The ultrawealthy are shifting their focus when it comes to buying residential properties, according to a recent study conducted by Douglas Elliman and Knight Frank. These individuals, with a net worth of $30 million or more, are now seeking a combination of lifestyle and investment opportunities in their real estate purchases. The report indicates that a significant portion of ultra-high-net individuals in America are planning to acquire a new residential property this year. In fact, on average, these ultrawealthy individuals already own four homes, with one-quarter of their residential portfolio located outside their home country.
Market Priorities for the Ultrawealthy
When it comes to making their next big purchase, the ultrawealthy prioritize “lifestyle” and “investment,” followed closely by considerations such as taxes and safety. While the luxury real estate market has faced challenges like low supply, slow sales, and rising prices, the ultra-high-end sector has managed to outperform the rest of the market. Despite a decrease in the number of sales over $50 million in the U.S. last year compared to the previous year, experts anticipate a potential increase in luxury supply due to stabilizing or falling interest rates.
The Wealth Report forecasts that the top U.S. luxury market for price growth in 2024 will be Miami, with an expected increase of 4%. Following Miami, New York is projected to experience a 2% price growth, while Los Angeles is expected to see a 1% increase. On a global scale, Auckland, New Zealand, is anticipated to be the best-performing luxury real estate market with a projected price growth of 10% this year. Other top markets include Mumbai (5.5%), Dubai (5%), Madrid (5%), Sydney (5%), and Stockholm (4.5%).
Global Luxury Real Estate Performance
Last year, the world’s top 100 luxury real estate markets achieved an average price gain of 3%. Manila, Philippines, emerged as the best-performing luxury real estate market with a remarkable 26% growth, driven by investors seeking refuge from Hong Kong and China. Conversely, New York experienced a 2% decrease in prices, and San Francisco remained relatively flat at a 0.5% growth rate. Reflecting on prime markets, Oxford, in the U.K., saw the most significant decline globally, with prices dropping by 8%.
Ultrawealthy American buyers are expanding their real estate investments overseas, with a notable presence in ultraprime properties in London priced above $10 million. Additionally, U.S. buyers are becoming more active in European markets such as Italy, France, and Portugal. This trend indicates a growing willingness among American buyers to explore alternative real estate options abroad.
Changing Property Values
Despite the luxury status of residential properties, the purchasing power of $1 million has declined significantly in both the U.S. and internationally. For instance, in Aspen, $1 million buys only 215 square feet, while in Hong Kong, it purchases 237 square feet. In comparison, New York offers a comparatively spacious 367 square feet for the same amount, making it appear more affordable in the context of ultraluxury markets.
The preferences and behaviors of ultrawealthy homebuyers continue to shape the luxury real estate landscape, influencing market trends and property values both domestically and internationally. As these individuals seek a mix of lifestyle enhancements and investment opportunities, real estate markets worldwide must adapt to cater to their evolving needs and requirements.