The $10M question: What’s the outlook for ultra-luxury homes?
Sotheby’s International Realty looked at the pace of wealth gains that drove purchases of ultra-high-end homes that start at $10 million.
Key points:
- The 2023 Luxury Outlook report explores trends among luxury buyers across the globe.
- The report found that a record increase in personal wealth globally in 2021 helped to drive purchases of the most expensive properties.
- With wealth expected to grow by 36% over the next few years, the ultra-luxe market may continue to attract new buyers.
Be it ever so opulent, there's no place like an ultra-luxury home.
Sotheby's International Realty has released its 2023 luxury outlook report, which examined what the company called an "explosion" of personal wealth worldwide that poured into the very tip-top of the luxury housing market.
Called ultra-luxury residences, properties in this exclusive zone emphasize size, quality, design and amenities with "wow" factor, according to Sotheby's and other real estate companies that focus on high-end homes. Ultra-luxury homes generally run in the $10 million-plus range but may exceed $100 million.
"In almost all cases, the value of ultra-luxury properties appreciates" even in a cooler market, wrote Cody and Zach Vichinsky, co-founders of Bespoke Real Estate. The New York-based firm deals exclusively in the ultra-luxe market. "Economic uncertainty spells opportunity for the acquisition of real assets. This is most true in ultra-luxury markets," the Vichinskys said.
"Buyers are still engaged and asking brokers to tell them when something interesting comes on the market so they can act quickly, if needed. However, they are likely to be more discretionary," said Philip White, president and CEO of Sotheby's International Realty.
Homes in this price tier are more aptly called estates or compounds and may boast more than a dozen bedrooms, restaurant-caliber kitchens and ample green space. Extras may include private elevators, gold-leaf interiors, multiple swimming pools (from salt water to "cold-plunge"), wine cellars, advanced security systems, personal golf courses and putting greens, and garages that fit not just one or two Bugattis or Lamborghinis but an entire fleet of high-end vehicles.
And how are buyers able to purchase these luxe properties? Perhaps because personal wealth worldwide grew by 13% to a staggering $460 trillion from January-December 2021, according to the report.
The pace of "exceptional wealth gains" in 2021 was the fastest annual growth rate on record according to figures from Credit Suisse, which projects that personal wealth will increase by 36% to $169 trillion by 2026, according to Sotheby's International Realty — even after accounting for a likely dip in wealth during 2022.
That is great news for the ultra-luxury market in the U.S. and globally. "Unsurprisingly, this explosion in personal wealth has translated to an influx of luxury buyers — and an increase in price points — in high-end property markets across the globe," the report noted.
The brokerage highlighted ultra-luxury waterfront homes under development in Puerto Rico as an example. The homes offer a new level of opulence, and a price tag to match. "It's not really an emerging market, but it is in many ways, too, and people were kind of surprised by what happened," said Oriana Juvelier, vice president of Puerto Rico Sotheby's International Realty.
New sales records were set in 2021 for luxury homes in Puerto Rico. "Before I sold a $30 million home in 2021, our highest sales price in the last two years was $6 million and before that it was $2 million," Juvelier said.
Affluent Americans increasingly are looking abroad when shopping for luxury homes, according to the National Association of Realtors. Properties in Central America, Mexico and parts of Asia have the most appeal, according to an article published in January in Realtor Magazine. Canada had been a popular destination until the country this year imposed a purchasing ban on foreign buyers.
Buyers from outside the U.S. are also taking a closer look at property investments in the States, especially in warm-weather areas including Florida, California and Texas.
The 2023 report surveyed Sotheby's International Realty agents globally who represent buyers and sellers of homes valued at $10 million and more. It included supporting information from Morgan Stanley, Credit Suisse, Wells Fargo Wealth & Investment Management, and the National Association of Realtors.
The report concluded that America's highest net worth individuals feel confident investing in ultra-luxury properties because the assets often are one-of-a-kind — the creme de la creme of high-end properties — and likely to grow in value over time.