Global luxury property trends

Although sales in the luxury property sector are returning to a more normalised pre-covid pace, many premier global centres and prized second-home destinations continue to command exceptional prices for prime property with price records being broken in some markets.

The cities of Dubai, Miami and Melbourne and the states of Arizona, Utah and Massachusetts all recorded their highest-ever priced residential transactions in 2022 and, on average, sales prices of luxury residences last year were 34% higher than in 2017.

This is largely due to the fact that during times of economic uncertainty, investors are drawn to the historic stability of residential property and this is especially true of the more resilient luxury market which traditionally offers solid returns well above the current interest rate.

The 2022 Douglas Elliman and Knight Frank Wealth Report reveals that a large share of private capital is being put into property, with private investors increasing real estate investments by 52% in 2021.

And according to Knight Frank’s Prime International Residential Index (PIRI 100), the average value of luxury residential property increased by 8.4% last year, which represents the highest annual increase since this index started tracking in 2008. Although there is nothing new about property being the go-to investment in uncertain economic times, there have been a number of notable shifts in buying trends amongst luxury investors, some of which can be attributed to the pandemic:

• More space:
  
  With work-from-home and home-based learning having become the norm for many people, even post-pandemic, the appeal of properties like city penthouses has diminished whilst the demand for larger houses with outdoor living space has increased exponentially. 
  
  
• New locations:
  
  But what is equally significant is that many of these investors are not merely moving out of the city and into the countryside or to nearby coastal areas, they are moving states, counties and, often, even countries.
  
  According to data from Coldwell Banker Global Luxury’s 2022 Trend Report, many consumers are hoping to purchase a home in their dream location, specifically referring to international properties and a whopping 40% reported a higher quality of living or potential investment opportunities as their motivation for wanting to buy abroad.

• Co-primary living:
  
  Second – or even third or fourth – homes are common investments among the uber-wealthy who have traditionally used these properties as vacation homes. However, what’s becoming increasingly common, is the use of secondary homes for longer periods. 
  
  Since flexible and remote working became the new norm, wealthy homeowners have decamped for several weeks or even months at a time to relax or to work remotely in a more agreeable setting.

• Retreats:
  
  There has been a notable increase in demand for homes that are not merely away from the hustle and bustle, but which act as true retreats; remote properties where one can truly get away from it all.
  
  
• Sustainability and eco-awareness:
  
  The pandemic precipitated an increased awareness of the importance of sustainable living which is being evidenced in recent buyer preferences, especially at the top end of the market where money is often no object.
  
  Additionally, with energy costs rising and supply even threatened in some areas, it makes sense to have energy-saving and generating systems and features like smart cooling technology in the home. Many of these homes now come with electric car charging stations and we’re starting to see alternatives to traditional materials such as cork spray rather than paint for exteriors.
  
  Developers world-wide are now rising to the challenge to provide sustainable luxury homes in beautiful locations for the uber-wealthy, whether it be a primary or co-primary residence.

South Africa may be under considerably more economic pressure than many other countries, but the luxury market here is also faring well with record prices being achieved in some areas.

Recorded year-on-year ending 31 October 2022, Lew Geffen Sotheby’s International Realty sales in the R10m to R20 price band have almost doubled this year, once again breaching the R1.5 billion mark.

The Western Cape is currently receiving the lion’s share of the attention in the luxury sector as it’s the most popular destination amongst semigrants and European and American foreign buyers because, over and above the lifestyle it offers, it’s perceived to have better governance and service delivery.

Our Constantia Upper Team has done exceptionally well during the past two years and they recently won the National Turnover award in the Sotheby’s group for their performance/results for last year.

In the northern suburbs of Johannesburg, this sector is being driven by an influx of wealthy investors from other African countries, many of whom perceive this area to be a financial safe haven.

Although the luxury sector does march to its own drum, the truth of the matter is that when the luxury market is booming, it inevitably trickles down to the other sectors and aids the overall real estate recovery cycle.