There’s an easy way to identify the cities with the big real estate bubbles. Just find out where the richest citizens live!
Back in late 2016, writer Peter Reegh put together a list of the 15 cities based on population of the wealthiest citizens, which was published on therichest.com. These same 15 cities remain at the top of this list today (only now more inflated than a year ago), allowing us to immediately know what areas to avoid.
And, once real estate prices have crashed, which I expect they will begin to do sooner rather than later, we’ll have a list of 15 places to find bargain properties!
Here they are, from the “poorest” of the rich to the richest…
15. Istanbul
Not everyone would have guessed this, but it’s the most classic and beautiful city on the strategic cusp of Europe and the Middle East. And, at last count, it’s home to 24 billionaires, which is more than what Tokyo or Seoul has.
14. Tokyo
Tokyo is the perfect example of what happens when a major bubble bursts. The richest people lose the most because they dominate the bubbly financial assets from real estate to stocks. Tokyo’s massive wealth decline shows the downside risk of these richest and most expensive cities.
At its height in 1989, Tokyo would have taken first or second place on this list. It’s only at #14 now, with just 18 billionaires calling it home.
13. Chicago
Chicago is the third-largest city in the U.S., and it’s the financial capital for the commodity markets and the Midwest, so it’s not surprising that it’s on this list.
12. Paris
Perhaps the most classic city in Europe, Paris has bubbly real estate prices to match. It is home to 22 billionaires, less than half that of London. But, then again, London is the financial capital of Europe!
11. Seoul
Seoul is more beautiful and sophisticated than I expected, and it’s home to 30 billionaires.
10. Mumbai
The leading-edge and largest city in India, Mumbai is the country’s financial hub and home to Bollywood. It has 30 billionaires, 60% as many as Beijing. Not bad for a country with less than half the average incomes of China.
It’s also the location of a 27-story, billion-dollar home right downtown.
9. Boston
Boston’s presence on this list is unsurprising. After all, it’s home to very strong finance and healthcare companies.
8. Washington, D.C.
Also, not a stunner, Washington, D.C., is the government center of the U.S., just like Beijing is to China.
7. Beijing
Beijing is the richest city in mainland China, with 50 billionaires. As expected, it’s one of the most overvalued cities in China after Hong Kong.
6. Moscow
This was a bit of a surprise, but it attests to how much wealth and power the 10,000 oligarchs in Russia (and Putin) have amassed.
5. Los Angeles
Compared to New York’s 1 million wealthy, Los Angeles only has 350,000 rich people. But its total wealth is estimated at $1.3 trillion, which is more than what San Francisco boasts. But, then again, San Francisco is more overvalued, as its overall ranking suggests.
4. London
London has the third-highest number of billionaires, 50 of them, and is a magnet for Middle Eastern and Russian investors.
3. San Francisco
There may not be as many billionaires in The City by the Bay as L.A. – just 23 – and it has only $1 trillion in wealth, but San Francisco is the second-bubbliest city in the U.S. compared to average or median incomes.
2. Hong Kong
The Jewel of the Orient has the second-greatest number of billionaires – 60 of them. And its real estate bubble is even greater than New York’s when compared to average or median incomes. It has the highest price-to-income ratios in the world today.
In Hong Kong the rich drive up the cost of living more than anywhere else for the everyday person. And, yes, it is now offering 61-square-foot “closet” condos to compensate.
1. New York
The Big Apple is home to 1 million wealthy citizens and 80 billionaires, dwarfing any other city. It has a total estimated wealth of $3.5 trillion.
The overvaluation in these top global cities is roughly in the order of this ranking. I have been warning rich people in these cities that these paragons of wealth will fall the hardest, and that would include Silicon Valley.
Yet almost all I talk to think that because these cities are so attractive and have such rich citizens, they can’t fall even a little…
History says the exact opposite.
During the Great Depression, Manhattan, then also the #1 “city,” fell the most of any and took the longest to recover by far.
My advice in these uber-cities: RENT, DON’T OWN!
The content of our articles is based on what we’ve learned as financial journalists. We do not offer personalized investment advice: you should not base investment decisions solely on what you read here. It’s your money and your responsibility. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments such as futures, options, and currency trading carry large potential rewards but also large potential risk. Don’t trade in these markets with money you can’t afford to lose. Delray Publishing LLC expressly forbids its writers from having a financial interest in their own securities or commodities recommendations to readers.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar influenced by the hawkish market sentiment surrounding the Federal Reserve and expectations of prolonged higher interest rates.
GBP/USD: The first downside target is seen at the 1.2600–1.2605 zone
GBP/USD trades on a weaker note around 1.2620 during the early European session on Friday. The decline of Pound Sterling is backed by the growing speculation that the Bank of England will begin the rate-cut cycle this year.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.