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Demand for luxury real estate remained high throughout 2021 and the year ends as one of the most robust for luxury residential real estate markets in history, says a report.
Supply remains lower than demand and time-on-the-market for luxury single-family homes often continues to “last just hours”, said the report by Luxury Portfolio International (LPI), the world’s premier network of luxury residential real estate brokerages.
LPI's 2022 State of Luxury Real Estate Report (SOLRE) saw a continuation of dominating home purchasing-related trends that began during Q3 2020 and continued throughout all of 2021. Price increases are expected to continue, it said.
Sustainability is ‘critically important’ (66 percent) when considering future home purchases with 75 percent of luxury home buyers choosing their next home with environmental sustainability, the report said.
The study also shows an increase in the number of affluent sellers of residential real estate worldwide; that among luxury homes buyers, the majority (74 percent) shared strong feelings of a personal economic confidence and still 75 percent are significantly concerned that their discretionary spending power could be tested soon.
And while 2022 is expected to continue at a fast pace, there are signs that the luxury residential real estate market will be increasingly stabilising, a crucial step to avoid complications for a long-term, super-heated market.
“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. “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. Demand will remain strong, and a healthy, new normal in luxury real estate will start to take hold in 2022.”
Sustainability, according to the study, is now a major differentiator in luxury homes, and buyers are willing to pay a premium to have features and amenities that better prepare them for the future. 75 percent of those surveyed noted choosing their next home with sustainability in mind, with an unprecedented 90 percent noting “yes” as to factoring sustainability in relation to a Next Chapter in Life home search. According to the study, a “Next Chapter in Life” home search pertains to those moving to be closer to family, because of their children’s education, a career move, and other mitigating factors.
People interested in sustainability as a major factor of their home purchase are 71 percent more likely to view the purchase as a legacy home that will be passed on to their heirs. Further, as interest in sustainability grows, the quality of the buyer improves for the benefit of the seller, in that this buyer wants to transact sooner and for a relatively higher budget.
FOMO, or Fear of Missing Out is the feeling of anxiety that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on social media. With a year at home and headlines touting the hot market, FOMO has become a significant concern for 26 percent of luxury buyers. FOMO manifests in different ways, first as a true “missed the boat” moment where prices extend beyond reach. A second concern – equally impactful – is arranging finances for major purchases.
While Covid-19 remains a significant concern, the study revealed that the market has already accounted for much of its effects. This compared to last year when the top trend in luxury real estate was finding a home that would accommodate the family that works from home.
That said, according to the study, working from home, is wearing on a substantial percentage of luxury home buyers. The study revealed that 27 percent of luxury buyers cited working from home as a ‘significant concern.’ Remote work and the associated frustration and stress of being home continues to play a significant role in the purchase decision process.
Buyers concerned about de-stressing their work-from-home environment noted diversions such as entertainment at home, night life nearby, and relaxation-inducing amenities like a spa/hot tub, a specialty cocktail scale, and specialty rooms for media and gaming.
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