As most people continue to batten down the financial hatches, an elite group of the world’s “stateless super-rich” is blossoming, and transcending geographical boundaries to purchase properties in major cities across the globe.
With no strong ties to specific countries, these individuals lead nomadic, season-driven lives. Their choice of where to live at any one time is based on that location’s climate, their children’s education, tax constraints or which of their friends they want to lunch with on any particular day.
“The more money you have, the more rootless you become because everything is possible,” says Jeremy Davidson, a property consultant who specialises in properties that cost £10m or more in the most sought-after postcodes in London.
“I have clients who wake up in the morning and say, ‘Let’s go to Venice for lunch.’ If you’ve got that sort of money the world becomes a very small place. They tend to have a diminished sense of place, of where their roots are,” he says.
This increasingly global lifestyle has led to the stateless super-rich buying a larger portion of the world’s most expensive homes as they look to park their wealth in perceived havens. On average they own four to five properties, usually consisting of two in their country of principal residence, one in a “global city” such as London, Paris or New York, and a holiday home in a hot climate – or one in the Alps.
Exclusive research for the Financial Times by Knight Frank shows that foreign buyers now dominate sales of “super-prime” homes – typically defined as the top 5 per cent of the most valuable properties – in the world’s major cities.
“I am not surprised that these top-end markets are so international in terms of their buyers, the reality is the super-rich who buy these properties live increasingly global lifestyles,” says Liam Bailey, head of research at Knight Frank. “The super-prime market wouldn’t exist without a global market – it only really got going in the past 15 to 20 years as Russian money poured into London and Monaco.”
This has led to many countries’ super-prime property markets being increasingly dominated by international buyers, turning some cities into playgrounds for the wealthy. The international rich have long-favoured Monaco – confirmed by figures showing 100 per cent of its super-prime property is sold to international buyers – but this demographic now buys as much as 95 per cent of the expensive homes in Paris, and 85 per cent in London.
While these individuals have seen their property investments pay off as high-end housing markets around the world have soared on the back of this strong demand in recent years, it has also resulted in a number of knock-on social consequences for the domestic populations of these emerging global cities.
David Adam of Global Cities, a consultancy that works to improve cities’ success in international markets, acknowledges that the globalisation of cities can have an impact on their resources.
“Cosmopolitanism begins in cities but the challenge for many places will be to ensure that national citizenship enjoys the benefits of this international experience and the local economies are not left behind,” he says.
The most obvious impact in many global cities has been to change the visual order of these cities, especially in well-to-do and desirable areas.
Saskia Sassen, a US sociologist at New York’s Columbia University and author of Cities in a World Economy (Sage), says this often comes with a change in the scale and appearance of homes. “Even very good architects manage to generate a style that is not usually much admired by engaged residents and passersby, whether the poor aficionado urban historian, old wealth, or anti-gentrification activists,” says Sassen.
Another social impact, perhaps more difficult to measure, is the dilution of what is referred to as the “civic” quality of an area, explains Sassen. “It can feel less like a neighbourhood and more like a corporate district in the low density of street life,” she says.
The problem is that these super-prime areas have a high proportion of second, third, or fourth homes that are left vacant for periods of the year as their owners move from one exclusive destination to another. These individuals will spend a few months in St Moritz, before moving to their trophy mansion in London, and then on to their luxury villa in Sardinia for the summer months.
Critics argue that these buyers aggravate the housing shortages prevalent in these cities while spending less in the local economy than permanent residents. Sassen says in some extreme cases poorer local residents can start to develop a sense of distance from their city.
“In my research I found that in several cities across the world, locals – often high-income and old rich locals – did not mince their words when saying that all of this was a loss to their neighbourhood and city,” Sassen says. “This was especially the case in places where the impacts of this rebuilding of vast stretches of their cities were the most negative, for instance, raising local prices, pricing out locals and not paying taxes on income or on the neighbourhoods’ or cities’ real estate.”
The gentrification of areas tends to drive out services for the local people who need them, explains Rohit Talwar, chief executive at Fast Future, a research company that analyses future trends. “Councils argue that they are justified in getting rid of services such as post offices and pubs because the people who would have needed them have sold up and moved away.”
There is also a lack of integration between the incoming stateless super-rich and the communities into which they are buying. “Some foreign nationals will come to London or New York because other wealthy individuals from overseas are buying there, but they are not interested in getting to know the local community in those cities. They also tend to bring their own domestic staff with them,” says Talwar.
Davidson agrees. “The super-rich will often lead their lives quite in isolation. They are not going to be greeting fellow parents at the school gate as they don’t do the school run as the kids will be dropped off by a chauffeur in a bullet-proof Range Rover.”
The combination of these issues, along with a move towards protectionism by governments, has meant a backlash in some global cities is emerging against foreign ownership. Even those that define themselves as “global cities” are becoming increasingly intolerant of super-rich incomers. In Hong Kong, there are growing grumbles from the indigenous Cantonese about the influx of mainland Chinese buyers.
“The flow of new wealth from these countries is arriving in austerity-soaked UK, US and France,” says Bailey. “There is a reaction politically in the recipient countries – note mansion tax arguments in the UK, new ban on second homes in Switzerland and arguments over tax rates for ‘the 1 per cent’ in the US.”
Some countries have gone even further to curb the influx. Singapore has introduced a 10 per cent additional buyer’s stamp duty to all foreign purchases in Singapore, while in March the Swiss public supported a referendum for a 20 per cent limit of second homes. This was largely aimed at countering “cold beds” – second homes in resorts occupied in peak periods but empty otherwise – and providing affordable housing for locals.
China has introduced a raft of measures including property taxes and credit quota limits. Dr Yang Liang Chua, head of research for south-east Asia at Jones Lang LaSalle, says the concern over the potential destabilising impact of money coming from wealthy buyers from the US and Europe has been one of the triggers for Singapore’s preemptive measures.
Commentators say it is hard to know what further impact this dominance of the international rich will have in the coming years, but many believe some cities have already lost the strong “community feel” and public-spiritedness they once had as more and more properties are owned by people with multiple homes worldwide.
Tanya Powley is the FT’s mortgage and property reporter; Lucy Warwick-Ching is the FT’s online Money editor