Is a $1M Home Still Considered Luxury Housing?
The world’s affluent population – those with $5M-plus incomes – grew 19.8% in 2021. In the U.S. it was 24.8% in both population and wealth, up from 8.1% in 2020.
MADISON, N.J. – A new report on the luxury home market, conducted by Wealth-X and commissioned by Coldwell Banker, Real Estate LLC, found a notable 2021 uptick in both the number of affluent people and the amount of money those people hold.
“The Report: 2022 Global Luxury Market Insights” offers an in-depth analysis of emerging worldwide luxury real estate market trends, market growth opportunities and global wealth.
“The Report sheds light on the extraordinary paradigm shift that has occurred within the luxury real estate sector since 2020,” says Michael Altneu, vice president, Coldwell Banker Global Luxury. “Stock market gains, rising home equity, increased savings and the cryptocurrency boom have all contributed to a massive expansion of wealth and the sheer number of affluent individuals across the globe.”
Altneu says that monetary growth fueled unprecedented demand when combined with “a renewed focus on home for fulfilling a range of needs, from security, escape, community, work and wellness … As a result, luxury is no longer concentrated in a few major cities; it’s everywhere and we’ll continue to see the growth of secondary markets for years to come.”
Based on the data, 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 their 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.
In the U.S., the numbers grew even higher. This affluent population rose 24.8% in both total population and wealth during the same period, up from 8.1% in 2020. That led to a notable expansion of luxury real estate sales.
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.
Key Findings in The Report
International interest in the U.S. real estate market may reignite as foreign investors take advantage of loosened travel restrictions and high returns. Like American consumers, many continue to seek turnkey properties with additional space and privacy, and they’ve also expressed interest 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.
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.
Climate-change concerns have also filtered into buying decisions. 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 has changed locations
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 those 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.
“Double-digit wealth and affluent population gains have happened concurrently with a once-in-a-generation change in living patterns and migrations,” says Liz Gehringer, president of Coldwell Banker Affiliate Business and Chief Operating Officer. “As luxury real estate represents a larger percentage of the total housing market than ever before, it is absolutely crucial that luxury real estate professionals have a firm grasp of all factors influencing wealthy buyers and sellers today. The agent has become the affluent buyer’s connection point to new locations around the world. “
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