12 Aug What You Need to Know About the Luxury Real Estate Market
There were predictions to see a significant downturn in the demand for high-end real estate in 2019. World trade activity, geopolitics, and the anticipation of price being affected by inventory may have caused a slowdown in the luxury real estate market but overall, stats show there was a strong consistency in sales, inventory, and pricing without the dramatic downturn or upswing expected.
Looking at a most recent review from The Institute’s Luxury Market Report, results show that the high-end market did see some changes like new trends in purchasing power, preference, and demand in the luxury category. The impact of global uncertainty, changes in purchasing decisions, and relocations to avoid high local taxes, had the greatest influence on spending habits and location appeal, creating a ‘new normal’ in the market.
The median North-American luxury single-family-home price saw a 5% fall month-to-month, yet the median selling price stayed at a consistent $1.4mill over the last 18months (Coldwell). Then, there is luxury condo living – demonstrating to be one of the strongest divisions in the market, currently sitting at a median price of $900k.
The question is, who are the considered “wealthy” and what qualifies as the “luxury property” they are buying? The market is determined on how and where the wealth is actually being spent.
Statistically, 87% of ultra-wealthy individuals are men around the age of 62 with only 11.7% of them have inherited their fortune. Meaning others made their fortune from long and successful careers. According to Wealth-X, the number of ultra-wealthy individuals is still increasing at a 1.3% rate each year.
If we look at the niche market in North America, there are tiers of wealth to help us distinguish: The Affluent, The Wealthy, High-Net-Worth Individuals, The Very Rich, The Ultra-High-Net-Worth Individual, Centi-Millionaires, Demi-Billionaires, and Billionaires. Why is this important? Because certain markets have certain qualities and attributes that are each unique to each tier when it comes to what they look for in owning property.
For global affluent buyers and investors, the appeal to purchase real estate still lies in North America and Europe. They are interested in quantity without compromising the quality. Markets in major cities like Denver, Austin, Nashville, Arlington, and even Montreal are seeing a demand in these luxury-style living opportunities. But the trend is not in purchasing luxury mansions in the suburbs, but rather condominiums, townhomes, or smaller properties.
The demand hails from up and coming business professionals, global entrepreneurs, and baby boomers who want the ‘all-inclusive,’ amenities, plus the unique and convenient experience of living a work-play lifestyle. The wants vary between demographics and geography, but buyers want properties that are move-in ready, more manageable, conveniently located to work and or attractions, and offer lavish features, without any extra work. Even the accommodation of pets is a huge factor in decision-making. More and more residential condo communities are including doggie day cares, parks and walking areas, doggie spas and washing stations to appeal to their demographic.
According to Coldwell Banker, these specific themes were made clear in their annual review on what’s keeping the luxury market alluring. Developers are rising to meet the persistent need in high-end property demand, including increase in the average condo size. They are listening and trying to give a full experience of suburban living within the urban environment.
Buyers are able to recognize the value, within things such as a place with a large yard in the city, or the historic meaning of the location – that people are willing to spend on such amenities, making luxury condos a huge driver in the market. Large tech cities are seeing potential buyers use the latest real estate technologies to their advantage making purchasing more accessible and convenient. Especially in cities such as San Francisco, Portland, Seattle, Raleigh-Durham where there is significant growth and sales.
Southern California has multiple cities considered “Power Markets.” Los Angeles, San Diego, Silicon Valley, Orange County, and San Francisco are all in the Top 5 percent for Condos.
It’s expected to see the ‘move-in ready’ luxury home market hit $920 billion by the end of 2025, up from $550 billion from 2 years ago.
The term “Mansion” has made its way to becoming overused. Charlie Cheever of quora.com writes, “Technically, realtors term mansions as houses that have at least 8,000 square feet of floor space.” Merriam-Webster’s definition is less definitive, simply stating that a mansion is “a large and impressive house: the large house of a wealthy person.”
Luxury real estate can be defined differently across different markets. It considers property value, median resident income, and depending on the specific metro area, development varies greatly. For example, a luxury home in Los Angeles will have a significantly higher top end versus a market like Oklahoma City. There are common features in said homes, such as prime location, luxurious interior finishes and design, high-quality kitchen appliances, and custom decoration.
In general, grand amenities are a must for buyers. Entertainment offerings such as game rooms, movie theatres, great rooms, bars, spa and pool area with cabana’s, gyms or fitness rooms or even lavish landscaping – gardens, courtyards, balconies, water features, or walking trails, are all examples of wants that trump the size and amount of rooms in a home.
Within the industry, luxury real estate holds competition of it’s own. Agents must put in the effort to keep up with the caliber of Luxury listings. Hiring the best photographers and videographers, consistently making connections within the real estate team, expanding global marketing to international buyers, and maintaining strong online exposure to new clientele are all things to consider. When dealing with more volume and more money, luxury real estate takes twice as long – even with the best agent and marketing. It’s more likely to have price reduction and a greater subjectivity of value, but expect and prepare for the sale or purchase to take longer.
If you’d like to learn more about the Luxury Real Estate market or you’re considering a secondary property, contact my team and we’ll point you in the right direction.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc. with information from resources like Coldwell Banker, Luxury Home Marketing, RIS Media, and Realtor.com.