What real estate buyers can expect in the coming year as pent-up demand from international buyers is expected to increase.
Sotheby’s International Realty Second Annual Luxury Trend Report for the Year reveals that relief from the market frenzy may not happen quickly as prices are expected to rise in 2022. In addition, a shift to a hybrid work model is fueling more buyers to invest in real estate and seek larger homes that can accommodate remote work while remaining within commuting distance.
Sotheby’s International Realty’s 2022 Luxury Outlook report identifies the trends likely to shape the world’s prime housing markets in the year ahead. The comprehensive report offers insight into the high-end real estate industry as the starts-and-stops of the pandemic’s reopening fueled even stronger demand and inventory struggled to keep pace.
The Sotheby’s International Realty 2022 Luxury Outlook report was compiled by surveying Sotheby’s International Realty agents around the world who transact in the US$10M+ price category. This information was complemented by gathering supporting data from other leading industry experts, including UBS Wealth Management; Henley & Partners, a global citizenship and residence advisory firm; the National Association of Realtors; in addition to art and luxury experts at Sotheby’s, the famed auction house, to round out luxury trends in the year to come.
According to Sotheby’s International Realty, 2022 is likely to be the year of the international luxury real estate buyer as borders open and vaccinations and boosters roll out.
Nearly half of respondents agree that a rise in interest rates might affect the market;
In North America, millennials and Gen Xers are expected to make up the majority of luxury-home sales in the coming year.
Between 2018-2042, nearly US$70 trillion will be passed down from older generations and millennials will continue to use their share for real estate, according to Cerulli Associates.
In the U.S., price appreciation of second homes is expected to continue even after the number of transactions slowed due to limited inventory.
The most important amenities for today’s luxury buyers are a garage with storage, first-floor full bathroom, eat-in kitchen, and deluxe primary bedroom suite.
“Following another historic year in real estate, Sotheby’s International Realty agents around the world continue to have their finger on the pulse on industry trends and market acuity,” said Philip White, president and chief executive officer of Sotheby’s International Realty. “Luxury Outlook heavily relies on the expertise of our network spanning 77 countries and territories to provide on-the-ground insight on the biggest stories in 2021, from the resurgence of urban cities to the role of cryptocurrency, and what it means for buyers and sellers in the short and long term.”
Second-home markets have been experiencing high demand since mid-2020, with luxury buyers motivated to seek out properties in holiday destinations with easy access to beaches, mountains, and other scenic spots where they can wait out the pandemic.
In fact, vacation-home sales were up 57.2% year-over-year for January-April 2021, compared with the 20% year-over-year change in total existing-home sales, according to data from the National Association of Realtors.
There have been similar increases in inquiries in Europe: Foreign buyers, undeterred by Covid-19, are buying properties on the French Riviera sight unseen, with brokers reporting multimillion-dollar sales to investors who haven’t set foot in the homes. In Greece, inquiries from American second-home buyers were up by 60% in spring 2021 year-over-year, Greece Sotheby’s International Realty found.
Upsizing Indoor and Outdoor Space
While cities continue to lure luxury buyers, their priorities have shifted in favor of locations with single-family homes or larger condos, particularly with outdoor space.
“It used to be that big homes in the city languished on the market, but now people want a grandiose home with as much space as they can get,” says Tim Salm, real estate agent, Jameson Sotheby’s International Realty in Chicago, Illinois.
Chicago buyers quickly shifted from wanting high-end condos to single-family homes in the city with office space and room to entertain and exercise, says Ryan Preuett, real estate broker, Jameson Sotheby’s International Realty.
Even the empty nesters who were able to sell their big suburban family home during the pandemic are looking to “downsize” into as large a condo as they can find, Preuett says.
In San Francisco, there are similar trends. “We’ve seen an incredible interest in places like St. Francis Wood in San Francisco because there are big stately homes there,” Goodman says. Sales were up 175% in that neighborhood year over year from January through August 2021, and prices rose 18% in that same period, she says.
“The interest for larger homes with open and functional areas, and condominiums with leisure spaces, should continue even after the pandemic,” says Victorino in Brazil. People have adapted to being home more and having more space, and that isn’t likely to change, she says.
“After selling for over 25 years, the evolution of this real estate market has been a head-turning experience,” Walpert says of the Los Angeles area. “The amount of ‘out-on-the-town’ pandemic money saved and profitably invested, combined with pent-up demand for housing, resurrected and expanded our luxury market.”