Although these millionaires and billionaires can be found all over the globe, the reality is that most of the world’s ultra-rich population tends to congregate in world-class cities. Generally speaking, UHNWIs are looking to live in places that are conducive to safeguarding and growing their wealth, but that also give them access to top-end amenities that allow them to live comfortably and luxuriously.
Top 10 Cities for the Ultra-Rich
To start, we’ll look at a list of global cities, organized by expected number of UHNWIs in 2023: London continues to top the list, with a roster of 4,944 ultra-rich residents today and the projected growth over the coming years to eclipse the 6,000 mark by 2023. Tokyo has the second highest amount of UHNWIs today, but the city is adding them at a slower rate than other rival cities. As a result, Singapore will move into the #2 spot overall by 2023, with an expected total of 4,393 high net worth residents. Finally, it’s worth noting that only two cities on the top 10 list are expected to see growth above a 30% clip over this five-year period. Shanghai and Beijing could be cities to watch for decades to come, as they add millionaires and billionaires at a faster rate than any of the other heavyweights.
Fastest Growing Cities
Where are the billionaire meccas of the future? Here are the 10 cities that are expected to add UHNWIs the fastest between 2018-2023: Not surprisingly, all 10 of these cities are located in Asia. Two Indian cities (Delhi and Mumbai) top the list, and are likely to add nearly 40% to their ultra-rich populations over the next five years. China also has a strong showing here. Interestingly, just missing the above top 10 were a few non-Asian cities: Auckland (#11), Madrid (#12), Munich (#13), and Nairobi (#14) are all expected to grow their UHNWI populations by roughly 25% by 2023. on These are in the form of Treasury securities, some of the most liquid assets worldwide. Central banks use them for foreign exchange reserves and private investors flock to them during flights to safety thanks to their perceived low default risk. Beyond these reasons, foreign investors may buy Treasuries as a store of value. They are often used as collateral during certain international trade transactions, or countries can use them to help manage exchange rate policy. For example, countries may buy Treasuries to protect their currency’s exchange rate from speculation. In the above graphic, we show the foreign holders of the U.S. national debt using data from the U.S. Department of the Treasury.
Top Foreign Holders of U.S. Debt
With $1.1 trillion in Treasury holdings, Japan is the largest foreign holder of U.S. debt. Japan surpassed China as the top holder in 2019 as China shed over $250 billion, or 30% of its holdings in four years. This bond offloading by China is the one way the country can manage the yuan’s exchange rate. This is because if it sells dollars, it can buy the yuan when the currency falls. At the same time, China doesn’t solely use the dollar to manage its currency—it now uses a basket of currencies. Here are the countries that hold the most U.S. debt: As the above table shows, the United Kingdom is the third highest holder, at over $655 billion in Treasuries. Across Europe, 13 countries are notable holders of these securities, the highest in any region, followed by Asia-Pacific at 11 different holders. A handful of small nations own a surprising amount of U.S. debt. With a population of 70,000, the Cayman Islands own a towering amount of Treasury bonds to the tune of $284 billion. There are more hedge funds domiciled in the Cayman Islands per capita than any other nation worldwide. In fact, the four smallest nations in the visualization above—Cayman Islands, Bermuda, Bahamas, and Luxembourg—have a combined population of just 1.2 million people, but own a staggering $741 billion in Treasuries.
Interest Rates and Treasury Market Dynamics
Over 2022, foreign demand for Treasuries sank 6% as higher interest rates and a strong U.S. dollar made owning these bonds less profitable. This is because rising interest rates on U.S. debt makes the present value of their future income payments lower. Meanwhile, their prices also fall. As the chart below shows, this drop in demand is a sharp reversal from 2018-2020, when demand jumped as interest rates hovered at historic lows. A similar trend took place in the decade after the 2008-09 financial crisis when U.S. debt holdings effectively tripled from $2 to $6 trillion.
Driving this trend was China’s rapid purchase of Treasuries, which ballooned from $100 billion in 2002 to a peak of $1.3 trillion in 2013. As the country’s exports and output expanded, it sold yuan and bought dollars to help alleviate exchange rate pressure on its currency. Fast-forward to today, and global interest-rate uncertainty—which in turn can impact national currency valuations and therefore demand for Treasuries—continues to be a factor impacting the future direction of foreign U.S. debt holdings.
