2012 was the year of record-high sale prices for luxury properties. From a $121 million sale for a residential property in London, to an $88 million sale for a residential property in New York, last year saw buyers pounce on some of the world’s most high-end homes.
The characteristics of luxury real estate differ from country to country. However, location, lifestyle, and provenance (history of ownership) often play significant roles in determining how high-net-worth individuals value properties.
Today, there are more billionaires in the world than before the 2007-2008 financial crisis. There are also more millionaires – 55 percent more since the year 2000. With more high-end homebuyers entering the market, the supply of luxury properties can’t keep up with demand. The result? Multiple offers and bidding wars, which are driving sales prices up.
Unlike the general housing market, the luxury market tends to remain insulated from global political shifts and money flows, as such concerns are less likely to impact the purchase decisions of millionaires and billionaires around the globe. So while some economists predict that U.S. home prices will only rise by one or two percent per year over the next half decade, the same may not be true for luxury home prices.
According to a recent study, the luxury real estate market will likely follow the luxury goods market – not the general housing market. And with luxury goods expected to grow about 7 percent year over year through 2014, experts anticipate that luxury real estate will continue to show strong momentum.
Early numbers confirm what the experts predicted. According to the National Association of Realtors, there’s been a 38.7 percent increase in sales of properties worth between $750,000 and $1 million over the past year, and sales of properties worth $1 million-plus have risen by 25.7 percent during the same time period.