Luxury Portfolio International® (LPI), the luxury division of Leading Real Estate Companies of the World®, recently released a study of the world’s most affluent households: “State of Luxury Real Estate.”
The report focuses on consumers in the top 1-5% income bracket across 17 countries and 30 million households. The study was conducted in collaboration with the Affluent Consumer Research Company, finding that of the 30 million-plus households surveyed, more than 15.5 million will be in the market for residential real estate over the next three years. Within that group, 66% (10.3 million consumers) say they’re likely to purchase a property valued at U.S. $1 million or more.
“It is clear that affluent residential real estate buyers see opportunities within their respective markets,” said Mickey Alam Khan, president of Luxury Portfolio International®. “We are noting a surge in buyers throughout many markets worldwide, where it continues to be a seller’s market in the luxury space vis-à-vis the previous year. We expect that trend to continue through 2021—as well as the next couple of years—as buyers rush into the market. The ultra-luxury buyer perspective is that the current climate is getting stronger. In many markets, we see home values going up, and there is more interest in prime property.”
Trends among these soon-to-be buyers: One-quarter mentioned they have an investment or rental property in mind for their next purchase. The No. 1 global preference, however, is new construction in a newly developed neighborhood as it commands the highest price among the luxury buyer segment, according to the report.
“Investment sentiment toward real estate is positive and outstrips other forms of financial investment,” added Alam Khan. This bodes well for developers and resellers, along with sister industries, such as home design, art and furniture.”
The pandemic has greatly shifted luxury home trends. According to the report, quarantining highlighted an increased need for self-reliance amenities at home, and many respondents say that COVID influenced their motivation for wanting to live abroad, specifically in Mexico, India, China and post-Brexit United Kingdom.
The report highlighted the following four leading trends:
– The home must meet more needs, having solutions for working, learning and diversion at home.
– Luxury buyers are looking to expand their borders, seeking out homes in another country.
– Affluent buyers are interested in homes with a lot of space outside their main living quarters, such as properties with a guest house or separate adjoined residence.
– Luxury buyers want to work with a reputable brokerage that offers basic, quality offerings with a focus on customer service, while offering new technology.
From a confidence standpoint, LPI found that luxury buyers are bullish on the residential real estate market, with 45% believing it is getting stronger, compared to 31% who said it is getting softer. The majority (52%) perceive their current home value to have risen more than 10%, and 50% of luxury buyers state they believe now is a good time to purchase real estate, beating out other investments such as stocks, private equity and gold, among others.
“Real estate is an increasingly sensible investment at a time when financial and alternative investments appear potentially disconnected from traditional success indicators, like revenue and profit,” said Chandler Mount, CEO of Affluent Consumer Research Co., the study’s author, and research partner for Luxury Portfolio International®. “Many luxury buyers all over the world share this sentiment, and the implication is a lot of money flowing into real estate in the coming year.”