Luxury waterfront mansions in Miami, Florida
Luxury Portfolio International (LPI) takes a deep dive into the state of luxury real estate. New research from LPI shows that the ratio of affluent consumers looking to buy residential real estate over $1 million versus sellers is estimated to be 3:2, thus setting the stage for an inventory crunch within the high-end property segment.
LPI, the largest network of luxury real estate brokers and agents, recently released its study of “the world’s affluent households on the demand for residential real estate among the world’s wealthiest.” The report is one of several pieces of new pieces of research from LPI that confirms a bustling luxury real estate market.
“Real estate is seen as the most desirable investment category,” said LPI President Mickey Alam Khan. “Affluent consumer confidence is rolling along. Strong financial market performance is an indicator for continued confidence.”
Affluent Consumer Research Company crunched the numbers for LPI, focusing on consumers in the top 1%-5% income bracket of 17 countries, representing more than 30 million households. The results support the robust luxury real estate market.
Of the 15.5 million consumers interested in purchasing residential real estate over the next 3 years in surveyed markets worldwide, 66% were interested in purchasing a property valued at $1 million or more. Luxury buyers are bullish on the residential real estate market, with 45% thinking the market is getting stronger. Looking on the positive side, consumers expect their property values will continue to increase.
Mickey Alam Khan and Chandler Mount, principal researcher at Luxury Portfolio International and founder/CEO of Affluent Consumer Research Co., discuss the findings.
EP: Were there any surprising trends in the report?
MAK: We already knew that inventory was tight in the luxury end of the real estate market, but the 3:2 ratio of demand versus supply was a big surprise. That yawning gap is bound to keep prices high, but also deter first-time luxury homebuyers.
EP: Talk about the five pillars of the luxury buyer mindset and what that means for the future of luxury real estate.
CM: Extra time spent working, living, and playing at home has caused luxury buyers to look critically at what they have now, and decide if they can find a space that fits their lifestyle better.
“Doing more with less” may have run its course and the expectation is that the home will properly suit their needs for work, life, and play.
EP: How long do you see this “white hot” market continuing?
CM: We expect the imbalance to get better as time goes on, nearly equalizing by 2023. The expectation is that luxury real estate will remain a seller’s market, barring a change in these intentions.
EP: What are the takeaways for luxury buyers as we look to the second quarter?
MAK: Since this segment is expecting to stay home longer, there could be renewed interest in adding to the home including putting in the pool and remodeling spaces that people delayed doing sooner.
Work from home/living at home will likely remain a hot topic, but as winter turns to spring we can expect people will spend more time outside and have greater desire to get back to their usual spring habits (e.g., travel, outdoor activities).
Look to the luxury market’s continued desirability and strong performance as we move into the second quarter of 2021.