The demand for global luxury real estate is on the rise in 2023, despite economic and geopolitical uncertainties worldwide.
Luxury Portfolio International released a new report “State of Luxury Real Estate 2023″ that encompasses the opinions of an aggregate 90% of the world’s affluent class.
With both the transference of wealth and the overall growth of wealth in the top 5%, the global wealthy are aware of the economic and geopolitical challenges but are generally undaunted. Most saw their fortunes improve in late 2022 and expect 2023 to be an even stronger year.
The good news for the global luxury residential real estate market is that prime property continues to be a solid investment in a time of upheaval with financial investments. Both owners and buyers expect values to rise in 2023, and that investment-property purchase expectations will remain at 2022 levels without diminishing.
Key findings from the global study include:
Affluent Housing Shortage Continues
For the third consecutive year, the number of buyers is greater than the number of real estate sellers, as inventories continued to dwindle, especially in the luxury sector.
This shortfall in the total number of available housing units impacts choice, and in turn, has impacted total sales as consumers wait for the ‘right’ home to purchase. While overall inventory began improving during the second half of 2022 as sales slowed, the need for new housing stock remains a priority.
Although improving slightly, 2023 is still expected to have fewer sellers than buyers globally, continuing to feed demand for new markets and new developments.
Luxury Homebuyers’ Market Behavior
The mid-2020 to mid-2021 luxury market buying frenzy pushed some prospective buyers out of contention in their most-desired markets. U.S. buyers have adapted to the situation by looking in secondary markets, and there are now hundreds more luxury markets today than in 2019.
While 2023 is anticipated to mirror the real estate buying and selling intentions of 2022, consumers remain optimistic in their purchasing plans. The research reveals that 2023-25 will be likely stronger than pre-COVID times.
The Luxury Homebuyers’ State of Mind
The luxury homebuyer recognizes that a recession is either here, or about to be here. They are also aware of the myriad of global issues, but it does not really bother them. They have instead turned to their significant personal strengths – financial, intellectual, emotional, and social – allowing them to build resilience against the turbulence of the global landscape. In simple terms, they are adapting to the circumstances.
One of the offshoots of these adaptations is that luxury buyers are becoming more effective homebuyers. They are prioritizing key facts and figures about the quality of the investment (the facts) while considering the intangibles of the purchase (their feelings).
To that end, real estate professionals that cater to reason over emotion (or vice-versa) are only doing half the job that luxury buyers need them to do. Consequently, the priority for luxury buyers in 2023 is an investment in quality, both in the tangible (the right setting, a good investment) and the intangible (does it feel good).
When asked to rank their needs and wants in a competitive context the hierarchy becomes clear:
- Quality of investment
- Good for the world
- Good for me
Certainly, each market and buyer will have their own sense of priority order, but as a global class, these factors are what matter most to them. And lastly, as it relates to mindset, the under-50-year-old buyer is more willing to purchase sight unseen and via online channels.
Ready to Entertain, Be Out-And-About Again
The study revealed that luxury homebuyers are resoundingly back in the swing of things when it comes to at-home entertainment. These individuals have a different mindset than their non-buying counterparts, as they are more likely than the average affluent consumer to have plans to attend a large-scale social event.
The trend has been mostly steady since the summer of 2022, but there has been a notable uptick in cocktail parties, which may be an early indicator for networking and expanding-the-group social events. This furthermore mirrors an increase in luxury gift-giving.
Economic, Political Challenges Not Slowing Down Creation of Global Wealth
Global wealth grew at 13% last year, with forecasts anticipating robust growth through the middle of the decade. As total wealth grows, the number of high- and ultra-high-net-worth individuals (HNWI) also climbs, reaching all-time highs.
The millionaire cohort is expected to grow by 40%, to reach new highs of 87 million HNWI by 2026. The United States, China, United Kingdom, Canada, Australia, New Zealand, and India are experiencing the most growth in HNWI’s this year. Japan and European stalwarts France, Germany, and Italy have experienced a decline.
City Center Remains the Most Desirable Address
While the impact of COVID was an immediate desire for “personal space,” hence exponential demand for single-family dwellings, in particular, among the wealthy, the study revealed that 37% of luxury homebuyers expect to purchase in the city center, where investors outnumber primary homebuyers.
This is a positive step, in particular, for areas such as New York City and London, which have come back strong since being seriously impacted during the pandemic. This dynamic is predicted to cause investment-grade properties to come off the market more quickly while dwellers search for turnkey residences, the result being an increase in home prices for city-center luxury properties.
Luxury buyers are interested in city living for a variety of benefits: nearby shopping, restaurants/nightlife, and a shorter commute. What they will not sacrifice is the quality of schools (whether public or private) and access to parks and nature. In short, the city center is “back” despite lingering doubts about COVID.
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Mickey Alam Khan, President of Luxury Portfolio International, states:
The luxury homebuyer is arguably the most astute connoisseur of real estate in the world. The study underscores that they are highly attuned to the realities of the global financial and geopolitical landscape, yet luxury residential real estate remains a preferred destination for their wealth. The panorama of the ‘COVID boom’ is clearly behind us, with the latter half of 2022 ushering necessary market stability into 2023 and beyond.
To access the complete report, please visit the following link: https://www.luxuryportfolio.com/reports
About Luxury Portfolio International
Luxury Portfolio International is the leading network of the world’s premier luxury real estate brokerages and their top agents, offering unparalleled marketing and intelligence services across the globe.
The network currently comprises 245-plus members in more than 45 countries. It is the luxury arm of Leading Real Estate Companies of the World® the global network of top independent real estate firms, with 550 companies and 136,000 sales associates in over 70 countries.
Last year, network members participated in over 1.2 million global transactions. LPI attracts a global audience of visitors from more than 200 countries/territories every month and markets more than 50,000 luxury homes annually.