Fueled by a scarcity of available homes, escalating housing prices, and a surge in demand for more spacious residences, the luxury real estate market has undergone a transformative shift that is likely to have long-term ramifications.
In 2021, this trend was further amplified by exponential growth in global wealth. Research by Wealth-X, commissioned by Coldwell Banker Global Luxury, reveals that global wealth for individuals worth $5 million or more swelled by an astonishing 20.4%, a dramatic increase from the 2.1% growth seen in 2020. In the United States, this figure was even more significant, with a 24.8% increase from an 8.1% growth the previous year.
Additionally, the population of high-net-worth individuals grew by 19.8% globally, and by 24.8% in the U.S., further fuelling the market.
How did the luxury real estate market achieve such remarkable expansion in a brief time, and where do future opportunities lie?
Coldwell Banker Global Luxury’s 2022 Report, which relies on data from Wealth-X and the Institute for Luxury Home Marketing, provides an optimistic forecast for the upcoming year, focusing on key market trends and growth prospects.
International Buyers Eyeing the U.S. Market As travel restrictions relax, foreign investors, buoyed by newfound wealth, are increasingly targeting U.S. real estate. Approximately 83% of Coldwell Banker Global Luxury Property Specialists predict a revival of international investment in the U.S., particularly in cosmopolitan cities like Los Angeles, New York, and Miami. However, suburban regions are also likely to benefit as international buyers look for larger homes and more privacy.
Domestic Migration Patterns
The rise of remote work and the appeal of low-tax states are encouraging Americans to relocate, affecting both urban and suburban markets. Notable regions with high purchasing potential for detached homes include Staten Island, Delaware’s Sussex County Coastal, Cincinnati, Charlottesville, and Napa County. Agents must adapt to these migration patterns, familiarizing themselves with various markets to meet client needs effectively.
Multiple Home Ownership Trends Due to multiple factors like wealth accumulation, changing lifestyles, and climate considerations, there is a noticeable increase in global consumers owning multiple properties. Almost 70% of individuals with over $5 million in net worth own at least two homes, according to Coldwell Banker Global Luxury’s recent report. Major global cities like London, Paris, Singapore, Geneva, and Beijing lead in this trend.
Inventory Challenges and Opportunities The shortage of available homes continues to plague the market, with 73% of Coldwell Banker Global Luxury Property Specialists citing it as a significant hurdle for 2022. However, an anticipated construction boom could alleviate some of these concerns.
The Evolving Role of Real Estate Agents With soaring property prices and intense market competition, the expertise of real estate agents becomes crucial. Tim Foley, Executive Vice President of Operations at Coldwell Banker Realty, notes that better integration of transactional tools will allow agents more time to understand their clients’ broader lifestyles. Advanced digital platforms and local know-how have enhanced agent-client engagement, but in the luxury segment, agents must also be savvy about market trends, consumer behavior, and broader economic factors to serve their affluent clients effectively.