Luxury housing market is ‘holding strong’
Michael Altneu, vice president of Global Luxury at Coldwell Banker, said luxury housing has proven resilient in a cooling market.
- Wealthy individuals see real estate as a “safe haven” and a hedge against inflation, according to survey findings in the 2022 Global Luxury Trend Report.
- While luxury home sales are down year over year, they remain above pre-pandemic levels.
- Luxury single-family home prices have appreciated by 60% since 2017.
Luxury homes have been more resilient and insulated from economic fluctuations than other housing sectors during the market downturn, according to Coldwell Banker Real Estate.
Coldwell Banker defines luxury housing as the top 10% of listed homes in any given market. "A luxury property in Boise, Idaho, won't be the same as a luxury home in a traditional epicenter of wealth like Los Angeles or New York," said Michael Altneu, vice president of Global Luxury at Coldwell Banker.
Affluent consumers see real estate as a "safe haven," even in a cooling real estate market, Altneu told Real Estate News. Homeowners and investors in the luxury sector often view their residential properties as protection against inflation, he said.
"There is certainly optimism in the luxury sector, and these buyers continue to see the value in property investment. The luxury market is holding strong, and we expect it to remain resilient heading into 2023," Altneu said.
Real estate a safe bet for luxury buyers
According to The Trend Report 2022, an annual deep dive into the luxury housing market and affluent buyers, "investment is continuously top-of-mind" for the wealthy, no matter the market environment. Real estate continues to be a critical asset for building and maintaining wealth.
"Over one-third of affluent individuals surveyed believe that real estate is the safest investment one can make when compared to stocks, bonds, pensions and cryptocurrency," Altneu said. Luxury buyers tend to see real estate as a long-term investment and a way to build generational wealth especially in a period of uncertainty, he said.
And, despite the current uncertainty, affluent buyers are optimistic about the year to come. Survey respondents were "over three times more likely to think that 2023 will be a better time to invest in real estate compared to 2022 — rising a whopping 42% from only 11% a year ago," according to Altneu.
"While luxury buyers might be taking a more 'wait and see' approach, there is still plenty of capital and opportunity in the market," Altneu continued.
Is the luxury market cooling?
When asked about a September Redfin report showing luxury home sales falling by double digits over the summer, Altneu said the findings need to be put into perspective, describing the last two years of rising home prices as "truly unprecedented."
"We saw record sales, housing appreciation and insatiable demand for bigger, better homes. Analyzing 2022 against 2021 is really not a fair comparison," Altneu said.
The pandemic buying flurry inflated the numbers, but compared to 2019, "sales and prices are higher" today for luxury homes, and there is less inventory available, he said.
"Looking back even further, today's luxury single-family home prices have seen 60% appreciation since 2017, and luxury attached home prices increased nearly 41% from 2017," Altneu said, referring to The Trend Report data.
The luxury housing market is also somewhat buffered from economic shifts, particularly rising interest rates, because affluent buyers are more likely to pay in cash, according to the National Association of Realtors.
Specialized agents for specialty markets
Altneu noted that most high-net-worth individuals rely on agent specialists for their understanding of local luxury markets and the needs of affluent consumers.
"This is where we really lean on our global luxury property specialists to provide world-class knowledge and white-glove service to their clients," he said. He said that the agents honor the need for client privacy and know the market well enough to connect buyers with services and social groups in their new communities.
Said Altneu: "Homeownership will always be a powerful asset class for the wealthy."