It seems only a few short years ago that demand for large properties, mega-mansions, private estates, and luxury ranches were all the fashion. But the younger generation, especially Millennial millionaires, are shying away. Here, we look at the changing face of the luxury home market and explore why today’s luxury homebuyers are choosing to downsize.
It’s not about the price
Don’t be mistaken that it’s about the price. According to the September 2019 edition of the North American Luxury Market Report by the Institute for Luxury Home Marketing, that is simply not true. It has more to do with changes in lifestyle preferences and the value that luxury homebuyers can obtain for their money. Larger properties are viewed as too labor-intensive and too expensive to run and manage. Instead, today’s home purchase decisions are based on the experience and amenities that a property offers.
For instance, Mark Cuban (TV’s “Shark Tank” Investor) just bought a vacation property in Laguna Beach that is under 7,900 square feet for $19 million. It’s a stunning, ultra-modern property, with walls that open up the outdoor space, a private pool, and ocean views. But the significant difference isn’t just that it’s a smaller space than you’d expect for this billionaire. Instead, it’s the opportunity to own a private home that has access to community amenities on par with a luxury hotel—including things like concierge service, room service, housekeeping, and a spa.
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Millennials influence trend toward lifestyle amenities
As Millennials (aged 23–37) become prime consumers, their numbers—as stated by Pew Research—will overtake Baby Boomers by the end of this year. We are already starting to feel the definite shift being created by their purchasing power. These affluent Millennials are investing in forms of discreet wealth, showing preference toward intangible items such as wellness and eco-friendly products rather than name brands.
But this trend isn’t just the jurisdiction of the young. More and more luxury condo developers are pouring their money into providing a plethora of amenities, as they recognize the equal appeal from empty-nesters, retirees, and Baby Boomers.
The changing face of the real estate industry now fully recognizes the importance of including amenities that address the physical, social, and mental/emotional/spiritual dimensions of its residents.
Today’s luxury homebuyers seek diversification and location
There has also been a growing trend for today’s wealthy to diversify and purchase not one, but several smaller residences in various locations to further enhance their need for unparalleled experiences. This also explains why luxury homebuyers are downsizing and prioritizing quality over space.
Another aspect of this growing trend is location. Buyers are looking for the benefits of a great walk score to nearby dining, shopping, and lifestyle experiences.
Looking to the future
The Institute for Luxury Home Marketing predicts that the future lies in building master-planned communities. These will be designed to provide “wellness communities” that offer a well-rounded neighborhood with real estate built for multiple generations. They will put people’s well-being at the center of the conception, design, creation, and development of their home.
Luxury is currently the trend leader. But as the trend grows, developers will be able to leverage the benefits at more affordable rates—allowing them to create more affordable smart-healthy homes and neighborhoods.