Jeff Hyland and Bonnie Stone Sellers, Founding Directors of Forbes Global Properties, have prepared the Luxury Property Report for 2021. We are bringing the first two part of the 5 parts report to our pages.
 

FORBES REPORT
Year-End Market Perspectives
The international luxury property market in 2021
 
A year ago we launched Forbes Global Properties, a curated consumer marketplace and an invitation-only membership network that connects discerning buyers to the world’s finest homes and the top-tier agents that represent them. Operating exclusively in the luxury sector, Forbes Global Properties offers branding and marketing services to elite real estate brokerages, and is the exclusive worldwide residential partner of Forbes.

Forbes Global Properties was launched amid a turbulent economy and a devastating once-in-a-century global pandemic. Despite these headwinds, the performance of the international luxury property sector over the past 12 months—not to mention our growing membership network—has been nothing short of extraordinary.

The population of potential luxury home buyers grew substantially in 2020-2021, as did the net worth of the world’s wealthiest individuals. Forbes estimates that between March 2020 and March 2021, nearly 500 individuals joined the billionaire class, with roughly one new billionaire minted every 17 hours during the early pandemic. The global group of high-net-worth-individuals (HNWIs)—those with investable assets of more than US $1 million excluding their primary residence— also increased, growing by 1.2 million over the past year, according to Capgemini’s 2021 World Wealth Report.

As the pool of potential luxury home buyers expanded, so did the motivation of HNWIs to buy a new prime property. This amplified interest in luxury property acquisition, coupled with a growing population of HNWIs worldwide, provided ideal market conditions for our first 12 months in operation.

To celebrate our first anniversary, we invited our member brokerages spanning 11 countries and 140 locations—all established local leaders in luxury property sales— to share their successes and perspectives on the state of the prime property market. We hope you enjoy reading these insights.
 
Table of Contents

• 1 Property Prices
• 5 Buyer Demographics
• 8 Luxury Amenities
• 14 Second Homes
• 18 Case Studies

 
 
PROPERTY PRICES
Global Prime Property Prices Surged in 2021 Amid Soaring Asset Prices

The world is experiencing one of the most accelerated periods of wealth creation and capital availability in history. As the pandemic surged in early-mid 2020, governments worldwide introduced unprecedented fiscal stimulus packages to sustain their economies. This capital injection, coupled with low interest rates and relaxed credit conditions, helped bullish investors lift stock markets, resulting in a 44% gain of the S&P 500 from the beginning of 2020 to date. After a sharp contraction in 2020, the luxury goods market also saw gains, growing by 29% annually, according to Bain & Company.

The factors that resulted in roaring global equity and luxury goods markets in 2020-2021 concomitantly impacted prices in many prime residential markets. A stark drop in available luxury housing stock coupled with increasing demand further drove price appreciation. We studied a sampling of primary and secondary luxury markets to illustrate.

Brokers across almost all our surveyed housing markets reported that luxury inventory declined during 2020 and remained low throughout 2021. “There is a shortage of stock here,” said Ken Jacobs of Private Property Global in Sydney, where median house prices reached AUD 1.5 million (US $1.1 million) in the third quarter of 2021, a 32% annual increase, and top sales exceeded AUD 60 million (US $43 million). “The adage has always been sell before you buy. The current dynamic has many owners hesitant to sell without having found their next home due to the fear they will be left on the sideline, thus losing the benefit of a strong sale price on their existing home. This fear is compounding the stock shortage.”

Traditional second home markets have also been hampered by seller hesitation and explosive buyer demand, intensifying inventory constraints. California’s Lake Tahoe region witnessed a surge in demand from affluent Silicon Valley tech executives: “Driven by untethering from a physical office and focus on quality of lifestyle,” said Jeff Brown of Tahoe Mountain Realty. “Correspondingly, few are willing to give up a foothold in the community; thus, supply is painfully tight. Demand has overwhelmed supply, driving pricing through the roof.” Median house prices in the region neared US $1 million at the close of the third quarter, up from US $750,000 a year ago, and the highest-priced sales topped US $31 million earlier in the year.
Even in Dubai, where rapid development in the 2000s and early 2010s prompted government controls to curb oversupply, unprecedented demand and inventory constraints are impacting pricing, particularly at the top of the market. “Believe it or not, Dubai actually has a severe lack of high-end property supply, with only a handful of projects catering to the ultra-highnet- worth segment of the market,” said Abdullah Alajaji of Driven Properties. “This has caused double or even triple-digit percentage increases in certain areas, with some areas experiencing price increases over 100% since the start of the year.”

In second home markets reliant on a steady stream of overseas buyers, lockdowns and apprehension about traveling amid the early pandemic resulted in some price declines in 2020. But as vaccines became broadly available and borders reopened, luxury property sales in heavily air-travel reliant regions such as Mexico’s San Miguel de Allende saw a dramatic turnaround. “We were typically seeing 25% under asking price offers in 2020; that compares to 2021 where we are seeing either full price offers or 10% under asking,” said Ann Dolan of CDR San Miguel, noting that median sales prices rose by more than 9% in 2021.

Price increases evidenced across median sales prices were amplified in the ultra-luxury echelons of our surveyed markets. In Hong Kong, average sales prices increased year-on-year by 7% to HK $9.3 million (US $1.3 million), but luxury sales prices grew by more than 12%. “As a financial center, Hong Kong’s real estate market typically tracks stock market trends and the rebound in global/domestic stock markets has also fueled property investments,” noted Joshua Miller of okay.com.

Colorado’s Telluride region reported median sales price gains across the overall market of 12% yearover- year, but: “The top 10% of the market saw larger increases of more than 40%,” said Sarah Stogner of Telluride Real Estate Corp. Similarly, in Hawai’i, luxury sales of US $3 million and above in 2021 outpaced 2020 in both the number of transactions and total dollar value sold, by an increase of 195% and 235% respectively. “The continued growth of the real estate market has been remarkable, fueled by new wealth and new high-net-worth individuals,” said Matt Beall of Hawai’i Life. “There’s a newfound velocity to both money and people. We are seeing a younger and more motivated group of buyers who view luxury real estate as an asset class. They are diversifying into new business models and flexible working locations that weren’t available previously.”

As inflationary pressures loom, the explosive double- and triple-digit price increases recorded in many prime property markets are likely to return to more sustainable levels over the next 12-24 months. Real estate remains a hedge against inflation and HNW buyers will continue to seek out exceptional properties for investment and lifestyle purposes. “In uncertain times there is a flight to safety from both an investment and emotional perspective. Housing provides both,” said Ken Jacobs of Private Property Global in Sydney.

 
BUYER DEMOGRAPHICS
Luxury Home Buyers Skew Younger Than Ever Before

Across global property markets, younger buyers in 2021 commanded a larger share of the luxury home buying market than ever before. Buyers under the age of 56 (Gen X, Millennials and Gen Z) comprised at least two-thirds of buyers in most of our studied primary home markets and at least half in our selected luxury second home markets.

The Millennial generation (ages 25–40) is the world’s largest adult demographic cohort and comprises 23% of the global population or 1.8 billion people. More than 60% or 1.1 billion of the world’s Millennials reside in Asia. It is no surprise that Millennials in areas such as Singapore and Dubai comprise an outsized percentage of luxury home buyers—60% and 35% respectively—relative to other prime property markets. And these figures are trending upwards: “The pool of Millennials purchasing homes is projected to increase,” noted Sammi Lim of Singapore’s Brilliance Capital.

Outside of Asia, Millennials are rapidly becoming a greater segment of overall luxury buyers as they age into their peak years for homeownership, particularly in primary residence markets such as Boston and California including Los Angeles, Santa Barbara/Montecito, and Ventura County.

“We have seen a significant demographic shift since the pandemic,” said Robert Riskin of Village Properties in Montecito, where median sales price reached US $4.1 million in September. “The biggest change has been the increase in young families making Montecito their primary residence.”

Notably, although many of these multi-million-dollar homes are sometimes a Millennial buyer’s first residential purchase, these properties aren’t what would be traditionally considered a “starter” home. Familial assistance, fueled by the great wealth transfer of capital from Baby Boomers to their adult children, has bolstered the purchasing power of the under-40 buyer. “Sometimes with Millennial and Gen Z buyers, parents helped with the down payment and/or provided the funds,” noted Renee Grubb of Village Properties.

Familial assistance is not the only contributing factor to the purchasing power of these younger buyers. “With the rise of cryptocurrency, we have noticed that younger and younger buyers are being introduced to the buyer pool,” observed Ryan Knowles of Maison Bahamas, Forbes Global Properties’ newest member. “In many cases, these buyers make purchase decisions in a quicker fashion than their older counterparts.”

At the highest echelons of the luxury property market, however, Millennial buyers remain relatively uncommon. This mirrors the demographics in the global billionaire population—of the 2,755 billionaires worldwide in 2021, only 106 are Millennials (3.8%). This cohort has a combined net worth of US $573 billion, comprising less than 5% of the combined US $13 billion net worth of all billionaires worldwide.

By comparison Gen X comprises 26% of the combined net worth of all billionaires worldwide. Accordingly, affluent Gen X buyers (ages 41-56) are a more important buyer group in certain luxury markets, as shown in Exhibit 2, page 8. “Millennials are very active, but the primary cohort remains Gen X,” said Jeff Brown of Tahoe Mountain Realty in California’s Lake Tahoe mountain resort area, where Gen X comprises 70% of luxury home buyers.

In second home markets, where the acquisition of a luxury vacation property has traditionally been a discretionary purchase supplemental to a primary residence, the number of younger buyers is also growing. This demographic shift has begun to impact the marketing approach of luxury real estate experts.

“While sellers are still trending as Baby Boomers, we are seeing younger buyers in the Gen X range,” observed Sara Roberts who oversees marketing for Slifer Smith & Frampton Real Estate in Colorado’s ski resort regions of Aspen, Vail, and Summit County. “Our marketing reflects this; we gear many of our seller-focused messaging and tools towards the Baby Boomer generation, while our buyers’ tools are geared toward a more tech-savvy Gen X and Millennial customer.”

 
The conclusion we understand from this detailed report is that the world has changed and those who are willing to adapt to this world continue to win. The most influential factor in the luxury housing market is the changing generation's willingness to take bolder steps in their investments. Who said that a generation that eats their meals fast, goes to their destination quickly, and does their job very quickly, will think long and hard when investing?!