Presidio Graduate School’s Macroeconomics course for Spring 2012, is authoring a series of articles. The articles on this “micro-blog” reflect reactions and thoughts on news items, economic theory, and other issues as they pertain to the concept of sustainability. Follow along here.
By Dilnaz Kain
Over the past few decades, globalization has helped create great wealth as well as great poverty. A new class of millionaires has emerged in many developing nations as well as developed nations. This fragmented millionaire demographic is referred to as the global super-rich.
A common trend among the global super-rich is to buy expensive properties across the globe. Luxury properties in desirable cities are being purchased but not occupied for lengthy periods of time. New York, a popular global destination, has many ghost neighborhoods, where absentee owners live in their homes for only a few months out of the year. The negative impacts include empty streets, isolated tenants, lowered sales tax revenue for the city, and fewer customers for local business. This creates a lack of integration between incoming homebuyers and locals. It can also reduce the number of services offered to the local population. Many of the absentee owners treat these properties as financial investments and many go as far as to simply follow the buying patterns of their peers.
Another impact to local populations is when local landlords begin raising prices to cater to the new stateless super-rich. Locals can get priced out of their own communities. Jerusalem, has seen a 20 percent rise in home prices annually since 2009. Many locals attribute this to foreigners and expatriates who own apartments and properties for short visits to Jerusalem.
Similarly, local businesses also adapt to cater to the changing demographics. London, which has had an influx of Russian oligarchs in the past 15-20 years into highly desired neighborhoods, has seen local restaurants begin catering to the new Russian clientele. This is in turn reduces the amount of goods the locals have come to expect.
Luxury apartment developers are also building to match the needs of the global citizen elite and compromising on the aesthetics and values of the local communities. Popular global cities like London, Paris, New York, Hong Kong, and Monaco continue to see this trend as more millionaires are created each year.
The current global, economic climate looks to encourage this behavior among the global super rich as the trend allows the super rich to hedge against instability in individual currencies. By buying multiple properties across the globe they are also diversifying their investments as well as creating safe havens to be used in the event of political instability.
If this trend continues then globally developers will continue to cater to a growing global elite and a super-prime real-estate market in turn leaving the rest with less.