Residz Team 3 min read
Buyers of luxury properties are ‘turning back to cash’, according to a new report.
The Sotheby's International Realty 2023 Luxury Outlook report was compiled by surveying Sotheby's International Realty agents around the world who transact in the US$10M+ price category. It was supported by data from industry experts.
Let’s take a look at what they said.
High interest loans unappealing to the wealthy
According to the report, rising interest rates have put wealthy and ultra-high-net-worth buyers off loans.
“We are definitely seeing buyers move from loans to cash,” says Ryan MacLaughlin, owner and principal broker, Island Sotheby’s International Realty in Hawaii.
“Some are hoping to finance the home after the fact as a refinance with a lending institution, once interest rates go back down. They will wait for that even if it is a year or two away.”
French Polynesia Sotheby’s founder Jacques Menahm says in the report that about 50% of his transactions in the past year came from cash buyers, and for good reason.
“Sellers always prefer cash over credit,” Menahem says.
Meanwhile John Cain, global real estate advisor, Pacific Sotheby’s International Realty, says in the report that over 50% of his clients pay all cash.
“In the last three to six months I’ve seen more cash buyers enter the market than financed buyers.”
Global wealth ‘explosion’
The report spells out how global wealth increased in 2021.
“Even when adjusted for inflation, Credit Suisse estimates real wealth to have increased by 8.2% in 2021.The U.S. added the most household wealth in 2021, with China, Canada, India, and Australia rounding out the rest of the top five.”
The ‘explosion’ in personal wealth has translated to an influx of luxury buyers but inventory of luxury properties is low, says the report. This has protected prices from falling.
For example, Puerto Rico Sotheby’s International Realty vice president Oriana Juvelier says developers are now catering to higher-end clients.
“One house is selling at US$10 million, the next at US$12 million, the next at US$20 million, setting record after record.”
Luxury buyers viewing Aussie homes ahead of Olympics
Luxury buyers from all over the Asian-Pacific region make up a good percentage of clients for Queensland Sotheby’s International Realty. Tyson Clarke, senior sales executive, says most are coming from Singapore, Vietnam, and Hong Kong.
Many are looking for primary homes, and are particularly interested in “key blue-chip suburbs within 10 to 15 kilometres of the Central Business District,” Clarke says.
“With the [2032] Olympics coming, many are looking to position themselves close to new infrastructure and games activity.”
Wealth expected to increase prices of luxury homes
Credit Suisse’s Global Wealth Report 2022 says global wealth creation is expected to increase over the next several years.
Sotheby’s says that translates to a potential influx of luxury buyers and an increase in price points in high-end property markets around the world.
So how can a seller attract a cashed-up luxury buyer?
Here’s some advice from Josh Behr, principal, LIV Sotheby's International Realty in Denver:
“The first two weeks of every listing, no matter what the price range, no matter where the location, are always a seller’s market, so it’s very important for sellers to make the most of that opportunity.
“The greatest risk is for sellers who think, for one reason or another, they can ‘beat’ recent sales that have taken place nearby their properties in a new market environment.”
And, consider putting in a saltwater pool.
The report found that the most important amenities for today's luxury buyers are a salt-water swimming pool, water purification systems, electric car charging stations, and floor-to-ceiling windows.
Residz can help buyers and sellers reduce the stress:
Image: Sotheby's International Realty 2023 Luxury Outlook report