Demand for luxury home purchases has not dwindled even as the pandemic’s volatile nature continues to pose challenges in real estate. According to a 2022 State of Luxury Real Estate (SOLRE) report, authored by Luxury Portfolio International® (LPI), home prices in the segment are expected to continue increasing as supply struggles to meet high demand.
While most luxury buyers (74%) are still reporting strong personal economic confidence, 75% say they are very concerned their discretionary spending power could soon be tested. However, LPI forecasts that the market could stabilize in the near future even as the fast-paced market is expected to continue through 2022.
“After a record-breaking year in luxury real estate, we anticipate that some balance will be restored to the market,” said Mickey Alam Khan, president of LPI, in the report. “It is important to view the luxury market over a trajectory of several years, noting that half of 2020 was in paralysis due to the pandemic. The red-hot market that began in the latter part of 2020 continued into 2021 and will continue a positive trajectory into 2022. The difference will be that there will be more luxury sellers in 2022 than in 2021, and while there will be fewer actual luxury buyers, it is still a seller’s market.”
“The pandemic madness that drove us to an over-heated market is being normalized,” added Alam Khan. “Demand will remain strong, and a healthy, new normal in luxury real estate will start to take hold in 2022.”
What are the trends driving this increasing demand for homes in the luxury price point? According to the report, sustainability is a major component, with 75% of those surveyed for the report stating they will choose their next home with sustainability in mind, and 90% saying they will be factoring sustainability in relation to a “Next Chapter in Life” home search. Sustainability is particularly important in legacy homes, where homeowners plan to pass on the property to their heirs.
Among the concerns luxury buyers say they face are fear of missing out on the latest trends (26%) and having a space that can accommodate remote work (27%), the latter of which was cited as last year’s top considerations during the home search.
On a global scale, this segment of homebuyers is interested in purchasing across all price points, even as prices increased 33% year-over-year. Over 14 million affluent households are interested in purchasing a new home (6.4 million of which are in the luxury category), while 1.2 million luxury homeowners are interested in selling in the next three years—a 32% increase over last year.
But where is this segment moving? While suburban migrations have been popular amid the pandemic, LPI reports that that over half of luxury buyers globally (55%) expect to purchase their next home in a city, while 77% just want to be within commuting distance.
Shared living spaces are fading away as single-family homes grow in popularity—a trend led by North America but catching up in Europe and the Middle East where 40% of buyers seek the additional space and privacy, as well as in Asian-Pacific countries where 29% look to do the same.
While demand for homes continues to increase across the wide range of buyers in the luxury space, there’s been a surge in real estate priced under $1 million, signaling that upper-middle class buyers who delayed purchasing due to COVID are making their way back to the markets.
To read the full report, click here.
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.
