Coldwell Banker Real Estate LLC, a Realogy (NYSE: RLGY) brand, and the Coldwell Banker Global Luxury program released “The Report: 2022 Global Luxury Market Insights,” an in-depth analysis of emerging worldwide luxury real estate market trends, market growth opportunities and global wealth.
Based on data from Wealth-X commissioned by Coldwell Banker Real Estate, the world’s affluent population – those with a net worth of $5 million and up – grew 19.8% in 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 – a significant jump from 2020, which only saw a 2.1% year over year increase. Meanwhile, U.S. wealth growth rates were even higher in 2021, rising 24.8% in both total population and wealth during the same period, up from 8.1% in 2020.
This massive wealth growth and population jump of affluent individuals, combined with new living patterns and changing property preferences, led to a historic luxury real estate market expansion. In 2021, sales of luxury single-family homes, defined as the top 10% of any given market, 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.
This year, The Report compiled insight from curated surveys of Coldwell Banker Global Luxury Property Specialists worldwide and data collected by the Institute for Luxury Home Marketing and Wealth-X to better understand the trends reshaping the luxury market domestically and abroad.
Key findings featured in The Report include:
The Return of the International Buyer
International interest in the U.S. real estate market may reignite as foreign investors take advantage of loosened travel restrictions and high returns. Approximately 83% of Coldwell Banker Global Luxury Property Specialists surveyed anticipate the return of international buyers to the U.S. market. Like American consumers, many continue to seek out turnkey properties with additional space and privacy and have also expressed interest owning in secondary or suburban areas. According to The Report, the U.S. states that attracted the greatest number of foreign homebuyers from April 2020 to March 2021 were California, Arizona, Texas, Florida and New Jersey.
New definitions of sustainability are taking the luxury market by storm. Millennial buyers are flocking to homes that incorporate personal and environmental wellness into the design. Homes with these features can command price premiums of 10% to 25%, sometimes higher. Concerns about natural disasters and extreme temperatures have filtered into buyer consciousness as more consumers recognize the threat of global warming. Green cities, like Portland, San Francisco and St. Paul, are attracting interest from those seeking out more eco-friendly locales. For this group, luxury is defined by functionality, environmental harmony and ease of use.
Luxury is Everywhere
38% of Coldwell Banker Global Luxury Property Specialists surveyed say that most buyers came from out-of-state in 2021. As the search for more space continues, secondary cities like Denver, Boise, Sacramento, San Antonio, Raleigh and Salt Lake City fared extremely well. Inventory levels for luxury single-family homes dropped, ranging from 19% to 36% year over year in these six markets, affecting the number of possible sales at the end of 2021. As a result, prices rose annually ranging from 19.9% to 37.5%. Urban cores are also making a comeback; Manhattan alone saw a 101.7% increase in luxury sales during 2021. Work from home opportunities, climate change considerations and accessibility to dream locations means luxury may continue to expand throughout the country as consumers search for the home that best fits their needs and desires.
The Opportunity Index
The Opportunity Index, introduced for this year’s The Report, highlights 120 major U.S. luxury property markets according to their buying potential. These markets may still have room to grow in 2022, like hidden gem towns and undiscovered suburbs next door to affluent hotspots.
Using the 2021 national average year-over-year sold price growths for luxury homes as the baseline (24% for single-family properties and 16% for attached properties), each market was awarded a 100-point score. Any market with average prices below the set price baselines was determined to have room for price growth and therefore awarded a point per percentage decrease. This score was then added to the score for the national average inventory level decrease (a 20% drop became the baseline). A 100 point score was awarded to markets at the baseline of -20% and a point added to those with lower percentage scores – as they theoretically had more available inventory and potentially, more opportunity.
Coldwell Banker Global Luxury® identified the top five markets for single-family and attached homes based on the highest Opportunity Index scores:
Single-family home markets: Staten Island, New York, Sussex County Coastal, Delaware, Cincinnati, Ohio, Charlottesville, Virginia, Napa County, California.
Attached home markets: Cincinnati, Ohio, Lake Norman, North Carolina, Marin County, California, Greater Seattle, Coastal Pinellas County, Florida.
Rising Global Real Estate Footprint
Secondary home purchases are on the rise; approximately 70% of individuals with a net worth of $5 million and up now own two or more properties per Wealth-X, as reported in Coldwell Banker Global Luxury’s “A Look a Wealth” 2021 study. Coldwell Banker Global Luxury Property Specialists also reported that more affluent buyers were purchasing a getaway home — approximately 32%, up from 23% in 2020. Traditional lines between primary and secondary residences are blurring with many affluent individuals choosing to spend time in their secondary homes or deciding to purchase new properties to add to their growing real estate portfolios.
Data provided by Wealth-X in 21 major cities outside of the U.S. shed more light on the cities with the highest populations of wealthy individuals with a net worth of $5 million and up, primary vs. secondary homeowners and residential vs. real estate footprints in these locations. The five cities with the highest population of individuals with a net worth of $5 million and up in 2021 include: Tokyo, Japan, Hong Kong, China; Paris, France; Osaka, Japan, London, United Kingdom.
When looking at real estate footprint, which considers all properties owned by individuals with a net worth of $5 million and up, a different set of cities emerges as these locations attract wealthy individuals who have a propensity to buy both primary and secondary properties: London, United Kingdom, Paris, France, Singapore, Geneva, Switzerland, Beijing, China.