Q3 2022: Top 20 World Cities by High Net Worth Individuals

[iheartthed]

Originally Posted by lio45

Yes. No other answer.

You might as well ask “is the cheapskate with $1.5M in a brokerage account who lives modestly actually wealthier than the guy who won $500k in the lottery and is living the high life right now?”

If you have a luxury product to sell, the latter is a better customer. But that’s not exactly the same thing as measuring wealth.

The woman with a $2 million brownstone on a fixed income is not living a luxury lifestyle. She could qualify for food stamps. More likely that the guy in suburban Detroit is living the more luxurious lifestyle.

[lio45]

Originally Posted by fleonzo

And does anyone have a US only list? Thanks in advance

1. New York, NY (345,600)

2. San Francisco Bay Area, CA (276,400)

3. Los Angeles, CA (192,400)

4. Chicago, IL (160,100)

5. Houston, TX (132,600)

[lio45]

Originally Posted by iheartthed

The woman with a $2 million brownstone on a fixed income is not living a luxury lifestyle. She could qualify for food stamps. More likely that the guy in suburban Detroit is living the more luxurious lifestyle.

And that’s EXACTLY why I brought a third person to the example, who lives a more luxurious lifestyle than both yet is unarguably the poorest of the three when we’re measuring wealth.

In order of wealth:

1. Free and clear Brownstone lady
2. Guy in suburban Detroit
3. Guy who’s spending his lottery earnings

In order of “who should you visit if your job is to sell luxury products”:

1. Guy who’s spending his lottery earnings
2. Guy in suburban Detroit
3. Brownstone lady

[Crawford]

Originally Posted by iheartthed

The woman with a $2 million brownstone on a fixed income is not living a luxury lifestyle. She could qualify for food stamps. More likely that the guy in suburban Detroit is living the more luxurious lifestyle.

I agree, but this is a separate issue from wealth.

There are plenty of people living in the Bay Area with $2 million+ homes but driving old Hondas, wearing crappy clothes and shopping Sam's Club.

There are plenty of people living in 400-500k homes in Ohio and Michigan, driving luxury vehicles and shopping for luxury consumer goods.

It's just a different allocation of resources. I'd say the scruffy Bay Area dude with the $15 jeans and the sedan with 200k miles and the $2 million Sunnyvale home is richer than the social climber with the leased BMW, the $400 shoes and the exurban OH McMansion.

[lio45]

Originally Posted by Crawford

I think both sources of wealth should be treated the same.

Yeah, there are costs/barriers to selling a home, but there are also costs to cashing out a brokerage account. Generally speaking, if you have (say) $1 million sitting in a Vanguard account, it would be very costly to just liquidate the whole thing at once. You'd have a giant tax burden.

Selling a $1 million house (and not buying a new one) is probably a bit easier, bc there's no tax on the sale for a married couple for up to 500k of profit. Most homeowners would probably get away with paying nothing.

Wasn’t sure how capital gains on primary residences are treated in the US, but you just explained why Canadian real estate is super boosted: one’s primary residence here is an untaxed asset class upon selling, without limit.

[iheartthed]

Originally Posted by lio45

And that’s EXACTLY why I brought a third person to the example, who lives a more luxurious lifestyle than both yet is unarguably the poorest of the three when we’re measuring wealth.

In order of wealth:

1. Free and clear Brownstone lady
2. Guy in suburban Detroit
3. Guy who’s spending his lottery earnings

In order of “who should you visit if your job is to sell luxury products”:

1. Guy who’s spending his lottery earnings
2. Guy in suburban Detroit
3. Brownstone lady

But that third example doesn't actually break the reasoning for not including primary residence in calculation of "wealth" (distinct from calculation of "net worth"). Whether he lives modestly or not, the person with the brokerage account has more financial flexibility than the other two people. The lottery winner has more flexibility than the house rich retiree.

[lio45]

Originally Posted by Crawford

I agree, but this is a separate issue from wealth.

There are plenty of people living in the Bay Area with $2 million+ homes but driving old Hondas, wearing crappy clothes and shopping Sam's Club.

There are plenty of people living in 400-500k homes in Ohio and Michigan, driving luxury vehicles and shopping for luxury consumer goods.

It's just a different allocation of resources. I'd say the scruffy Bay Area dude with the $15 jeans and the sedan with 200k miles and the $2 million Sunnyvale home is richer than the social climber with the leased BMW, the $400 shoes and the exurban OH McMansion.

Exactly. And it’s not even “I’d say…” You don’t get to decide, it’s basic math. $2M > $1.5M, period.

[Investing In Chicago]

Originally Posted by iheartthed

Yeah, it's pretty different. I would argue that a person is not really wealthy if their source of wealth is the single family home where they live. Is a retired elderly woman on a fixed income, living in a $2 million Brooklyn brownstone, more wealthy than someone living in a $200k house suburban Detroit with $1.5 million in a brokerage account?

I'm not sure I follow...If I bought a house for $1,000,000 and put 20% down, am I $200K "poorer" because I put cash towards the purchase of my home?

I own multiple investment / rental properties, 2 of which are completely paid off, are they not included in my net worth? should a bank not evaluate those properties when determining my wealth / credit worthiness for a loan?

To answer your question, yes the old lady is wealthier, assuming no other assets/income which is very very unlikely in that fake scenario.

[iheartthed]

Originally Posted by Investing In Chicago

I'm not sure I follow...If I bought a house for $1,000,000 and put 20% down, am I $200K "poorer" because I put cash towards the purchase of my home?

I own multiple investment / rental properties, 2 of which are completely paid off, are they not included in my net worth? should a bank not evaluate those properties when determining my wealth / credit worthiness for a loan?

I specifically said primary residence.

[Investing In Chicago]

Originally Posted by iheartthed

But that third example doesn't actually break the reasoning for not including primary residence in calculation of "wealth" (distinct from calculation of "net worth"). Whether he lives modestly or not, the person with the brokerage account has more financial flexibility than the other two people. The lottery winner has more flexibility than the house rich retiree.

How do you define the difference between "Wealth" and "Net Worth"? Net worth is a measure of wealth.

[lio45]

Originally Posted by iheartthed

But that third example doesn't actually break the reasoning for not including primary residence in calculation of "wealth" (distinct from calculation of "net worth"). Whether he lives modestly or not, the person with the brokerage account has more financial flexibility than the other two people. The lottery winner has more flexibility than the house rich retiree.

And why does financial flexibility matter here? I thought we were measuring wealth, not flexibility.

A guy with a million in cash in a mattress is wealthier than a guy with $1.5M in a brokerage fund, according to you?

[Investing In Chicago]

Originally Posted by iheartthed

I specifically said primary residence.

But why does that matter?

Wealth/Net Worth matters for things like Loans, a bank is 100% looking at all of your assets to determine that number. If you own your primary residence outright, you can bet a bank will allow you to borrow against that asset, assuming there is nothing crazy in your credit.

Perhaps I don't understand the use-case for why your measuring wealth the way you are? I can't think of a single scenario where it would be beneficial to measure your wealth/net worth w/out your primary residence.

[lio45]

Originally Posted by iheartthed

I specifically said primary residence.

Ironically, I’d actually be wealthier-after-taxes if I could magically convert everything I own into one single primary residence of the same value located in Canada.

[iheartthed]

Originally Posted by lio45

And why does financial flexibility matter here? I thought we were measuring wealth, not flexibility.

A guy with a million in cash in a mattress is wealthier than a guy with $1.5M in a brokerage fund, according to you?

The barrier to liquidating a brokerage account is minimal versus keeping cash in a mattress. The brokerage account is also accruing interest.

Liquidating your primary residence is not a trivial thing. If a person derives the majority of their wealth from their primary residence then I don't see how that person is considered "wealthy" in most cases. If they diversify the asset then sure, but until they do that I don't see why we would muddy the definition of wealthy when it's pretty easy to just exclude it.

[iheartthed]

Originally Posted by Investing In Chicago

But why does that matter?

Wealth/Net Worth matters for things like Loans, a bank is 100% looking at all of your assets to determine that number. If you own your primary residence outright, you can bet a bank will allow you to borrow against that asset, assuming there is nothing crazy in your credit.

Perhaps I don't understand the use-case for why your measuring wealth the way you are? I can't think of a single scenario where it would be beneficial to measure your wealth/net worth w/out your primary residence.

I'm not 100% sure but I don't think you can easily get a bank loan by just owning a house and no income or other assets. That would be extremely predatory.

[lio45]

Originally Posted by iheartthed

The barrier to liquidating a brokerage account is minimal versus keeping cash in a mattress. The brokerage account is also accruing interest.

Liquidating your primary residence is not a trivial thing. If a person derives the majority of their wealth from their primary residence then I don't see how that person is considered "wealthy" in most cases. If they diversify the asset then sure, but until they do that I don't see why we would muddy the definition of wealthy when it's pretty easy to just exclude it.

It’s you who’s muddying the definition. The rest of us have a very clear one: wealth is wealth.

Spending habits are irrelevant. I live a really modest lifestyle these days (I’m extremely illiquid). People with a tiny fraction of my net worth likely live nicer lifestyles.

“How much do you spend per year” and “how wealthy are you” are entirely different questions. Often correlated, sure, but not necessarily.

[Investing In Chicago]

Originally Posted by iheartthed

I'm not 100% sure but I don't think you can easily get a bank loan by just owning a house and no income or other assets. That would be extremely predatory.

Right, but you'd have a hard time getting any type of loan with zero income and only one asset, of any kind.

[Investing In Chicago]

Originally Posted by iheartthed

The barrier to liquidating a brokerage account is minimal versus keeping cash in a mattress. The brokerage account is also accruing interest.

Liquidating your primary residence is not a trivial thing. If a person derives the majority of their wealth from their primary residence then I don't see how that person is considered "wealthy" in most cases. If they diversify the asset then sure, but until they do that I don't see why we would muddy the definition of wealthy when it's pretty easy to just exclude it.

Just because you don't see it, doesn't mean it isn't true. I'm using Net Worth to define wealth, the equity in your home is part of your overall net worth. I'm honestly not quite sure what you're using to measure wealth.

[iheartthed]

Originally Posted by lio45

It’s you who’s muddying the definition. The rest of us have a very clear one: wealth is wealth.

Spending habits are irrelevant. I live a really modest lifestyle these days (I’m extremely illiquid). People with a tiny fraction of my net worth likely live nicer lifestyles.

“How much do you spend per year” and “what’s your net worth” are entirely different questions.

But you've stated a few times that you own real estate, so your net worth isn't primarily derived by your primary residence. Would removing your primary residence from the calculation substantially impact your "wealth"* calculation?

*Also, to be clear, your primary residence obviously is part of your "net worth". But if you don't qualify as "wealthy" by removing your primary residence, then you probably aren't "wealthy".

[iheartthed]

Originally Posted by Investing In Chicago

Just because you don't see it, doesn't mean it isn't true. I'm using Net Worth to define wealth, the equity in your home is part of your overall net worth. I'm honestly not quite sure what you're using to measure wealth.

The government doesn't think you should consider primary residence in it lol: https://www.sec.gov/info/smallbus/se...-standard-secg