PERSPECTIVE FOR THE FUTURE

Emerging from the pandemic and a historic homebuying boom, we have arrived at a key inflection point. The data through the end of August 2022 makes it clear that many luxury real estate markets are transitioning. As inventory levels rise across locations, property type, and price points, the expectation is that more luxury property markets will eventually shift toward balance or a traditional buyer's market.

However, not all indicators point toward a major downturn. If inventory remains tight, the seller's market trend that has dominated the luxury real estate world will likely continue. The vast amount of wealth that was created during 2020 and 2021, coupled with the affluent’s steadfast reliance on real estate for wealth building, also makes it hard to imagine a full-scale retreat from property buying. Despite affluent individuals losing some of this wealth to stock market declines this year, Wealth-X still forecasts a modest uptick in wealth allocation to real estate and luxury assets, predicting it will grow $1,050.8 billion globally and $438.1 billion in the U.S. by the end of 2022.

Wealthy individuals consistently embrace real estate – four in five survey respondents agree that real estate is a safe investment and almost nine in 10 think that the 2023 real estate market will be better or the same as 2022. Even if some affluent clients choose to wait on the sidelines, they may not be doing so for long. Over 75% are planning a home purchase within the next one to six years, with more than 40% planning to move in the next one to three years.

While demand for luxury properties is widely expected to soften compared to last year, it is important to put the slowing of sales and increases of inventory in perspective: 2021 was a rare market occurrence brought on by a mass wealth creation event and a life-changing pandemic.

Instead, 2022 market comparisons are better understood in the context of stable years. Sales in the first eight months of 2022 are still 8.6% higher compared to this same time period in 2019. Looking back even further, today’s luxury single-family home prices have seen 60% appreciation since 2017 while luxury attached home prices increased nearly 41%. We know that a home does not just provide financial stability; as we discovered during the pandemic, a home can provide emotional and psychological security, a sense of wellness, and a better quality of life. It is this pursuit of the dream home – whether it is for investment or vacation purposes, or in the United States or abroad – that will always drive the affluent toward real estate as it fulfills both the intangible and tangible needs in their lives.

As the luxury housing market begins to reset and wealthy individuals pursue properties that provide them with a source of stability over the next few years, they will also be looking for stability in their trusted luxury real estate professionals.

Agents will be their guiding source. Those who will rise to the top in this new buying environment will need to be deeply networked and able to service clients across multiple markets worldwide – while also keeping their clients’ long-term and short-term priorities in close focus. They need to have knowledge and expertise – not just on their local real estate climate, but also on financial markets, lifestyle, and global events – so they can properly advise clients with a balanced perspective.

The Coldwell Banker Global Luxury® program is committed to cultivating just this kind of agent. As a leader in luxury since 1933, we are uniquely positioned to help guide agents and their clients through this present moment of uncertainty – by always having our eye on the future.