Where are the Ultra-Rich Buying Luxury Homes?
Ranking the world’s best cities for luxury
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Whether it’s a 10,000 sq. ft mansion in Bel Air, or a classy penthouse in Monaco with a harbor view, the buyers of top-end real estate tend to be very particular.
In fact, the most robust markets for luxury real estate can be found concentrated in only a few world-class cities like Hong Kong, London, or New York, or in luxury destinations like Cannes or The Hamptons. These are all timeless locations that have the amenities and activities to appeal to large amounts of high net worth individuals.
But at the same time, what is trending at any given time is a lot less predictable. Only so many homes change hands every year, and they do so based on global macroeconomic trends, the political environment, changing tastes, speculation, and shifts at a local level.
In the luxury home market, one year’s boom is another year’s bust – it just depends on who is buying and selling, and why.
Price Disparity for Luxury
As with all real estate, pricing is not uniform across the board.
In the city-state of Monaco, it costs $5,420 per square foot for top-end real estate. Interestingly, the same space can be bought for a fraction of the cost for only $1,068 in Los Angeles or $831 in Hawaii (Kauai).
This is yet another factor to consider in where the rich are buying. Is it worth it to go a bit over the top and buy a house on The Peak in Hong Kong, or will a mansion in Singapore suffice at a 84% discount?
Timeless vs. Hot Markets
In a 2017 whitepaper from Christie’s International Real Estate, markets are ranked based on two ideas: the Luxury Index and the Luxury Thermometer.
The former rates timeless markets, like New York and Hong Kong, which tend to have the most luxury sales overall. The latter does so based on what’s “hot” and trending upwards in a given year. These may not necessarily be the biggest markets, but they are ones that are getting an influx of new activity and interest from buyers.
The Luxury Index
|2016 Rank||City||Change from prev. year|
In the aftermath of Brexit, Christie’s noted that sales in London of $1 million+ primary homes declined by -35% in 2016. It’s no surprise then, that Hong Kong has displaced London as the top city for prime real estate sales according to the index.
The Luxury Thermometer
|2016 Rank||City||Change from prev. year|
The Canadian market continues to be madness, with luxury sales up 83%.
We previously documented Vancouver’s real estate mania, but the city has since implemented a 15% tax on overseas buyers. As a result, these buyers are turning increasingly towards nearby Victoria, BC, Canada, the #2 ranked city on the Luxury Thermometer in 2016.
How Decentralized Finance Could Make Investing More Accessible
Under the current global financial system, billions of people do not have access to quality assets. Here’s how decentralized finance is changing that.
Infographic: How Decentralized Finance Could Make Investing More Accessible
Did you know that a majority of the global population doesn’t have access to quality financial assets?
In advanced economies, we are lucky to have simple options to grow and protect our wealth. Banks are all over the place, markets are robust, and we can invest our money into assets like stocks or bonds at the drop of a hat.
In the United States, roughly 52% of people are invested in the stock market – but in a place like India, for example, this portion drops to a paltry 2%. How can we make it possible for people on the “outside” of the financial system to gain access?
Breaking Down Barriers
Today’s infographic comes to us from Abra, and it shows how decentralized finance could make investing a more universal phenomenon, especially for those that don’t have access to the modern financial system.
It lays out four key obstacles that prevent people in developing markets from investing in quality financial assets in the first place:
- The Geographic Lottery
Where you live plays a massive role in determining your ability to build wealth. In advanced Western economies, the average person is much more likely to be invested in financial markets that can help compound wealth.
- Financial Literacy and Complexity
Roughly 3.5 billion adults globally lack an understanding of basic financial concepts, which creates an impenetrable barrier to investing.
- Local Market Turmoil
Even if a person is mentally prepared to invest, local market turmoil (hyperinflation, political crises, closed borders, etc.) can make it difficult to get access to stable assets.
- The Cost of Investing in Foreign Markets
Foreign assets can be pricey. One share of Amazon is $1,800, which is realistically more money than many people around the world can afford.
In other words, there are billions of people globally that can’t take advantage of some of the most effective wealth-building tactics.
This is just one flaw in the current financial system, a paradigm that has created massive amounts of wealth but only for a specific and well-connected group of people.
Enter Decentralized Finance
Could decentralized finance be the alternative to open up access to financial markets?
By combining apps with blockchain technology – specifically through public blockchains such as Bitcoin or Ethereum – decentralized finance makes it possible to get around some of the barriers that are created by more traditional systems.
Here are some of the innovations that are making this possible:
Smart contracts could automate transactions and remove intermediaries, making investing cheaper, faster, and more accessible.
Fractional investing could allow partial or shared ownership of financial assets by using tokenization. This would make expensive stocks like Amazon ($1,800 per share) available to a much wider segment of the population.
Location independent investing is possible through smartphones. This would make it possible for people in remote parts of the developing world to invest, even without access to nearby financial institutions or local markets.
Like the internet with knowledge, decentralized finance could reshape the world by making financial access universal. Who’s ready?
How Macro Trends Shape the Market’s Future
From climate change to aging populations, macro trends are changing the future. Here’s how to use them to your advantage.
It’s hard to say for certain what the future holds.
Without the luxury of a crystal ball, investors must find opportunities by analyzing the market. There’s just one problem: the 24/7 news cycle is enough to make anyone’s head spin.
Where should an investor focus their attention, when almost every new venture is forecast to be the next big thing?
The Powerful Influence of Macro Trends
Today’s infographic comes to us from U.S. Global Investors, and it highlights how analyzing macro trends can serve as a key investment tool.
Two Main Investment Approaches
When selecting stocks, many investors fall into one of two camps:
1. Top-down Investing
- Analyze macroeconomic trends.
- Identify specific sectors and regions.
- Choose individual stocks based on company fundamentals.
Considering the aging Chinese population, a top-down investor may choose to invest in Chinese healthcare stocks.
2. Bottom-up Investing
- Complete in-depth company analyses.
- Select a stock that is outperforming others in its sector.
A bottom-up investor could analyze Home Depot and choose to invest if it had strong performance relative to Lowe’s.
These approaches can be used separately, or even combined together. Zooming out allows investors to identify the big picture opportunities. Then, a bottom-up approach can find the companies that best capitalize on each trend.
What is a Macro Trend?
A macro trend is a long-term directional shift that affects a large population, often on a global scale. For example, climate change is affecting industries in both positive and negative ways. While “green” industries have seen increased support, ski resorts are projected to have 50% shorter winter seasons by 2050.
There are a couple of main ways to identify macro trends:
- Government policy
Government policies are a precursor to change, shaping macro trends and creating opportunities. For instance, Obama’s Recovery Act fueled growth in renewable energy with a $90 billion investment.
- Economic cycles
The cyclical nature of the economy means that investors can also use history to identify macro trends. Consider fiscal and monetary policy, which is implemented in response to economic data:
- Expanding economy
The central bank raises rates and the government reduces fiscal stimulus. As a result, inflation is moderated.
- Contracting economy
The central bank lowers rates and the government increases fiscal stimulus. As a result, growth is stimulated.
- Expanding economy
Discovering Long-Term Value
Macro trends are a key tool for discovering long-term market opportunities. They are beneficial because they are:
- Unbiased and data-driven
- Not swayed by daily headlines
- Tend to avoid riskier, niche industries
- Can be diversified by sectors and regions
There are currently many macro trends at play. For example, Trump’s sweeping tax reform and deregulation boosted the U.S. economy, lifting GDP growth to a 13-year high of over 3% in 2018 Q3.
However, not everyone’s a winner. America’s reduced taxes have made Canada less competitive. It’s estimated that 4.9% of Canada’s GDP is at risk due to ripple effects from U.S. tax reform. What’s more, regulators worry that the bank deregulations might put the financial system at risk.
The proposals under consideration… weaken the buffers that are core to the resilience of our system.
— Lael Brainard, Member of the Board of Governors of the Federal Reserve
So, how do investors distill this wealth of information into a future of wealth?
Spotting the Next Wave
In today’s hyper-connected world, it’s easy to get lost in data overload. Thinking big picture allows investors to focus on trends that:
- Have a long-term outlook
- Affect a large population
- Create a clearer vision of the future
Then, an investor can target the most promising regions and sectors. When used effectively, this approach enables investors to ride the next big wave that will shape markets.
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