Growing Luxury Markets
As many primary markets see fluctuation in pricing and inventory, buyers in the top end of the market are undergoing a process of discovery, searching for residences off the beaten path that offer fulfilling lifestyles and more value. Several areas have seen a recent uptick in growth due to the availability of quality inventory at lower prices, higher returns for investors and a refuge from the competitive landscape of hot real estate markets. Job growth and the presence of large companies have also made these areas popular markets for buyers.
Fort Lauderdale, Florida, USA
Today, cities that were once viewed as getaways or vacation areas are now increasingly seeing buyers who are looking for secondary and even primary residences. Fort Lauderdale, Florida has been a second-tier market to Miami, Florida for some time, however it is quickly becoming a top growth city with developers looking for affordable locations to build luxury condominiums. The Four Seasons, Auberge and the Ritz-Carlton are among the luxury hotel brands that recently unveiled new developments along the beach giving buyers access to new restaurants and nightlife steps away from their new homes.
Formerly known as a spring break and vacation destination, Fort Lauderdale was named one of the Top 10 U.S. Markets to Watch by Colliers International in 2018. Many residential buyers have a flocked to the area for the weather, the draw of condominiums curated by well-known luxury brands and of course, affordability. Luxury properties in Fort Lauderdale compared to similar properties in Miami Beach were reported to have a 261% price difference in 2016 giving buyers the opportunity to enjoy the same amenities and scenery for a fraction of the price.
Essex, Kent, Hertfortshire, United Kingdom
Outside of the U.S., European luxury buyers are also flocking to markets that can provide more value for the price. According to a recent report by LonRes, a data source and network for property professionals in London, there was a substantial increase of Londoners looking to move outside of the city in 2018. Buyers were actively looking to purchase homes in nearby areas like Essex, Kent and Hertfordshire. The study showed that more than 30% of newcomers in each of those three areas migrated from London. In fact, an estimated £30 billion worth of property was purchased outside of London in 2018 by those seeking more affordable housing.
Charleston, South Carolina, USA
South Carolina is also emerging and taking the luxury market by storm. It’s proving an extremely popular location for both growing families and Baby Boomers looking for a quiet lifestyle in a mild climate. In fact, the secret is out, as the area has seen steady growth in recent years with the affluent Mount Pleasant neighborhood being deemed one of the 10 fastest growing cities in the United States by the U.S. Census Bureau. Recently residents from New York have migrated to Charleston in search of affordable housing (as compared to New York prices). The job market in the area is also favorable for those seeking a career change. The unemployment rate in Charleston is the lowest in South Carolina partially due to major manufacturing companies like Mercedes-Benz, Vans and Boeing relocating to the city and creating more job opportunities for locals.
The luxury market, however, is becoming quite saturated in the area making it difficult for buyers seeking high-end residences. Agents in Charleston agree that there is an inventory problem in the area and luxury homes are in high demand with most “good” houses (residences in high-end neighborhoods, on the peninsula, renovated homes, etc.) selling within 30 days on the market and many selling for over the asking price. The market is incredibly competitive with particular interest in homes between $1 million and $5 million, along with homes between $500,000 and $1 million being very scarce in the area.
In China, where there are 170 cities with a population over 1 million, many of those larger cities are now becoming more prominent to Western travelers and attractive to wealthy Chinese real estate investors. For example, the city of Shenzhen has grown rapidly over the past several years and was even the city with the largest number of skyscrapers built in 2018. While property values have increased in Shenzhen, it remains a more affordable option than pricey Hong Kong.
Museums can also have a major role in attracting attention to a lesser known market. So much so that there is even a name for it: “The Bilbao effect,” which references the impact that occurred when the Frank-Gehry-designed Guggenheim museum was built. It completely changed the profile of a small Spanish town by attracting a large global audience, tourism and interest in the area. In addition to boosting the cultural profile of the town, the museum also increased the real estate values of nearby homes. This kind of “starchitecture” attracts tourists, hospitality and revenue into the area resulting in higher property values for residents.
In any city, large or small, luxury buyers are looking for a mix of good value, charm and access to the amenities that make urban life most appealing. As consumers change, so to have many great cities around the world, capitalizing on potential by offering cultural opportunities and modern developments that reflect a new and hip urban sensibility.
To view the full article, take a look at the feature in the March 2019 issue of Luxury Portfolio magazine.