,000 square feet and this home has 135,000 square feet of living space – and this wasn’t just some new money but real big money from the Vanderbilt family.

Perhaps the home’s most McMansion like feature is its borrowing of architectural styles with French and English gardens alongside French architecture. Here is Wikipedia’s brief description of the estate’s architecture:

Vanderbilt’s idea was to replicate the working estates of Europe. He commissioned prominent New York architect Richard Morris Hunt, who had previously designed houses for various Vanderbilt family members, to design the house in the Châteauesque style, using several Loire Valley French Renaissance architecture chateaux, including the Chateau de Blois, as models. The estate included its own village, today named Biltmore Village, and a church, today known as the Cathedral of All Souls.

Vanderbilt borrowed the imposing and monied architecture of Europe to convey similar ideas in the United States. Yet, over a century later, the home’s architecture is celebrated.

My conclusion? The Biltmore Estate is nowhere close to being a McMansion.

Luxury building boom continues in New York City

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The housing market may still be somewhat sluggish throughout the country but the luxury market continues to grow in NYC:

New York City developers will spend 60 percent more on new homes this year, while adding only 22 percent more units, a sign of the market’s tilt toward luxury condominiums, the New York Building Congress said.

Spending on new housing will reach $10.9 billion, the most in records dating to 1995 and $4.1 billion more than last year’s total, the trade group said in a report released today. The number of homes that money will build is 22,500, up from 18,400 in 2013.

A record wave of ultra-luxury condo projects planned or under construction in Manhattan accounts for the “wide disparity” between costs and unit production, said Frank Sciame, chairman of the New York Building Foundation, the trade group’s philanthropic arm…

Even as construction spending increases, the number of homes produced still falls far short of the 30,000-plus built annually from 2005 to 2008, the building congress said. In 2008, the city gained 33,200 units at a cost of $5.9 billion.

This echoes the larger housing market in the United States: while the market for cheaper or more affordable homes is slow, the luxury market still has plenty of builders and buyers. And we are talking about New York City, one of the places to be for the wealthy and influential.

The article also hints that New York Mayor Bill de Blasio promised lots of affordable housing in the next ten years. Having more luxury condos doesn’t necessarily preclude also building cheaper units but the statistics above suggest overall building is down. What big-city mayor could truly turn down or fight luxury projects? Cities desperately need such money even as they need to find ways to help promote housing for more average residents.

Chinese homebuyers flood LA suburb with big homes

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Bloomberg examines an influx of large-home purchases by Chinese buyers in Arcadia, California:

A year ago the property would have gone for $1.3 million, but Arcadia is booming. Residents have become used to postcards offering immediate, all-cash deals for their property and watching as 8,000-square-foot homes go up next door to their modest split levels. For buyers from mainland China, Arcadia offers excellent schools, large lots with lenient building codes, and a place to park their money beyond the reach of the Chinese government.

The city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions. The deals happen fast and are rarely listed publicly. Often, the first indication that a megahouse is coming next door is when the lawn turns brown. That means the neighbor has stopped watering and green construction netting is about to go up.

This flood of money, arriving from China despite strict currency controls, has helped the city build a $20 million high school performing arts center and the local Mercedes dealership expand. “Thank God for them coming over here,” says Peggy Fong Chen, a broker in Arcadia for many years. “They saved our recession.” The new residents are from China’s rising millionaire class—entrepreneurs who’ve made fortunes building railroads in Tibet, converting bioenergy in Beijing, and developing real estate in Chongqing. One co-owner of a $6.5 million house is a 19-year-old college student, the daughter of the chief executive of a company the state controls.

Arcadia is a concentrated version of what’s happening across the U.S. The Hurun Report, a magazine in Shanghai about China’s wealthy elite, estimates that almost two-thirds of the country’s millionaires have already emigrated or plan to do so. They’re scooping up homes from Seattle to New York, buying luxury goods on Fifth Avenue, and paying full freight to send their kids to U.S. colleges. Chinese nationals hold roughly $660 billion in personal wealth offshore, according to Boston Consulting Group, and the National Association of Realtors says $22 billion of that was spent in the past year acquiring U.S. homes. Arcadia has become a hotbed of the buying binge in the past several years, and long-standing residents are torn—giddy at the rising property values but worried about how they’re transforming their town. And they’re increasingly nervous about what would happen to the local economy if the deluge of Chinese cash were to end.

Interesting look at how this affects one particular community. It seems to bring together several issues that might trouble the average American suburbanite:

1. An influx of immigrants. This is happening across the suburbs as many new immigrants move directly to the suburbs. At the same time, there are a number of ethnoburbs in the LA region so this is not unknown.

2. An influx of immigrants from China. The United States has an interesting current relationship with China and Americans didn’t treat Chinese immigrants well in early California. A large group of wealthy foreigners from a country with a huge economy and shadowy government might make some nervous.

3. This big money means older homes are being torn down and replaced with big houses. A large number of teardowns in an established community tends to attract attention as the homes can change the character of neighborhoods as well as raise prices (though this is also presented positively in this story as long-time residents can cash out).

All together, this rapid change will be worth watching.