An Overview of Luxury Real Estate

Ninety percent of all millionaires become so through owning real estate

- Andrew Carnegie

As the riches of world keep on rising, the contemporary affluent consumer keeps on evolving and so is the definition of “Luxury”, which has grown to include individualistically relevant products and services with a deep personal connection to one’s values and beliefs.

Consumption patterns are changing rapidly and as a result brands are constantly adapting to this ever changing and exciting world.

Luxury is all about meaning: the very definition of luxury is based on inflation on the practical value of the goods and services by their symbolic value to the buyer.

In global real estate, it’s seller’s market yet again and as per industry predictions it will be true for years to come. Customers surmount sellers by nearly 3:2 looking out 3 years and high-demand markets will face the continued pressure.

When it comes to real estate, the word “Luxury” takes on a different definition because it’s not easy to define luxury real estate. From Mumbai to Hong Kong to Miami, “Luxury” is defined differently.

Luxury today means vastly different things than ever before to a widening arc of high-net - worth individuals (HNWIs) and ultra-high net – worth individuals (UHNWIs), (whose residential real estate transactional behaviours are influenced by numerous macro and micro influences which makes the buying behaviour differ from market-to-market and their perspective on property ownership luxuries, which ties directly to how they perceive themselves in the world.

Defining luxury real estate

Globally, a luxury home’s average starting price is $ 2.1 million. The yardstick differs from market to market and region wise – from $ 1 million in Ibiza to above $ 6 Million in Zurich and so on.

On one of the episodes of massively popular (rightly so) reality show, Shark Tank, Barbara Corcoran, owner of Corcoran real estate rightly commented that the three most important things for real estate are Location, location and location.

Location and lifestyle are the most important endorsements of appraisal and are pivotal to the choice of moneyed individuals who are looking not to merely buy a home but are looking for “Art of Living” through real estate. Since “luxury” is a very relative term and every real estate market tells a different story, getting a clear picture of global luxury market can be tricky but below are the following factors which make it easier to understand the trends:

• Inventory Ups and downs
• Private Transactions
• Cutting edge tech with lifestyle features
• Demand for high-end properties

Luxury Real Estate Meter

With an average property price of 1.25 million U.S.D, Hong Kong is the most luxurious real estate housing market worldwide followed by Munich, Singapore and Shanghai.

Top Performing Markets - 2019

• Berlin
• Frankfurt
• Moscow
• Manila
• Geneva

Markets To Watch Out For- 2020

• Paris
• Berlin
• Miami
• Geneva
• Sydney

Global UNHWI Distribution

The US dominates the rankings with maximum number of Ultra High Net Worth Individuals, more than Europe and Asia combined, accounting for nearly half of global numbers, though Asia is not far behind and is catching up fast.

The year 2019 saw the global UHNWI population (US$ 30 million or more) go up by 6.4%, despite global GDP forecast being reduced from 3.5% in 2019 to just 2.9% in 2020.

Luxury real estate assets contribute to a great deal towards total UHNWI wealth with gold purchases coming on a second number. A growing economy with low interest rates provides a highly hospitable environment for financial markets, and slow but still positive economic growth in the U.S., Europe, and China support further gains in global wealth. 

Crystal Gazing

Countries with the highest forecasted growth in UHNWI numbers over the next 5 years

The five-year growth forecasts place India as the leader with an estimated growth in the number of UHNWI by a whopping 73 percent with Egypt following with 66%. China receives more attention for its meteoric rise to power since last few decades, but India too enjoys a dynamic set of economic and demographic trends. It’s as densely populated as China and has recorded a better GDP growth than China lately.

Demand for luxury real estate is picking up pace in Egypt since investment in real estate is seen as a sanctuary against inflation and currency depreciation. Quite unsurprisingly, the demand for luxury real estate in Egypt is surpassing the supply. Despite the prices going up, flexible payment facilities are ensuring that the consumers do not think about the price of the real estate.

Landmark Global Listings

• Villa Maria Water Mill Estate
• The Hamptons, United States
• Area – 20,000 Sq Feet
• $ 572 M

• THE ONE / Bel Air
• California, United States
• Area– 100,000 Sq Feet
• $ 500 M

• The Bubble Palace
• Cannes, France
• Area– 1,200 Sq Metres
• $ 390 M

• Mesa Vista Ranch
• Pampa, Texas
• Area– 65,000 Acres
• $ 250 M

• Casa Encantada
• Bel Air, CA
• Area– 40,000 Sq Feet
• $ 225 M

• Villa Firenze
• Beverly Park, CA
• Area– 28,660 Sq Feet
• $ 165 M

Primary Market Vs Secondary Market

Commonly, the real estate sector is divided into two categories: primary and secondary. The primary sector consists of new resources, which include new launches and ongoing projects. Moreover, primary houses are the consumer purchases for own consumption.

The secondary market consists of sub-sale or secondary properties, previously owned houses in established residential or commercial areas. These properties are purchased mainly for rental or leasing purpose.

Purchasing a luxury property is not a straight and uncomplicated transaction. To ensure a smooth home buying process, it is crucial to have the best help you can get.

Luxury assets are usually rated as $1 million or more, but that depends on lot of factors like location, size, amenities and high-end features which make the property truly luxurious.

Luxury real estate brokerage firms have specialised agents who are top performers in their business and whose market knowledge combined with their experience, know how to achieve the best outcome in the process of luxury real estate transactions and who understand that no two luxury home buyers will be same.

The realtor should be astute and experienced to know that young affluent buyers will be different from moneyed baby boomers. International and domestic luxury buyers are entirely different from culture to language and have distinct sets of desires in a new home. Some luxury buyers like to make the decision solo while few might have a retinue of decision makers with him.

Luxury realtors leverage marketing power, their nexus and knowledge to handle every unique transaction and boost their client’s transactional profits. They need to be aware and well versed with all the possible audiences for luxury real estate marketing and they should also be astute enough to know which to target for a specific listing.

Luxury realtors spend a lot on marketing which requires a luxury size budget, not only for their patrons marketing needs but also for business marketing and to fetch all the relevant listings from around the world.

Since finding the best home starts with finding the best luxury realtors which can be done by learning about the top players in the luxury real estate market. Here are the 10 best luxury real estate brokerage firms worldwide which have an enviable reputation in the market and they do so by focusing only on the high-end real estate market.

The world is going through a great turmoil. As if hurricanes, earthquakes, volcanic eruptions, floods and wildfires were not enough to wreak havoc on mankind and economy, COVID 19 has sent the world scurrying for cover and has created a “new normal”. Bumbling cities and tourist attractions have turned into ghost towns with restaurants and shops closed, offices vacant and playgrounds closed. The events of 2020 have whipped up a new mantra for real estate professionals – “Natural disasters are the new truth.”.

As COVID-19 takes its toll on luxury residential property markets around the world, prices in most prime residential markets could drop by 5 percent in the year 2020, as per international property consultant Knight Frank.

Unsold inventory pressure coupled with a difficult economic climate is  expressed in Q3 FY20’S 6 year all time low GDP growth rate and has strained the prime residential sector across key cities globally.

As per the report by Knight Frank, prices are likely to fall in a range of 0-5 percent across Berlin, Cape Town, Geneva, London, Los Angeles, Madrid, Melbourne, Miami, New York, Paris, Sydney, Buenos Aires, Mumbai, Hong Kong, Singapore and Vancouver. Out of 20 cities analysed by Knight Frank, 16 have been forecasted to show property price decline and transactions being cancelled.

Global economic instability is unparalleled in scope and thus it is difficult to put an exact estimate on forecasts.

With little or no air-travel, consumers might prefer second home market closer to home which need not entail lot of travel and is accessible easily.

Strong dollar provides US, HK, UAE an advantage in many markets by allowing genuine buyers with sound liquidity to take advantage of the fallen prices and attractive mortgage rates.

In the aftermath of the current pandemic, buyers will place a lot of emphasis on eco-friendly homes with cutting edge state of art technology to maintain hygiene and save energy.

The pandemic has severely affected the holiday rental market which might force a lot of real estate owners to switch to long term rental market. It will be beneficial for urban destinations which is driven by domestic demand.