A new report released by Luxury Portfolio International (LPI) found that the chaotic real estate market created by COVID-19 is slowly stabilizing.
The second annual State of the Luxury Real Estate report by LPI, the luxury marketing division of Leading Real Estate Companies of the World, found that luxury buyers are concentrating more on what is important to them—better and more convenient locations, making wise investments and a focus on sustainability.
“After an incredible period for luxury real estate, it seems some balance will be restored in the year ahead,” said Mickey Alam Khan, president of Luxury Portfolio International.
Stabilizing the scales
The 2022 State of Luxury Real Estate report surveyed more than 4,500 affluent consumers in 20 countries, with 1,000-plus looking to purchase luxury homes in the next three years.
Supply, demand and pricing are beginning to even out after a whirlwind couple of years for the real estate market. Buyers still outnumber sellers, but the gap is shrinking.
According to the report, although half of respondents are still concerned that COVID-19 will again disrupt their lives, they are easing up on their sharp increase in demand for new houses throughout the pandemic, with 38% fewer buyers year-over-year.
Meanwhile, 71% of homeowners believe their property will increase in value over the coming year and the amount looking to sell has more than doubled since the year prior, meaning inventory should finally start to catch up with demand.
Years 2020 and 2021 saw luxury buyers heading to farther and farther remote areas to escape pandemic fears and restrictions and gain some much-needed space while spending a lot of their time at home.
Next year will see a shift in consumers returning to the cities and suburbs they fled. Per the report, a full 77% of luxury buyers say their next home purchase will be within commuting range of a major city, and 55% say it will be in one.
While previous years saw buyers’ main purchasing concern as more indoor and outdoor space, many homebuyers now say their next purchase will be as an investment (35%) or in search of a better place to live, be it neighborhood (19%) or city (10%).
No matter their reason for buying a luxury property, sustainability is on everyone’s mind. Seventy-five percent of those surveyed for the report said they would be considering sustainability during their next purchase, while 66% of respondents said steps towards sustainability are critically important, and half are even willing to pay more for it.
“In this environment, we expect prices to begin stabilizing, demand will remain strong and a healthy, new normal in luxury real estate can start to take hold,” Alam Khan said.
To read the full report, click here.