In this oligarchic era, dominated as never before in modern history by the ultra-rich, their movements are far more than grist for gossip columns. They are critical to the health of city economies around the world.
A recent study by the consultancy New World Wealth traces this movement globally, identifying the big winners and losers in millionaire migration. It defines millionaires as those with net assets of at least $1 million outside their personal residence – generally, people with sizable investment capital or their own businesses.
Among the countries that saw the largest outflows in 2015 are two where property rights are not the most secure: Russia and China. China ranks second in net outflows (-9,000) and Russia sixth (-2,000).
Another big factor: public safety. France lost an estimated 10,000 net affluents last year, many of them after the terrorist attacks, the largest outflow of any country, according to New World Wealth. Other big losers were struggling economies, including hard-hit Italy and Greece. In fourth place is India, a country that has exported its wealthy around the world for generations.
The country that was the biggest landing pad for the wealthy last year was Australia, gaining a net 8,000 millionaires. The country is popular most notably with Chinese investors as well as those from other Asian countries. In second place was the United States (7,000), followed by Canada (5,000) and, surprisingly, Israel (4,000). The United Arab Emirates (3,000) and New Zealand (2,000) round out the top six.
Favorite Cities Of The Affluent
Zooming in to the city level, the flows are a bit more surprising. The biggest winners are not the elite global cities, like New York or London, but ones that are comfortable, and boast pretty settings and world-class amenities. The leading millionaire magnets in 2015 were Sydney and Melbourne, gaining 4,000 and 3,000 millionaires, respectively, many from China. In third place is Tel Aviv, a burgeoning high-tech center which is attracting Jews fleeing Europe, notably from France.
Dubai ranks fourth, luring many Middle Easterners seeking a safer, cleaner business locale. Then comes a series of some of the most attractive cities on the planet, including Seattle (seventh) and Perth (eighth). In many cases these cities are gaining from “flight capital” from Asia and the Middle East.
London, long considered a primary haven for the mobile rich, actually lost a net 500 millionaires in 2015. Many, according to the study, are moving to other parts of the United Kingdom, often the countryside, or to other English-speaking countries.
But the biggest losers by far were declining first-world cities, many of which have never fully recovered from the 2007 financial crisis. These include Paris, which saw a net outflow of 7,000 millionaires, the most in the world. Not surprisingly, many of the exiting Parisians are Jewish, and many are headed to Israel. There are widespread reports that more of that city’s estimated 350,000 Jews may also be considering an exit. Overall migration from France to Israel rose in 2015, with 7,469 leaving for the Jewish State, up from 6,658 in 2014 and 3,263 in 2013.
Elsewhere in Europe, Rome lost 5,000 and Athens 2,000 amid poor economic conditions and perilous fiscal situations in their countries.
Chicago lost 3,000 millionaires in 2015. Although the city continues to attract top-drawer corporate headquarters and luxury housing, the city’s economy is far from thriving, and there is growing concern about a rise in crime rates and growing racial tensions. Unlike other exiting millionaires, who often change countries, most of those leaving Chicago headed to other parts of the U.S.
Why It Matters
The movement of wealthy people matters increasingly in globalized societies, which allow money and ideas to relocate with relative ease. Investors, entrepreneurs and innovators are extraordinarily mobile by nature. They also bring with them capital, connections and tax revenues that are then lost to their former host countries and cities. There is also an employment impact. New World Wealth estimates that 30% to 40% of the millionaires they have tracked are business owners.
Keeping the rich and luring more is a priority now widely embraced by many urban developers and politicians. Former New York Mayor Michael Bloomberg has suggested that today a successful city must be primarily “a luxury product,” a place that focuses on the very wealthy whose surplus can underwrite the rest of the population. “If we can find a bunch of billionaires around the world to move here, that would be a godsend,” Bloomberg, himself a multi-billionaire, said toward the end of his final term. “Because that’s where the revenue comes to take care of everybody else.”
This reliance on the rich, notes a Citigroup study, reshapes urban economies, not always for the best. Their presence creates an urban employment structure based on “plutonomy,” an economy and society driven largely by the wealthy classes’ investment and spending. A 2014 Brookings report found that virtually all the most unequal U.S. metropolitan areas – with the exception of Atlanta and Miami — areas are luxury-oriented cities including San Francisco, Boston, Washington D.C., New York, Chicago and Los Angeles. Although the number of high-wage jobs has increased in these places, much of the new employment has been in low wage service jobs. As urban studies author Stephen J.K. Walters notes, these cities tend to develop highly bifurcated economies, divided between an elite sector and large service class. “This,” he notes, “is the opposite of [Jane] Jacobs vision of cities that as places that are “constantly transforming many poor people into middle class people.’ ”
One clear effect is on housing prices, which have shot up precisely in those places now favored by the rich. Perhaps the most obvious case is Vancouver, where the inflow of predominately Chinese investors has helped make the Canadian city among the most unaffordable in the world, with median home prices breaking the million-dollar mark.
Yet if the presence of the rich creates more inequality, their departure could also have some nasty effects. The movement for example of one billionaire — hedge fund manager David Tepper — from New Jersey to Florida could leave the Garden State with a $140 million hole just from his change of address. Overall New Jersey depends for 40 percent of its revenue of income taxes, one-third of which is paid by the top 1 percent of the population.
Such movements could become more common, as affluent people look for more relaxed and less heavily taxed communities to settle in. A 2016 study by Phoenix Marketing International found that the fastest-growing millionaire populations in the country are not in big luxury cities but smaller towns like Mount Airy, N.C.; Cookeville, Tenn.; and Kalispell and Bozeman, Mont.
Despite this year’s campaign rhetoric, the influence of affluent migration is likely to become greater in the years ahead. The number of American households with assets of $1 million or more, not including their primary residence, increased 3 percent last year to 10.4 million, according to Spectrem Group, a market research and consulting firm. Meanwhile, the number of American households worth $25 million or more has grown 73 percent since 2008, compared with growth of 54 percent for millionaire households.
For communities around the world the choice is increasingly a Hobbesian one. Attract more of the wealthy to town, and see housing prices soar beyond the reach of the middle class, or push the rich away, and live with the likely loss of jobs, tax revenues and businesses. In a world dominated by oligarchy, these are the realities which countries and cities now have to confront.
This piece first appeared in Forbes.
Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.
Sydney photo by Christopher Schoenbohm.