Mickey Alam Khan, President of Luxury Portfolio International, shares his views on the latest in the international property market leaned from LPI's network of more than 250 independent luxury estate agencies worldwide.
How has the luxury property market across the world changed this year?
Our net takeaway is that not that much has changed at the high end. Demand has tapered and available inventory is trending up, by there still is not sufficient inventory to meet demand. Our prediction for the year ahead is that we will be moving forward in inches, not feet. We are heading in the direction of a buyer’s market, but we will not quite reach it. What we hope to see in 2023 is true market stabilisation.
So prices should remain strong?
Yes, the general sentiment is that there is still strong demand for luxury listings — and builders cannot build fast enough, which is why we have yet to see a dramatic reduction in prices. It’s still a question of supply and demand, and at the luxury level, we simply do not have enough supply — or enough of the ‘right’ supply — to meet the need.
Will rising interest rates have an impact on the market?
At the very top of the market, buyers are not dependent on mortgages. For the most part, transactions continue to be handled in cash. The recent rate hikes, which have significantly slowed the home mortgage market, haven’t impacted this segment of consumers.
What’s had far more impact on this tier of buyers than mortgage rates are the recent, major fluctuations in the stock market. Savvy investors have seen this and recognized the advantages of putting their money into the most stable of asset classes —in other words, real estate.
Buyers of luxury property — such as this glorious townhouse in London SW3, for sale at £10.75 million — aren’t affected by mortgage rates, since they are almost always buying in cash.
Have the effects of the Pandemic stopped playing a role?
In our opinion, 2020, 2021, and even the first half of 2022 were anomalies. The year ahead is most likely going to look like what we saw in 2019, which was a more balanced market. The economy is still, overall, moving down the right path. The economic strength, coupled with other factors, means that we may see a slowdown compared to the explosive two-and-a-half years we just experienced — but it will be nowhere near what we witnessed in 2008 and 2009.
What changes from the disruption of the last two or three years are with us to stay?
If there is one permanent factor that has changed within the last two years, it is that the home has shifted from a place to crash to a centre of gravity. That will not waver. Work-from-home set-ups continue to be part of everyday living, and consumers put an added emphasis on in-home amenities for entertainment, wellness, and gatherings.
A beautiful home office set-up will still be an absolute must in the luxury property market. This is the studio at Hillstreet Farmhouse, Wiltshire, for sale at £5 million.
How about local variations — are there any outliers that luxury property buyers should know about?
We’ve seen a few surprises across our global network, and we’ve made some key takeaways. In Naples, Florida, for example, many homeowners hit by Hurrian Ian have been demolishing and rebuilding rather than repairing damaged homes, and in doing so could turn losses into positives as they rebuild stronger and better structures.
Elsewhere in the USA, Texas actually saw a slowdown earlier in the year, but there has been a gradual uptick since autumn. Our agents on the ground are still seeing luxury consumers resettle there from the East Coast and California — and it remains a seller’s market. Chicago, by contrast, has seen high-end homes taking longer to sell, and price reductions have been happening; but in Hawaii, low inventory and huge international demand continue.
There are more varied pictures around the world, too: in South Africa, for example, prices are now 10% to 15% below asking. In addition the South African rand has slipped against the British pound and US dollar — these factors are really fuelling sales to international buyers. So while situations certainly vary from one market to the next, we are not seeing any evidence of the bottom dropping out.
What else should we be looking out for in the property market next year?
One major change will be the full-scale return of face-to-face events. Agents’ little black books and relationships will be more important than ever, and people are clamouring for more in-person get-togethers and celebrations — which in most cases will mean reconvening after years of being apart.
The return of travel will also have a big impact, and international sales will continue to rise next year. Visitatation levels are still significantly down from pre-pandemic numbers, but they are rising — and that will be a key element for the luxury housing market. Coastal cities, such as New York and Miami, saw property booms thanks in part thanks to international visitors buying homes, a market that all-but-disappeared due to Covid. Its eventual return is a key element of the buying and selling of luxury residential real estate.
Mickey Alam Khan is President of Luxury Portfolio International — find out more at luxuryportfolio.com
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