Luxury homebuyers are not “most buyers.” And while the market has shifted for them, too, luxury real estate is still considered the top investment for long-term financial security. 

It’s not hard to see why, either. Prices for luxury single-family homes have seen 60% appreciation since 2017; luxury attached home prices have increased by nearly 41%. 

According to Coldwell Banker’s Global Luxury Trend Report, released October 23rd, luxury real estate is still in a strong position for the rest of 2022 and heading into 2023. 

Here’s what you need to know. 

BAM’s Key Details: 

  • Luxury real estate remains in a strong position for 2022 and 2023
  • Buyers have more negotiating power but still contend with low inventory and high prices
  • More affluent buyers are buying homes with less square footage
  • Younger generations of affluent buyers are getting creative with financing 
  • The wealthy are returning to global property buying 

Luxury real estate seen by most as a safe investment

Four out of five survey respondents believe real estate is a safe investment. And over a third of them agree it’s the safest investment one can make compared to stocks, bonds, pensions, and crypto. 

Also, per the Trend Report, consumers in the luxury real estate market are more than three times more likely to believe 2023 will be a better year for investing in real estate compared to 2022—a 42% increase from only 11% a year ago.

More than three-quarters (77%) of luxury consumers surveyed for the Trends Report own an investment property. Nearly two-thirds of those own more than one. 

Investment strategy is top of mind for affluent buyers. And even with the looming threat of recession, these buyers see real estate as a prime asset for building and growing wealth. 

Consider the top four reasons survey respondents bought real estate as an investment: 

  • Portfolio diversification: 46.7%
  • Long-term investment: 46.1%
  • Passive income from rental property: 45.9%
  • Inheritance for their children: 45.3%

The top three reasons luxury real estate investors are optimistic about today’s market: 

  • Increased inventory: 42%
  • Rising rents: 38%
  • Real estate is a more stable hedge against inflation (compared to stocks): 38%

While the luxury property market is now trending towards balance, there is still insatiable demand from wealthy buyers looking to diversify their portfolios and build long-term wealth through investing in real estate. This strategy powered by the wealthy is the driving force that we see throughout The Trends Report and really underscores the power they still have when it comes to purchasing the properties that they desire.

Michael Altneu

Vice President, Coldwell Banker Global Luxury

The top trends shaping the luxury real estate market in 2022

Here’s a quick summary of the biggest trends in luxury real estate investment: 

  • A seller’s market gradually shifting in buyers’ favor – The majority of luxury housing markets analyzed for the Trends Report were still sellers’ markets (as of August 2022). Still, housing economists are seeing a gradual shift in buyers’ favor. Buyers have more negotiation power but still have to contend with high prices and low inventory. 
  • Luxury buyers opting for smaller homes – Luxury single-family homes with less square footage (2,500 to 3,500 square feet) sold 18.6% faster than larger single-family homes (4,500 to 5,000 square feet). 
  • Dissatisfaction driving luxury homeowners to relocate – About 25% of survey respondents expressed dissatisfaction with homes they purchased in the last two years, suggesting they may be ready to relocate in the near future. The most popular destinations for these buyers are New York and California. 
  • Luxury buyers seeking stability in the shifting market – As luxury buyers grapple with uncertainty, more are looking for properties that offer financial, emotional, or psychological stability, which could mean prioritizing homes in areas less affected by climate risk and extreme weather
  • Younger affluent buyers getting creative with financing – Rising interest rates have motivated younger generations of affluent buyers to get creative with their financing by paying in cash (51%) or with a private wealth mortgage (48.1%). Some also take advantage of nontraditional bank loans, seller carryback financing, and rate buy-downs.
  • Affluent investors returning to global property buying – About 92% of U.S.-based survey respondents are now looking to purchase a property abroad. Among the reasons are the rising cost of living, surging home prices, and the U.S. political climate.

Top takeaways for real estate agents

If you serve high-net-worth clients, they rely on you to be intimately familiar with how you can help them get the best deals possible, whatever is happening in your market. 

With the current shift in buyers’ favor, expect to see more interest in second homes and investment properties, as well as primary homes. 

Always be learning. And be prepared to work nontraditional hours to better serve your clients. 

This is the time to redefine the term “weekend warrior” and be the agent your clients can count on to be available when most agents aren’t answering their phones.