Despite pessimist forecasts in the fourth quarter of 2018, to date, the statistics for the 2019 luxury real estate market report a strong consistency with no dramatic upswings or downswings in sales, inventory, and pricing. Some markets certainly fared better than others, but in general terms, 2019’s stats show us there is no significant downturn. However, this is not to say all things have remained equal. The luxury market has seen some significant changes caused by new trends in purchasing power, preferences, and demand.
What is the luxury real estate market currently demanding?
While each market certainly has its own nuances, one trend has become very apparent in the luxury real estate market: it’s all about the ‘experience.’ According to the June 2019 edition of the North American Luxury Market Report by the Institute for Luxury Home Marketing, savvy homeowners, luxury real estate professionals, developers, architects, and designers are all putting their emphasis on defining the experience as part of their luxury marketing message.
“It’s part of a larger trend in which the affluent are increasingly investing in intangible goods like privacy, lifestyle, and education,” says New York Designer Andrew Kotchen.
And these sentiments are echoed as far afield as Paris, where designer Dorothee Boissier of Gilles & Boissier shared her views on luxury. “It’s linked to freedom, and feeling protected too. It’s also something that brings you wellness. It can be simple, but it makes you feel well.”
The general message is that luxury is not about throwing money around by adding more fancy materials, but rather about creating a comfortable experience that affords the feeling of luxurious wellness.
In an era where mass consumption means both the upper class and the middle class can own the same luxury brand, the rich are forgoing material goods to invest in the immaterial as a way to signify status. It also explains why luxury real estate buyers are downsizing; quality over space has become their priority.
It is a sentiment that holds true no matter the demographic or property being sold or purchased. Members of The Institute are noticing that affluent customers are putting higher expectations on the service levels of their realtors. They are looking for innovation in the marketing of their properties and expertise in finding amenity-rich properties in preferred locations.
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San Francisco exemplifies shifting demands
The city of San Francisco truly emphasizes this transition with 7 billion-dollar mega-projects scheduled to transform the city by 2023, not just with new housing and commercial buildings, but with outdoor public space as a major priority.
Driven by incentives that have attracted high tech companies to establish businesses in this city, it has created a flood of new tech-savvy Millennials as well as drawing homeowners from the Silicon Valley.
The incentives might be financial for the company, but it’s the city’s depth of amenities that have proven irresistible to this newer generation. And the demand for new and renovated properties has sent property values to unprecedented levels.
Previously considered undesirable areas are being redeveloped with new condominium-style properties offering luxurious quality designs that address all of today’s requirements. Both the historic and iconic residences of San Francisco are even more in demand, so long as the internal renovations are completed.
These all come with a heavy purchase price. But to this generation of buyers, a turnkey, luxury real estate property is worth the cost.
East Florida juxtaposed to San Francisco in every way
Communities from Miami to Boca Raton on Florida’s east coast, an area that is traditionally known for its second homeowners, snowbirds, and retirees, are juxtaposed to San Francisco in every way.
Since 2015, this market has seen a steady but significant shift in favor of buyers, and luxury properties, in particular, have seen a marked decline in activity, especially in the last 18 months.
Roman Pavlik of Laurie Finkelstein Reader Real Estate puts this decline down to two main factors; a strengthening of the US dollar, which has deterred international buyers, and a glut of new development resulting in the pressure of an excess of inventory.
“Buyers are coming from New York and Los Angeles due to the substantial increases of their taxes, but with the lack of foreign investors, this means the majority of buyers are actually tending to be local or have been renters over the last few years—and are now taking advantage of the price decreases.
Until recently, sellers of properties in the higher market have struggled to reduce their prices or renovate to the level demanded by current buyers. And so the reality is, if you are not prepared to compete in this new market, then you will be unlikely to sell.”
Barbara Pond of Keller Williams Coastal Partners, whose focus is hyper-local on Downtown West Palm Beach, concurs that buyers have changed with more focus on quality over size, preferring to pay for luxury amenities and convenience.
“A new luxury condominium with an impressive list of amenities and average prices around $7.5 million has seen extraordinary success, whereas the luxury resale market is firmly a buyer’s market.
Condos and historic homes have become favorites but, again, they need to be turnkey as buyers simply do not have the time nor the inclination to renovate.”
Barbara feels that with the integration of the new high-speed train service, together with investment into the local commercial and green space infrastructure, heralds a change in the future—with an influx of new homeowners from Miami looking for more “bang for their buck.”
A completely different luxury market in Toronto
Toronto, Canada’s largest city, saw historic price increases over a period of 8 years, only to be hit with the implementation of a slew of taxes and regulations in 2017, mainly against foreign and non-residents. However, population growth and revitalized consumer confidence have shown that this luxury real estate market has stabilized from the previous 2 years of unpredictability.
The luxury condo market continued to be strong in Toronto throughout these uncertain months. Chris Butryn of Royal LePage Connect Realty Brokerage puts this down to high demand from two demographics: affluent couples with high-paying careers and a new trend of empty-nesters, seniors, and retirees.
“I am not surprised by this trend. These luxury homeowners have always downsized, but what is different now is that many want to be in condominiums that are more manageable, offer lavish amenities, and the convenience of desirable locations in downtown Toronto, rather than moving to the suburbs.”
However, Chris is quick to qualify that although they are moving downtown, they are very selective in their choices. No small apartment with views of other buildings is acceptable, but rather a fully-equipped palace in the sky, so their lives remain as private as when they lived in large properties.
Luxury apartment buildings are catering to these demands, going to great lengths to attract these homeowners with access to private facilities both on- and off-site. Some even offer rooftop gardens, dog parks, resident bars and restaurants, and wellness facilities such as gyms, spas, and yoga studios.
These individual markets, although very different, once again show that luxury real estate markets are driven by the market force of desire, wants, and trends. For detailed market statistics, download the North American Luxury Market Report by the Institute for Luxury Home Marketing.