This summer we’re looking at the state of the luxury agent & broker in today’s increasingly complex real estate market. In October, we’ll gather in Beverly Hills at Luxury Connect to share best practices, network, and create blueprint for the luxury agent/broker of tomorrow. Don’t miss it.
Working with luxury homebuyer and seller clients can be a little like finding the Holy Grail — if you do it right. Agents who establish a productive relationship with their luxury clients can often look forward to assisting on multiple purchases and sales over the years.
But what about the new generation of luxury buyers hitting the market? What do they want that is different from the high-earners and spenders of years past?
After speaking with a number of agents specializing in the modern luxury market, and reviewing data on this growing segment, including our own targeted survey, Inman can say that while no two luxury homebuyers are like, the current crop of luxury buyers and sellers fall into several distinct categories, each with their own specific wants and needs.
Read on to learn more about this market segment and how to best position your business to appeal and succeed with the new luxury clientele.
Who is today's luxury buyer?
In our targeted survey, respondents said Generation X, those in the 38 to 53 age group, were the most active buyers this year while the most active sellers were baby boomers, aged 54 to 72.
Most buyers were married couples and or families with some multigenerational groups in the mix, the majority of households earning an annual median income of between $500,000 and $1 million, thanks to building their own businesses, being in upper management or doing well in the tech world.
And because they are doing well, a third are cash buyers in today’s market.
Of course the characteristics and demographics of the main players in luxury real estate depend on which market you are in.
In Boston, for instance, there is strong interest from Middle Eastern families wanting homes for student children, Asian investors looking for strong second-tier cities, and well-heeled babyboomer Bostonians looking to downsize from large suburban homes in exchange for comfortable and modern apartments in the city center.
U.S property firms with an international presence are doing extensive research on who the new luxury buyer is for 2018. Luxury Portfolio International, the luxury arm of Leading Real Estate Companies of the World, in a study published this year with YouGov, “The Rise of the New Aristocracy 2018” noted that in 2017, the U.S. added 745,000 affluent households to the number of families earning over $250,000.
Luxury Portfolio describes the New Aristocracy as well off young people aged between 25 to 40 who are increasingly expected to power the U.S. real estate markets in the coming years, partly due to inheritance and to their own success. They are usually married, have young children and have inherited or expect to do so in the next few years.
Sotheby’s International Realty is meanwhile closely monitoring an emerging affluent consumer base of mainly millennials ready to buy in the next three years which it identified and discussed in last years’ Global Affluence report.
These buyers are at the right stage in life for this type of purchase, wanting a home that fits a particular lifestyle and are doing well in their careers, the report found.
Looking at active luxury buyers for 2018, Christie’s International Real Estate (CIRE) has identified a number of new homebuyer groups in a recent study, “Luxury Defined,” starting with “Xennials”, older millennial buyers, born largely in the U.S between 1977 and 1985, many of whom work in finance and tech and are looking for second homes.
The company’s research also labeled what it terms “Nomad” millennials, aged 22 to 37. Members of this group are working in startups, tech and creative fields and “reinventing second-tier urban locales,” according to CIRE. They are “digital nomads” working remotely from their chosen locations buying entry-level luxury homes (though they may be doing so with family support and financial assistance).
Then there are the baby boomers “embracing a new lifestyle,” as they near or enter retirement. They have excellent spending power thanks to the rising value of their large homes and their success with equity markets over the years. At this stage of their lives, they are looking to live closer to the center of town.
What properties do they want?
Given that the most active luxury homebuyers right now are Generation X, it may not come as a surprise that the demand in the luxury sector is more for modern and contemporary homes.
Almost unanimously, respondents in Inman’s survey said that luxury buyers wanted detached single-family homes.
The most desired architectural design was contemporary, though some still wanted colonial.
The most popular interior style was for contemporary and modern though a sizable 27 percent still wanted traditional interiors.
Respondents told us their luxury buyers tended to want a larger new primary home with their next house, for it to be over 3,000 sq. ft.
Interesting, the majority of our survey respondents (nearly 50 percent) indicated that they preferred to be in the suburbs. Over 20 percent of buyers wanted scenic waterfront property, while just over 15 percent liked an urban location.
For extras they appreciated homes with pools (34.55 percent) and indoor movie theaters (23.64 percent).
Over a third (35.09 percent) wanted a smart home. The most popular smart home feature was a security system (53.57 percent).
Sotheby International Realty’s latest report on “Global Affluence: The Emerging Luxury Consumer” found that buyers liked a real range of styles and locations including waterfront, metropolitan and historic homes. Also: sustainable and eco-friendly homes.
Luxury Portfolio’s research found that its New Aristocracy cohort were looking for an urban home, but this didn’t mean they were going small. A number of buyers wanted a multi-generational home that could accommodate more than a single family, so over half were looking for homes of 7,500 sq. ft. or larger, and four-plus bedrooms and three-plus bathrooms.
Their tastes were wide ranging, an almost equal amount liking Victorian, modern, loft style, Turdor, and brick Georgian, according to Luxury Portfolio.
They also liked to be close to restaurants and dining, have outdoor space and entertaining areas, as well as specialty rooms for entertainment, hobbies, and a dedicated home office. Truly, the new luxury buyer wants to “have it all.” Except maybe the size of previous, “Old Money” luxury estates.
“Luxury is not always bigger, ” said a CIRE affiliated agent in Atlanta, Georgia, Jenni Bonura, quoted in the CIRE white paper, Luxury Defined. “Today’s mid-tier luxury buyers prioritize privacy and security, preferring tech-enabled homes that require minimal upkeep. A sprawling estate is not needed but a mansion with a smaller footprint…is highly attractive.”
Tastes differ widely depending on the nationality of the buyer, said Amanda Jordan of Sotheby’s International Realty in New York City.
Jordan said she regularly deals with international buyers from the Middle East, Asia and Russia, as well as domestic buyers from major U.S. cities, including, of course, New York.
“It’s best you get to know each of these groups because they each want quite different real estate,” advised Jordan.
In her NYC market, international luxury buyers like new development properties with many amenities. They often prefer properties associated with a marquee brand such as Four Seasons or The Plaza, Jordan said.
Domestic buyers are more interested in a location, its cachet and the unique qualities of a property. The hometown New Yorker’s focus, meanwhile is more on the opportunity for appreciation — they want confirmation that the value of the property is or will soon be higher. They like co-op properties, ideally around Central Park.
For his luxury buyers in Boston, Brian Dougherty, managing partner at Robert Paul Properties, a Luxury Portfolio International member, also sees a variety of needs.
He notes that the high spec Millennium Tower which was recently completed in Boston, sold 30 percent to internationals and a big segment to empty nesters who were relocating from the Boston suburbs. Chinese buyers only want brand new construction, while local buyers are happy to buy a 100-year-old brownstone, he said.
Quality will always draw luxury buyers and a story around the home, said Sotheby’s International Realty chief marketing officer, Kevin Thompson.
The Kingdom of Saudi Arabia bought Jackie Onassis’s childhood home from Steve Case, the co-founder of AOL, for $43 million in May, TTR Sotheby’s International Realty representing the seller.
“With this home you are buying a piece of history,” said Thompson. “Each time that home has sold, it has set a record for the highest sales price in the D.C. region.”
As younger age groups enter the luxury market, their presence is broadening the range of what might be considered a luxury home.
CIRE’s Xennial buyers, for instance, are looking for second homes which they see giving them unique lifestyle experiences, favoring well designed new construction in places such as Lake Tahoe and Jackson Hole, and, comfortable with the shared economy, they would happily rent these homes out on Airbnb, Vacasa, or Guest-to-Guest.
On the other hand, “Nomad” millennials are seeking a hip, urban lifestyle in second-tier cities and entrepreneurial hubs, including the growing metropolises of Austin, Charlotte, and Asheville. These buyers are concerned about walkability scores and good personal services nearby. Open floor plans, high-tech and fully automated home environments are also important to this group.
CIRE’s baby boomers are also competing with their younger buyer groups in urban luxury locations, but their priorities are slightly different. These boomer buyers are looking for luxury condos and town houses in urban neighborhoods or “close in” suburbs, spacious enough to accommodate visits from adult family and guests.
How can agents retain luxury clients?
As any established luxury agent will tell you, winning and retaining clients in the luxury sector as an agent is all about long term relationships, it is not a transactional business. And who you know can really help.
Douglas Elliman agent, Frances Katzen, advises agents not to be afraid to use their lofty contacts.
“Endorsements are never to be underestimated,” Katzen said. “If it’s a VIP, I have [Douglas Elliman Chairman] Howard Lorber reach out on my behalf as an endorsement for me.”
Meanwhile when approaching the seller of a property that didn’t sell, Katzen goes in very prepared and gives them the good, bad and the ugly on their property.
“These people don’t have time for theatrics. They have had the wedding, been married to the first broker and are privy to the game. I like being the 2nd wife.”
Luxury clients love nothing better than getting an early on a deal and an agent’s contacts can really help with this.
Brian Dougherty, managing partner at Robert Paul Properties, said: “Our value add to a buyer client is to help identify off-market opportunities where they can approach the purchasing process in a more civilized and thoughtful manner with less competition.”
Brokerages can also offer extra services which can be enormously helpful to their busy luxury clients.
Hudson Phillips Properties in Charleston has a division, Hudson Phillips Restoration and Design Services, which advises clients on how best to preserve the historical integrity of their property while modernizing the home with expertise.
“We’ve each bought, sold and renovated many luxury properties so we can speak with credibility and offer intimate advice as trusted friends and advisors to our luxury clients,” said broker-in-charge, Leslie Turner.
For some agents, your market can evolve and become more attractive to luxury buyers as is happening in Florida due to tax changes.
Luxury Portfolio International, drawing from a number of sources including Luxury Portfolio, realtor.com, the National Association of Realtors (NAR) and Redfin, notes that prices in Florida are rising at their fastest pace in five years and that luxury property prices are the highest in a decade rising 25 percent from a year earlier.
Michael Moulton, broker associate with Michael Saunders & Co, a member of the indie broker network LeadingRE has had clients buy multiple properties on the Gulf Coast of Florida. Moulton told Inman the new tax code has been a boon for his state.
“Based on the new tax code, those who are either retired or can make Florida their primary residence while still working, are leaving their previous high-state-income-tax locations and reviewing how to base themselves in Florida where we have no state income tax,” Moulton said.
Daniel de la Vega, president of ONE Sotheby’s International Realty in South Florida is enjoying seeing Miami gain in stature.
“It has the beaches and the weather that everyone loves, but as of late we are also developing a thriving culture,” de la Vega said of the Magic City. “We are attracting the best chefs and architects from around the world which has really placed us on the map.”
The Seattle market is another which has become more of a mecca for luxury buyers. Agents who know the best parts of the Emerald City are benefiting from this.
Dan Gottesman, luxury real estate advisor at Engel & Völkers Seattle, is seeing an influx of younger domestic and international players who are attracted to the city thanks to the presence of Amazon, Starbucks, Microsoft, Google and other tech giants and startups.
Gottesman said his intimate knowledge of the market is helping him attract luxury clients. “My business partner and I both grew up in Seattle and know almost all segments of the market better than our competitors, and we think our hands-on approach gives our clients what they want in a luxury agent.”
He points out why a luxury client is a good bet for any agent.
“They are savvy and sophisticated and usually can make a decision quickly about what they want.”
For new agents, wanting to get into luxury, how do you get into it in the beginning? There are no short cuts, said Charleston broker-in-charge at Leslie Turner.
“You can’t buy your way in. In my experience, hard work and providing excellent services to all clients, regardless of the price of the home they are buying, builds an agent’s reputation for professionalism and reliability.”