Despite inflation, higher mortgage rates, and stock indexes with double-digit losses, the luxury real estate market has thrived for the past two years.
And according to the 2022 Mid-Year Luxury Trends Report released by Christie’s International Real Estate, that trend will continue for the rest of 2022 and into 2023.
That sunny outlook for international high-end real estate is one of the main conclusions of the mid-year report.
Christie’s International Real Estate
As an international luxury real estate brand, Christie’s has affiliate companies in about 50 countries and territories across the globe.
Their report features interviews with 20 independent affiliates across Mainland North America, the Caribbean, Europe, the Middle East, and Southeast Asia—as well as co-CEOs, Thad Wong and Mike Golden.
Those interviews reveal three significant trends in the global luxury real estate market.
Luxury real estate trends
High-end real estate agents need to be aware of the following luxury market trends:
- Luxury real estate maintains favored status as a hard asset, protecting both primary and second-home buyers and investors from the effects of inflation.
- Blue-chip luxury markets remain strong as high-net-worth buyers and investors take the long view despite recent down-cycles.
- Luxury home shoppers seek relative value after two years of “hockey stick” price appreciation.
To highlight these trends, the report looks closely at 10 noteworthy luxury home sales within Christie’s International Real Estate network.
The strength of luxury real estate around the world in the first half of 2022 took a lot of observers by surprise. But throughout our network—certainly not in every market, but in many—brokers are predicting a strong finish to the year with momentum carrying into next year.
Luxury real estate valued as a hard asset
Luxury real estate isn’t immune to market conditions like the following:
- Inflation—the worst in four decades—and its impact on central banks
- Interest rate increases by the U.S. Federal Reserve
- Plummeting stock market values
- Bonds are seeing their biggest sell-off in four decades
- Wall Street is divided on what to expect during the second half of 2022
Volatility is driving up the market for hard assets, including real estate, especially in areas where wealth is tied to commodities like oil.
Dubai is a prime example. Buyers near and far are pouring money into its residential real estate market. And real estate developers in Dubai have expedited launches of over 100 new projects in the past year and a half—with no fear of overestimating demand.
Dubai is only getting started. The luxury market has bloomed in the last three to four years, really since before the pandemic.
Ultra-high-net-worth buyers are snapping up properties in Dubai. They can take advantage of various benefits—like friendly tax policies, recently-eased cultural laws, and the UAE’s Golden Visa program.
One of the most notable post-pandemic trends in the Dubai market is the evolution beyond their famed skyscrapers to low-rise villas with private pools and more outdoor space.
As these homes are in very short supply, prices have easily doubled and, in some cases, tripled over the past two years.
Blue-chip buyers take the long view
During the pandemic buying frenzy, property investments at all price points paid off significantly. But as the market shifts, high-net-worth buyers show no signs of slowing down. In contrast, homebuyers at lower price points are stepping back due to affordability issues.
Whether wealthy buyers are looking for value in some locations or paying a premium in others, the overall market will tilt toward the high end for the next couple of years, as it typically does in a volatile economic climate.
When it comes to the handful of blue-chip property markets across the globe, buyer activity doesn’t bow to the current economy. It relies more on the personal desires and long-term aspirations of buyers who can afford to wait out the down-cycles.
Luxury home shoppers hunt for value
With home prices rising steeply in many luxury markets, high-net-worth buyers worldwide are discovering markets where their money goes farther, like in Tuscany, Thailand, and Portugal.
As luxury real estate prices continue to rise and inventory remains historically low, many high-net-worth buyers are looking to alternate locations to avoid the blue-chip buying frenzy.
Many are gravitating to “luxury value” markets like the U.S. Virgin Islands and the Carolinas, where high-end home shoppers wield more buying power.
Be the expert your luxury real estate clients need
As luxury real estate buyers seek a reliable hedge against inflation, the demand for high-end real estate remains strong. But in a shifting market, not all luxury properties offer a hedge proportionate to their selling price.
For that reason, luxury buyers need a trusted local expert to help them spot the best investment opportunities in their market. Collect and share relevant data along with helpful insights on how that data affects your clients and the values of the properties they’re considering.