Take a drive through some of Los Angeles’ ritziest neighborhoods and you’ll quickly come to realize why the city is home to the second-largest concentration of ultra-high-net-worth (UHNW) individuals in the world.
A new report by data firm Wealth-X suggests that there were 16,295 homeowners with a net worth of over $30 million in LA as of December 2020. More than two-thirds of these high rollers considered La La Land their ‘secondary home,’ perhaps due to the state’s steep income tax rates.
In December, Elon Musk announced that he had moved from California to Texas, where there is no state income or capital gains tax. The SpaceX owner and Tesla CEO followed through on his promise to ‘own no homes,’ and sold four of his Los Angeles properties in 2020 for a combined $62 million.
According to Wealth-X, UHNW secondary homeowners tend to be slightly younger and have greater female representation. The pandemic fueled the demand for second homes as US luxury buyers, discouraged from traveling internationally, snapped up vacation properties in markets like Miami and Aspen instead.
“This group of wealthy individuals is used to travel, and it’s hard for them to stay put,” noted Joanne Nemerovski, Luxury Real Estate Advisor at Compass Chicago, in the report.
Los Angeles was ousted by New York, which is home to 24,660 UHNW individuals owning a primary or secondary residence. NYC was described as the “pre-eminent global city of the wealthy,” celebrated for its commerce, culture, shopping, education and real estate opportunities. London earned the number three spot on the list, followed by Hong Kong, Paris and San Francisco.
Among the global top 20 cities for UHNW homeowners, 11 are located within the United States. This was attributed to the country’s sheer size and geographic diversity — a wealthy individual living in Greenwich, Connecticut wanting to escape the cold can easily jet off to Naples, Florida for the weekend without packing their passport.
Despite the significant wealth gap that exists between typical Americans and UHNW individuals, their pandemic-influenced home buying preferences are strikingly similar. Buyers in both tax brackets moved farther away from urban centers as remote work became the norm, and some of the most coveted home features among luxury clients included “more indoor-outdoor living space, a summer kitchen and privacy,” according to Creig Northrop, President and CEO of Northrop Realty.
As the pandemic continues and companies embrace permanent work-from-home policies, next year’s report from Wealth-X could include a wider geographical spread of UHNW homeowners.
“2020 has seen large changes to the luxury real estate market,” said Bonneau Ansley III, Founder and CEO of Ansley Atlanta. “Many of my clients have made the decision to make a life change. As they can work anywhere, many are choosing quieter locations, with beaches or mountains, or moving away from the typically more congested cities.”