Double-digit wealth growth, international buyers, and new market growth opportunities.
BY MICHAEL ALTNEU
Driven by low inventory, high housing costs, and inflated demand for larger homes, luxury real estate experienced an industry-altering shift that will affect the market for the years to come. Soaring wealth also added to that equation in 2021. According to new findings from Wealth-X as commissioned by Coldwell Banker Global Luxury, global wealth for individuals with a net worth of $5 million+ grew by 20.4% in 2021, up from 2.1% the previous year, while U.S. wealth rose by 24.8% from 8.1%. Even more impactful was the rise in the population of affluent individuals, which grew 19.8% worldwide in 2021 (up from 2.2% in 2020) and rose 24.8% for the U.S., compared to 8.3% the previous year.
How did we reach such staggering growth in such a short period of time? And more importantly, where do opportunities still lie in this market?
Thanks to curated surveys from Coldwell Banker Global Luxury Property Specialists worldwide and data compiled by Wealth-X and the Institute for Luxury Home Marketing, Coldwell Banker Global Luxury’s The Report 2022 brings an optimistic outlook as we focus on key market trends and market growth opportunities to watch in the new year.
1. International buyers are looking to the U.S. market
We may begin to see a rise in international investment as travel restrictions loosen and overseas investors who have benefited from massive wealth creation look to the U.S. for their real estate investments. Approximately 83% of Coldwell Banker Global Luxury Property Specialists anticipate the return of international buyers to the U.S. market. Extravagant cities like Los Angeles, New York, and Miami remain favorites among international investors, but suburban cities may begin to see foreign investment as buyers seek single-family homes, larger spaces, and increased privacy.
2. Suburban cities can expect new faces
Work-from-home opportunities and low tax states have prompted many U.S. consumers to relocate throughout the country. Per our first Opportunity Index, the markets with the highest buying potential for single-family properties include Staten Island, Delaware’s Sussex County Coastal, Cincinnati, Charlottesville and Napa County. Meanwhile, Cincinnati, Lake Norman, N.C., California’s Marin County, Greater Seattle, and Coastal Pinellas County, Florida, may still have room to grow for attached homes.
As buyers relocate to new markets, agents must understand their client’s needs, be knowledgeable on their new community, and aware of their lifestyle. “It used to be that agents only had to know their local market, but with so much movement happening in luxury, they need to be able to speak about other markets from a place of knowledge,” notes Liz Gehringer, President of Affiliate Business and COO of Coldwell Banker Real Estate.
3. Rising real estate footprint
Whether it is because of wealth creation, changing lifestyle preferences, climate change considerations or economics, we are experiencing a rise in global consumers who own multiple homes. Nearly 70% of individuals with a net worth of $5 million+ now own two or more properties, per Coldwell Banker Global Luxury’s most recent “A Look at Wealth” report. According to a new review by Wealth-X from 21 major cities outside the U.S., the top locations with the highest real estate footprint, which considers all properties owned by affluent individuals with a net worth of $5 million+ include: London, Paris, Singapore, Geneva, and Beijing.
4. Will supply meet demand?
A lack of inventory remains a major challenge for 2022, according to 73% of Coldwell Banker Global Luxury Property Specialists surveyed for The Report. However, a forecasted construction boom may relieve some inventory concerns in the new year. As the demand for homes continues to rise and the development of new homes grows, we may see the housing inventory and listings increase as well. Luxury real estate prices skyrocketed, but we may begin to see those prices reach their limit as home sellers realize the highest price possible might have been reached.
5. BROKERs at the forefront
An increase in real estate prices and market competition means the advice of a trusted broker is even more vital to buyers in search of their dream home in 2022. Tim Foley, Executive Vice President of Operations of Coldwell Banker Realty, notes, “As brokers benefit from streamlined and more fully integrated transactional tools and processes, they will have more time to engage in the broader lifestyles of their clients.” Digital tools, social media platforms and local expertise have fostered quality engagement between an broker and a homebuyer, but luxury brokers will also need to have a deeper understanding of the latest market and consumer insights, lifestyle trends and economics to assist affluent clients.