The luxury real estate market is definitely on the upswing. After the last dreadful few years in which inventories were soaring and there were few luxury buyers, the market has finally shifted back again. Of course, trophy properties often sell irrespective of market conditions. Today, many successful agents are eyeing this sector and wondering what they can do to break into the luxury market in their area.
Defining the luxury market
What constitutes a luxury listing? Some people define the “luxury” market as being the top 10-20 percent of the market in any given area. Others prefer to categorize “luxury” as being an upscale home in locations such as Aspen, Colo.; Beverly Hills, Calif.; Boston; Manhattan; the Hamptons, N.Y.; or San Francisco, among others. A third group would argue that a luxury home must fall into the top 10-20 percent of all homes in one of the most luxurious destinations in the world, such as London, Paris or Hong Kong.
Coldwell Banker published a comprehensive report on the luxury market in December 2012. At a press conference last month, 10 of its top luxury agents provided a firsthand account of exactly what is happening in their local luxury markets. Below you’ll find a snapshot of the key trends.
Luxury makes a comeback
Both the Coldwell Banker Luxury Market Report and the agents who participated in last month’s press conference concurred: There has been a “renewed enthusiasm at the upper end of the market.”
The key findings from the Coldwell Banker report on the ultra-affluent (i.e., those who can purchase a home with a $10 million or higher price tag) are summarized below:
- 72 percent are local to the area they buy in.
- 44 percent are entrepreneurs.
- 54 percent are married with children.
- 39 percent of international buyers are coming from Asia.
- 62 percent are between the ages of 45 and 54.
- The most important feature (79 percent) to an ultraluxury homebuyer is “location, location, location.”
- The most effective buyer-targeted marketing: 44 percent said “online.”
The other key trend cited in the report was the unprecedented rise of affluent women.
“Women now control $20 trillion in consumer spending worldwide, and women’s global incomes have been estimated to grow by $5 trillion over the next five years (nearly twice the growth in GDP expected from China and India combined), making affluent women one of the most influential groups in the luxury marketplace today.”
In fact, the Federal Reserve Board predicts that by 2030, approximately two-thirds of the wealth in the United States will be controlled by women. What’s interesting is that the bulk of these women will be between the ages of 55 and 65. This applies to Chinese women as well — there are 2,700 Chinese women worth more than $30 million, of which 39 percent are under the age of 40.
These numbers conflict somewhat with what the agents reported is actually happening in the field. Virtually all the agents who were on the press conference reported that the bulk of their ultra-affluent clients were between the ages of 35 and 45.
Jennifer Ames (Coldwell Banker Chicago) summarized what many of the other agents said:
“Our ultraluxury clients are younger and more family-oriented. They don’t want the big, traditional home like the ones that their parents owned. Instead, they travel light and want a clean design with an open floor plan. Their suburban home must have plenty of light, big windows and an open kitchen. Outside, they want beautiful living areas, including gardens and a lavish outdoor kitchen complete with big-screen televisions. While older buyers are downsizing, they too are opting for the new and the contemporary.”
Jill Hertzberg (Coldwell Banker Miami Beach) mentioned how today’s buyers want to “bring the outside in” — this is part of the reason that big windows and outdoor eating areas are so important — and Chris Cortazzo (Coldwell Banker Malibu) added: “Our buyers want an open floor plan. Dining rooms are a thing of the past. Instead they want their own screening rooms, but not with theater-style seating. They also want pools, ocean views, as well as wanting to leave their stamp on the property.”
“Leaving their stamp on the property” can include a wide variety of improvements such as an infinity pool or an indoor ice rink. Several agents also indicated that an important trend among their ultra-affluent clients was building subterranean garages to house six to eight cars or more.
Of course, these clients also expect to have access to excellent schools; all the latest high-tech gadgetry; a wine cellar; and for those who live in areas where there is bad weather: mud rooms.
The one final point that these agents drove home repeatedly was, “The ultra-affluent purchase based upon the location and the lifestyle.”
To learn more about what ultraluxury clients want and how to best go about representing them, don’t miss part two of this series on Thursday.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice’s five-minute daily real estate show, just named “new and notable” by iTunes, at www.RealEstateCoachRadio.com.