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The Market For World Luxury Real Estate Heads Towards Equilibrium- Report

The Market For World Luxury Real Estate Heads Towards Equilibrium- Report

Luxury Portfolio International, the largest network of premier locally branded real estate companies, has indicated in its annual report of the 2022 State of Luxury Real Estate Report (SOLRE) that luxury-residence seekers are down following the reluctance of luxury residential sellers to sell last year.

The report indicates that there is strong desire to sell by luxury real estate sellers, though affluent consumers fell from 34 percent to 20 percent of the total affluent participants in the residential market. The perception, however, is that the luxury market is getting stronger, with more buyers coming to the table.

“With new construction experiencing delays and outright stoppages, there has been increasing interest for existing homes. However, owners were not necessarily ready to sell last year. This lack of inventory has been a significant price driver in most luxury markets. Now, it seems that luxury owners are convinced that the iron is hot and their interest in selling has increased by more than double (to 28 percent from 11 percent).”

According to Mickey Alam Khan, President of LPI "After a record-breaking year in luxury real estate, we anticipate that some balance will be restored to the market. 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.”

In fact, 71 percent of owners believe their home value will increase this year, creating a strong incentive to sell. The average luxury homeowner expects an increase of approximately four to five percent compared to three to four percent last year.

While 2022 is expected to continue at a fast pace, there are signs that the luxury residential real estate market will be gradually stabilizing, a crucial step to avoid complications for a long-term, super-heated market.

Buyer Trends In 2022

The mass of buyers has gotten smaller, but still outnumbers the available market. The market for luxury real estate remains strong after a record year of sales in many locations. Supply, demand, and price are all showing signs of normalizing suggesting the year ahead will be an active one.

“Across the full spectrum of affluent consumers, there is greater interest in purchasing real estate under USD $1 million. This signals a resurgence of upper-middle class buyers either those who were delayed in purchasing last year, or who are now willing and able to acquire.”

From the luxury buyer POV, the market is even more competitive than last year, with backlogged, delayed and frustrated buyers chomping at the bit to buy their next property. The buyer who is planning to spend the most also fears they missed their opportunity to take part in this market.

Psychologically it remains a sellers’ market. In practice, the forces of demand and supply will create a more balanced ratio of buyers and sellers in the coming year.

 

Source: Abdul-Razak Mohammed (Real Estate Times Africa)

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