As we move deeper into the third quarter of 2021, the boom that has swept up all aspects of the housing market—including the luxury sector—continues to hold strong…but for how long?
Through data from members of Luxury Portfolio International® (LPI), we see that the explosive demand for luxury listings has not waned. While still in the throes of the pandemic—with restrictions and lockdowns resuming in many markets as the cases of the COVID-19 variant swells—luxury homes remain a top priority for high-net-worth buyers, echoing the results of LPI studies from earlier in the year.
Currently, we are monitoring what the third wave of COVID-19 infections could mean for remaining high-end inventory, which, in many markets, is virtually non-existent. Single-family residences—a key target of buyers during the pandemic—continue to be in short supply.
While move-in-ready homes were being swept up in favor of those that needed upgrades and repairs, we see the lack of supply driving buyers to these opportunities. The latest flood of buyers who are seeking space, personalized amenities and distance from city centers are going to have to contend, in many cases, with homes that need improvements. There is no getting around it.
Furthermore, with a majority of consumers still navigating a work-from-home set-up (which will undoubtedly remain in-place for the remainder of the year, and continue to a certain degree after the pandemic subsides), we expect to see purchases of these properties endure, especially among those high-net worth individuals (HNWI) who now prefer to maintain a pied-à-terre in the city where they work and a large single-family home in the suburbs.
While some level of inflation is inevitable, it tends to not impact (and it won’t now) HNWI’s in any seriously debilitating capacity. While they may see their personal incomes plateau slightly, it will not hinder their appetite for residential real estate, either as primary, secondary or even tertiary options.
Pent-up demand remains steadfast for new-home construction. There is a lack of overall new-home construction, so we will continue to see high-end builders flourish. Many are purchasing older residences to build brand-new homes—a very appealing option in popular areas.
In spite of the new pandemic surge, we are beginning to see trickles of buyers from overseas setting their sights set on lucrative opportunities in global cities, such as Manhattan.
To that end, we continue to keep a watchful eye on New York, which, on the heels of the vaccine rollout, has been showing improved signs of life. Here, sales of condominiums have increased, as have those of co-ops. We view this next year or so as a one-time opportunity to secure a prime investment in one of the globe’s premier cities. As more international travelers re-enter these city centers, like New York, prices are only going to increase. It is inevitable.
Across our network, we’ve compiled key sales highlights from select markets. While our Luxury Portfolio members concur that the more precise comparison in data to the first half of 2021 (the midst of the COVID recovery) is the first half of 2019 (pre-COVID), because the of the global lockdown during the first half of 2020, we are still able to glean insights into the luxury market because of the compelling surge in sales:
– Baird & Warner in Chicago, Illinois: Single-family homes and condominiums priced over U.S. $1M saw a 191% increase in total units sold, year-over-year, in June of 2021 compared to June of 2020.
– William Raveis in Boston, Massachusetts, and Fairfield County, Connecticut: Condominium sales increased by 62.17%, but the average sales price dropped slightly from U.S. $1,876,687 to U.S. $1,845,247 from June of 2020 to June of 2021; in Fairfield County, Connecticut, which has experienced a massive influx of buyers from nearby New York City, single-family home sales increased by a whopping 115%, year-over-year—and an average sales price increase from U.S. $2,051,751 to U.S. $2,281,187.
– Brown Harris Stevens in New York, New York: Among condominiums and co-ops that closed over U.S. $1M across Manhattan, Brooklyn and Queens, recovery signs are evident as Q2 2020 vs. Q2 2021 data showed a median price jump of U.S. $1,761,821 vs. U.S. $1,832,133. The average price-per-room also edged up marginally from U.S. $532,246 in Q1 2020 to U.S. $536,100 in Q2 2021.
– Brown Harris Stevens in Palm Beach, Florida: The dollar volume of sold listings increased by 60.3% from June 2020 to June 2021—U.S. $205,600,599 to U.S. $329,768,900.
Looking ahead, as we transition into Q4 2021, there are several additional trends we’ll be watching:
– HNWI’s will continue looking for properties…investing in them for their safety and better quality of life—ensuring they can handle any future global health crises that might unfold.
– There will be a flight of Chinese money to other sectors beyond real estate; the impact will be one to monitor closely.
– Expect to see climate change impact luxury housing markets (heatwaves, fires, record droughts, catastrophic storms, etc.). It could mean a flight to other markets that haven’t been impacted by these challenges.
Mickey Alam Khan is president of Luxury Portfolio International®, the marketing and intelligence arm of the Leading Real Estate Companies of the World®. New York-based, he is also founder/editor-in-chief of Luxury Daily, the world’s leading luxury business publication, as well as American Marketer, a trends and insights platform for marketers and retailers. Alam Khan also founded and edited Mobile Marketer and Mobile Commerce Daily, turning both into leading publications in their space before he sold them in 2017. Prior to that, he was editor of eMarketer and DM News. He was also correspondent on Advertising Age from 1993 to 1998.
