The luxury real estate market serves a select group of enthusiastic buyers and exhibits its own unique characteristics. So if you are looking to break into this market or decide whether you should be buying or selling a luxury property, you must first understand current market trends. That’s why we’ve consulted luxury real estate experts, who helped us find out the top trends shaping the luxury real estate market today. But first, let’s find out what luxury real estate is.
Buying or selling a luxury property – which way to go?
Defining “luxury real estate” is tricky since market conditions affect the criteria used to describe it. In other words, it means that what passes for luxury in a small Midwestern town would not cut it in a large West Coast metropolis.
Only the top five to ten percent of listings in any market are considered luxurious. Luxury homes in major cities typically have to ask for prices of $1 million or more. The bar is set considerably higher in major cities like NYC. There, the prices usually start at over $4 million.
Pricing in a given area is determined by several factors related to the property’s location, amenities, and layout. While it’s true that a home may be advertised as having a few high-end features, that doesn’t necessarily indicate it should be priced as such. When determining the worth before selling a luxury home, it’s essential to take a holistic approach.
But what is smarter at the moment – buying or selling a luxury property? To answer this question, let’s analyze current trends in the luxury real estate market.
The housing shortage doesn’t affect the luxury real estate market as much
The severe shortage of available homes is a contributing factor to the skyrocketing price of real estate. Unfortunately,there aren’t enough sellers to match the buyers’ needs. However, this is only affecting entry-level and mid-range homes. On the other side, the luxury market is holding up relatively well. In fact, the number of luxury house listings went up by 15.8% in the fourth quarter of 2021 compared to the same period in 2020
Because only a select few people can afford to shop in the luxury sector, sellers often have to wait for months before a serious buyer approaches. Buyers are flooding the market due to the unexpected bull market, and sellers are eager to start a bidding battle.
The year 2021 saw a decrease in housing stock across the board due to increased demand, but the luxury market fared the best. The total number of luxury listings declined by only 5.1% in 2021 compared to 2020, whereas the number of listings for costly, mid-priced, and inexpensive houses all fell by double digits.
Luxury properties tend to sell faster
The luxury real estate market has grown even faster than the rest in the past couple of years. This industry has seen exceptional growth relative to the overall housing market. A year ago, it took three times as long to sell a premium home as it does today.
In 2022, the average number of days on the market for a luxury single-family home was only 11! Also, the sales ratio in the high-end real estate market was 66.42% in February of 2022. Considering that everything over 20% is regarded as a sellers’ market, it’s a great time to sell a luxury property.
Despite a narrower pool of potential buyers for luxury properties, sales of such properties increased by 41.6% in 2021, compared to 5.9% for mid-priced homes and 7.0% for inexpensive properties.
The market for luxury real estate is the hottest in the South
Knowing how far your dollar will go is a crucial first step if you’re looking to enter the luxury real estate market. And as was previously said, a home’s location is a significant factor in determining its level of luxury.
If you remove the cost of conveniences like parking and storage, the square footage a buyer may afford in Miami is more than double that in NYC. That’s one of the reasons sales of expensive properties rose, especially in the South of the United States. Between 2020 and 2021, expensive Miami real estate sales increased by 101.1%.
Tax breaks are also a crucial deciding factor. Since neither Florida nor Texas imposes a personal income tax, residents who make either of them their primary residence may enjoy favorable tax treatment. Southern states typically have lower construction costs, making it more affordable to develop high-end residences there. Plus, you can always count on easily finding and hiring reputable movers to help you have a smooth long-distance move and reach your new home stress-free.
Prices of luxury homes are increasing
A rising trend in home prices is creating new benchmarks for lavishness. The average price of luxury property rose 14.7% from 2020 to 2021. While this shift occurred, the median number of days on the market decreased by 38 days yearly. This is by far the largest decrease relative to all housing categories. Also, homes in areas where prices have consistently risen over the years continue to increase in value.
The popularity of owning a second luxury property is growing
Historically, the worry that one wouldn’t use a second property discouraged many potential buyers. Due to a lack of vacation time, the secondary residence would sit empty for most of the year, representing an unnecessary outlay of resources.
However, the situation is different when it comes to buying luxury property nowadays. More people can now buy second homes because they are no longer tied down to a single area for work. Today, mountain and coastal resort towns have become common stops on work-related vacations.
Co-ownership is on the rise, too. This is true not just for the affordable housing market but also for the luxury housing market. Some buyers are interested in a second home that provides all the comforts of a luxury residence. Most people who own second homes only stay there periodically, so buying one might be a financial burden unless you become a co-owner with someone else.
As you can see, buying or selling a luxury property comes with extensive benefits. However, to decide what option is the best for you and your unique situation, make sure to reach out to luxury real estate experts who’ll be able to help. Best of luck!