Per Bloomberg, wealthy homebuyers are finding global cities less welcoming and even hostile towards their cash. This is a secular shift as the wealth inequality created through a decade of easy money has enhanced social frictions and birthed the rise of populist governments. As Ray Dalio notes in his recent post, “The world has gone mad and the system is broken.”

Luxury property prices in 45 global cities rose an average of just 1.1% in the third quarter from a year earlier, the weakest annual gain since the end of 2009, according to a report from Knight Frank. They fell 4.4% in New York, 3.9% in London and 10% in Vancouver.

“The safe havens are becoming less certain,” said Dan Conn, chief executive officer of Christie’s International Real Estate. “It’s becoming much more challenging in the hubs to find a high quality place to deploy capital.”

Indeed, London and New York, among other cities, have recently passed taxes aimed at rich buyers. Same thing here in Vancouver with foreign buyer taxes, and increased property taxes on luxury homes. As a result, capital has fled luxury markets in these cities prompting the Knight Frank luxury home price index to slip to decade-lows.

The article adds, “Even as the flow of investment has slowed, many developers are delivering projects started when the supply of rich buyers seemed to go on forever. Now there’s a glut of luxury properties and — as anger mounts over wealth inequality — affordable units are in increasingly short supply.”

Perhaps no more evident than here in Vancouver. The current recovery in the Vancouver housing market is being driven in the affordable segments of the market, ie anything under $1M. As of the end of October there was just 3 months of inventory for homes priced below $1M in Greater Vancouver. Meanwhile, there is a glut of luxury homes sitting idle on the market, with 20 months of inventory for sale.