Europe’s wealthy are falling behind – London just dropped out of the top 10 cities for very high net worth individuals

london street
London.

  • A new report looks at where the very high net worth – between $5 million to $30 million – live.
  • London fell out of Wealth-X’s top 10 ranking for the first time dating back to 2004.
  • The US dominated the ranking, with seven cities in the top 10 including the top spot – New York.
  • See more stories on Insider’s business page.

London is no longer a top-10 hub for very high net worth (VHNW) individuals.

In fact, the city’s share of VHNW individuals dropped by 16% in 2020, according to a Wealth-X’s second edition of the Very High Net Worth Handbook, which classifies VHNWs as having net worth between $5 million and $30 million.

London was knocked out of eighth place to 12th – the first time that London has been out of the top 10 since Wealth-X records dating back to 2004.

The report cites a few different factors for London’s fall down the ranks, including damages from Brexit, general pandemic economic conditions, and “poorly performing” equity markets. All was compounded by much stronger showings for the VHNW in the US and Asia.

As Insider’s Harry Robertson reported, the UK’s economy shrank by 9.9% in 2020 – the worst contraction on record as the UK fared the worst of the G7. The UK has also been particularly hard hit by the virus.

“The third major wealth region of Europe significantly underperformed its global peers, with the VHNW population declining by 7% to 623,880 individuals,” the report said.

Meanwhile, New York remained in first place, showing that a different story was unraveling across the pond. In fact, US cities represent the vast majority of the top 10 for the VHNW, with seven cities making the list. New York is holding fast to number one, and all of the US cities represented saw their VHNW populations grow.

The wealthiest Americans also saw substantial growth in 2020, with America’s billionaires adding $1.62 trillion to their wealth over the last 13 months.

On the whole, the VHNW population grew by 1.3%, amounting to a total of around 2.7 million. That’s a much smaller gain than prior years, but Wealth-X predicts a robust recovery and 1 million more VHNW individuals by 2025. Even still, the VHNW population’s total wealth rose by 1.2% to a total of $26.8 trillion.

On the other hand, a recent report from the Pew Research Center found 54 million people fell out of the global middle class, classified as those who earn about $14,600 to $29,200 a year, meaning they live on around $10 to $20 a day. A January report from Oxfam estimated that not only did 200 million to 500 million potentially fall into poverty in 2020 – it could also take a decade for the bottom to recover.

London’s drop on the VHNW list is another potential signal of its uncertain future as a financial hub, and as a home for the wealthy. In March, London saw drops in the Global Financial Centres Index, which ranks how competitive different finance hubs are. While it’s still the second top financial center, it fell over 10 points and barely ranks above Shanghai.

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Homeowners in Portugal are getting paid to have mortgages as negative rates spread

Aerial view of Funchal with traditional cable car above the city, in Madeira island, Portugal
A cable car in Portugal perhaps floats above some of those mortgage holders with negative rates.

  • In Portugal, mortgage holders are seeing negative rates – meaning they’re getting paid by their banks.
  • What was supposed to be a rare phenomenon has likely increased during the pandemic.
  • Meanwhile, home-buying in the US has become expensive and difficult throughout the pandemic.
  • See more stories on Insider’s business page.

How would you like to be paid to have a mortgage? Maybe you should buy a house in Portugal.

Some mortgage holders actually have negative mortgage rates – meaning their banks pay them interest. The Wall Street Journal’s Patricia Kowsmann reported on the phenomenon, which was rare pre-pandemic. Rates were originally allowed that low a few years back to help bolster the economy.

But in Portugal, mortgages are increasingly seeing negative rates, a consequence of low interest rates in general across the developed world. One consumer-rights group, Deco, told the WSJ that it estimated more than 30,000 mortgages had negative rates back in 2019, but that has more than doubled now. BPI, the bank for one of the negative mortgage holders profiled, said it has paid out over 1 million pounds in interest.

The negative rates aren’t just in Portugal; some mortgage holders in Denmark are also increasingly seeing interest. However, banks there have begun administering fees for deposits; in many instances, according to the WSJ, the fees can offset the interest that the mortgage holders are receiving.

Meanwhile, in the US, prospective buyers should be prepared to pay more than the asking price, as supply stays low and goes quickly. As Insider’s Taylor Borden wrote: “It’s actually a horrible time to buy a house.”

Yes, Borden writes, American mortgage rates are low, but prices are high, effectively pushing the American dream of homeownership out of reach. Also, as the American economy has started reopening this spring, mortgage rates have gone back above 3% again, and seem likely to keep rising.

But even for the lucky mortgage holders of Portugal, it’s not all smooth sailing. One person that the WSJ spoke to, Paula Cristina Santos, has had to halt her own plans for buying a house. One reason why: The charge from her bank to get a new mortgage is just too high – and can’t compare to her current negative rate.

Read the original article on Business Insider