Coldwell Banker Global Luxury has released it’s luxury report for 2022, highlighting trends, influences, changing opportunities, and predictions into future markets.
The Report 2022
Released March 1st, 2022
Real estate analysis is based on what has occurred in the past; it is how predictions re made and how future decisions are evaluated.
The impacts of a once-in-a-generation pandemic inspired uncertainty at first, then a paradigm shift: people began re-imagining their ideas of home and rediscovering their essential values at the very moment when wealth was rising to historic levels around the world, thanks to rebounding stock markets and surging home equity gains. According to the latest Wealth-X data, the population of individuals with a net worth of $5 million+ reached more than 3.6 million globally. That was an increase of 19.8% over 2020 and a notable difference from 2020, which saw only a 2.2% gain over 2019. This extraordinary wealth growth led to a real estate expansion like we’ve never seen before. A new map for luxury opened up new locations and multiple homeownership in greater numbers. Home as safe haven became the rallying cry for our time.
Where do we go from here? What opportunities should we look for?
Luxury Report; Opportunities
Rather than focusing solely on the past, The Coldwell Banker Global Luxury program is looking forward in The Report 2022. Annual statistics in the top 10% of 120 U.S. markets were analyzed with our partner, the Institute for Luxury Home Marketing, to provide a view into future trends that could impact luxury real estate and the next opportunities that lie ahead. We consulted with Wealth-X to provide a global outlook on wealth, homeownership trends and where current and upcoming pockets of international affluence may reside. Wealth management expert Barry Ritholtz added his financial perspective, and as always, Coldwell Banker Global Luxury Property Specialists lent their boots-on-the-ground market insights. – Michael Altneu
This year’s report, published by the Coldwell Banker Global Luxury® program, curates the latest luxury real estate insider intelligence and forecasted market trends from the , Wealth-X, Coldwell Banker Global Luxury Property Specialists and other wealth experts.
Included in this year’s report:
- Luxury in Review: A look back on the luxury real estate market trends that shaped 2021
- Vision Survey: An exclusive survey of Luxury Property Specialists on the latest home buying preferences impacting the high-end
- U.S. Luxury 2022 Outlook: The six trends most likely to influence this year and beyond
- Supply and demand equilibrium
- Rising luxury price thresholds
- A new map for luxury
- Luxury new development on the rise
- The sustainability shift
- Return of international buyers
- The Opportunity Index – A review of 120 U.S. markets that still may have room to rise and houses to buy in 2022
- Global Luxury Outlook: The wealth and real estate footprints of 21 international cities outside of the U.S. provided by Wealth-X
- Financial Drivers of Wealth: The economic and financial factors impacting luxury real estate, plus 2022 money insights from wealth expert Barry Ritholtz
- The Agent’s Changing Role: A Q&A with M. Ryan Gorman, Liz Gehringer and Tim Foley
Key Takeaways
Lifestyle is a Top Driver
The residual effects of 2020 were still impacting affluent buyers’ real estate decisions in 2021. The continued to prioritize health, wellness, family, home and lifestyle. In fact, an overwhelming majority of Luxury Property Specialists surveyed said that buyers were purchasing in their market for lifestyle reasons; a well known fact of luxury buyers in Northern Michigan.
Global Wealth Rises by Double Digits in 2021
Data from Wealth-X shows that the world’s affluent population – those with a net worth of $5 million+ – grew 19.8% from 2020 to 2021, adding 597,550 individuals to bring the total population to 3,612,730 individuals worldwide. Their combined wealth rose 20.4% to over $75 trillion. This was significant increase from 2020, which saw only a 2.1% year-over-year gain. U.S. wealth growth rates were higher in 2021, rising 24.8% in both total wealth and population of individuals with a net worth $5 million+ year-over-year.
The Great Reconciliation Leads to Historic Real Estate Expansion
Massive wealth creation, combined with a transformation of living patterns that is expected to last for generations to come (what we’re calling “The Great Reconciliation”), led to insatiable demand for larger properties and more of them, depleted inventory and soaring prices. In 2021, sales of luxury single-family homes rose 14.5% while prices increased 20.3% from 2020. Sales of attached luxury homes saw a more dramatic uptick of 29.6% year-over-year and a 16.6% increase in prices.
A New Map Opens Up for Luxury
Affluent consumers are no longer concentrated in cities like Los Angeles and New York City. They are everywhere, in places such as Colorado, Idaho, Georgia and Tennessee (and Northern Michigan). Work-from-home opportunities, the desire for extra space, climate change considerations and accessibility to their dream locations means luxury may continue to expand throughout the country as consumers search for the home that best fits their needs and desires.
Trends Set to Influence Luxury Real Estate in 2022 Identified
Curated from market insights provided by the Institute for Luxury Home Marketing and a survey conducted with Coldwell Banker Global Luxury Property Specialists, several emerging trends may potentially influence the market in 2022. These trends include: the return of international buyers to the U.S. property buying scene, a supply and demand equilibrium, rising price thresholds and new luxury benchmarks, a growing focus on sustainability and a widening market for multiple homeownership as nearly 70% of individuals with a net worth of $5 million+ now own two or more properties.
Where are the Next Opportunties?
The Opportunity Index, introduced this year for The Report, highlights 120 major U.S. luxury property markets according to their “opportunity” or their buying potential. These markets may still have room to rise and houses to buy in 2022, which include hidden gems and undiscovered suburbs right next door to known affluent hotspots. State Island took the top spot for single-family homes and Cincinnati ranked highest as an opportunity for attached homes.
Where Does the World’s Affluent Live Outside of the U.S.?
As multiple homeownership climbs among the affluent and relocations are expected to continue, it is important for luxury real estate professionals to understand affluent individuals’ relationship to location and their preferences for primary or secondary homeownership in those places. Data provided by Wealth-X sheds more light on 21 major cities outside of the U.S. with the highest populations of wealth individuals (those with a net worth of $5 million+), primary vs. secondary homeowners and residential vs. real estate footprints in these locations.
Coldwell Banker Global Luxury® is recognized as a world leader in the marketing of exceptional properties and is widely considered to be among the world’s consummate marketing programs for successfully promoting luxury properties to a local, national and international marketplace.
Five 2021 Luxury Real Estate Trends to Watch in 2022By Michael Altneu, Vice President of luxury for Coldwell Banker
We’ve never lived through a year like 2021 – an astonishing statement, considering we were all expressing a similar sentiment around this time last year.
The luxury real estate buying boom that began in 2020 escalated in 2021. Insatiable demand depleted inventory across the U.S. and put upward pressure on prices. Driving the real estate surge was a combination of factors: 1) shifting consumer values caused by the Covid-19 pandemic, 2) historic wealth growth due to cryptocurrency gains, soaring stock markets, rising house prices and increased savings and 3) the idea of home became paramount. As people searched for safe places to put their wealth and re-envisioned home as multi-functional spaces for work, play and sanctuary, they sought out bigger and better living environments. Many luxury real estate professionals will look back on 2021 and be able to say that it was their best year yet.
The question now is: will 2022 build on this unprecedented momentum, or will there be a deceleration of demand as some experts are predicting? There are a number of unknowns that will dictate future market direction, but here are five key trends to watch:
1. Low inventory
Low inventory continues to constrict the top 10% of the market. In September 2021, there were 36% more luxury homes sold than new inventory entering the market. One month later, that figure ballooned to 55%. Coldwell Banker Global Luxury® Property Specialists from across the country have told me that they do not see inventory levels improving any time soon. “The biggest story of the year is that our inventory is down 44% year-to-date in the Aspen area and 72% in Snowmass Village,” commented Carrie Wells, the No. 1 agent in the Coldwell Banker network.
2. New luxury price thresholds
Declining inventory levels, combined with a lack of desirable properties, has pushed prices up across all luxury price points.
Median luxury sold prices* as of the end of October 2021, compared to the full year of 2020, has risen 23% for single family homes and 14% for attached properties, according to recent stats compiled by the Institute for Luxury Home Marketing, the partner who helped us prepare our 2021 “A Look at Wealth” report released this fall.
One of the price segments with significant growth was the $1 to $5 million range. In the first 10 months of 2021, there was a 69.2% increase in the number of single-family sold properties in that price category and 65.3% for attached properties, compared to the full year of 2019. Based on current trends, sales for single-family homes priced $1 to $5 million will rise YOY by 64.6% compared to 2020 and 112.6% compared to 2019, while attached properties will rise by 81% compared to 2020 and 96.6% compared to 2019.
As a result, luxury price thresholds rose across the U.S. In Los Angeles, the entry-level luxury home price hovered around $2 million for many years, but is now closer to $3 million, according to Joyce Rey of Coldwell Banker Realty in Beverly Hills. It’s not just happening in major U.S. cities either. Even in a small resort market like Hilton Head Island, S.C., the barrier to luxury entry has increased nearly 40% since 2019, from about $550,000 to $779,000 – “while at the same time experiencing a more than 60% decrease in the inventory of homes,” noted Thomas M. Kersey with Coldwell Banker Access Realty.
3. High demand for turnkey properties and new construction
Turnkey properties are still sparking bidding wars and fetching the highest prices. Jade Mills, also in Beverly Hills, said earlier this year: “People have a lot on their plate and adding a remodel to a move during such complicated times gives added attraction to a move-in condition house. Clients want done houses.” In Miami Beach, Danny Hertzberg of Coldwell Banker’s Jills-Zeder Group estimates that 90% of his affluent buyers want new construction, compared to 70% of them, pre-pandemic. Recent supply constraints in the construction industry – from labor shortages to materials like lumber, concrete and paint – have only amplified demand for turnkey and newly built properties.
This is also the case in Manhattan, where new luxury construction appears to be leading the city’s recovery. A joint report by Marketproof and UrbanDigs recently found that Manhattan new development deals in October 2021 rose 122% to 224 contracts from last year’s pandemic depressed 101. Month-over-month, the number of deals increased 28% from September’s 175 contracts. Median list prices also increased 71% year-over-year in October and 52% from September, buoyed in part by 200 East 83rd Street, a Robert A.M. Stern-designed luxury development by Naftali Group and Rockefeller Group, which reported 35 contracts ranging from $3.6 to $11.5 million. As Gerard Splendore, a broker for Coldwell Banker Warburg Realty, noted: “It is not entirely surprising that most post-pandemic buyers prefer pristine and immaculate spaces that are previously unoccupied as opposed to older residences with wear and tear. After all, who wouldn’t want to move into an entirely new home, with the most modern accouterments and facilities at their disposal?”
4. The migrations continue
The Great American Migration was still in effect for much of 2021, except partly in reverse. Whereas in 2020 people were fleeing densely packed cities and pandemic hotspots to small town hidden gems, suburbs and popular second home destinations, people returned to cities in 2021. Another group of buyers were also making moves to small to midsized cities with more affordable home prices and reasonable commuting distances to major employment centers.
5. The rise of co-primary ownership
Happening concurrently with migrations, as remote work became the norm, was the rise of co-primary ownership. Some affluent buyers did not fully migrate to other locations; rather, they simply swapped a secondary residence for a primary residence or chose to own two primary properties in different locations and split their time based on lifestyle preferences.
Looking Ahead
What will 2022 bring? Inflation, mortgage rates and construction supply constraints are all economic factors to watch. Our Luxury Property Specialists are also keeping an eye on what wealthy international buyers will do now that U.S. travel restrictions are lifted. Markets like Miami are especially keeping close tabs on this development, per the Jills Zeder Group. “Miami has doubled the number of sales in the $5+ million range year-over-year,” they recently shared. “As international buyers make a slow comeback to the Miami market and start competing with domestic buyers, we anticipate an even tighter inventory.” And, with low inventory levels and turnkey properties commanding a premium, will we see some wealthy buyers pivoting to adjacent “aspirational” markets or adjusting their expectations and purchasing properties that need a little work?
All of these elements will be in play in 2022.