Luxury Real Estate: Elevated Returns for Investors

Investing in real estate isn’t always a glamorous business, but luxury homes can add some bling to your portfolio. According to a survey of 81 international luxury markets, luxury home sales increased by 11 percent annually in 2017. In some markets, limited supply and heightened demand allowed luxury housing to outpace non-luxury home sales. In the U.S., a stable economy has helped drive luxury home sales, despite rising interest rates and questions over how tax reform might impact wealthier investors.

2250 Indian River Crescent, North Vancouver, BC. $36.2 million.

Experts say that the equity bull market is in the longest stretch in American history and as a result, there’s an increasing activity among high net-worth individuals. This should continue to boost portfolios and create a wealth effect, increasing confidence and funds to invest in luxury real estate. Investing in high-end properties isn’t limited to the elite, however. Newly created net worth is driving a new buyer, including millennials, say realty network executives. If you’re ready to invest like the rich, here’s what you need to know about moving up the property ladder with luxury real estate. Adjust your perspective. Luxury real estate isn’t your run-of-the-mill property investment. The luxury market is a global market; the buyer pool is international. As a result, it appeals to a larger audience and thus can command higher prices.

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40275 Highway 141, Gateway, CO. $149 million.

That can translate to elevated returns for investors–– as the evidence demonstrates, luxury real estate investments provide higher yields than the stock market without as much volatility. Real estate investors in top-performing markets are enjoying a windfall, and find comfort in the fact that luxury real estate values in the U.S. will always increase over time. High-end real estate also holds up better when traditional real estate or stocks flag. Luxury real estate investments tend to rebound better when markets soften because they’re considered desirable, are generally unique and tend to have strong intrinsic value that surpasses the cost of replacement. One significant benefit of owning real estate is that it will never be at zero value, even in a dismal market, while stocks can plummet to such a level.

10210 Strait Lane, Dallas, TX. Philip Johnson masterpiece. $27.5 million.

Luxury markets aren’t created equally, however. In general, luxury real estate can be lucrative, but some markets may be hotter than others, both domestically and internationally.

781 Fifth Avenue, New York, NY. Entire 18th floor, white glove service. $68 million.

For example, in New York City, there now exists supply saturation and that’s putting constraints on price. Yet, luxury properties saw tremendous appreciation in value from 2013 to 2016 as a new generation of luxury condos entered the market. In 2017, Seattle lead the way with the most robust year over year luxury sales growth, followed by Dallas and San Diego (as well as several cities in Colorado). All of the aforementioned regions proved to be among the hottest luxury second-home markets, with sales volumes of million-dollar-plus homes reaching levels not seen since the pre-housing crisis era. Internationally, Vancouver has emerged luxury housing markets. Studying market trends is crucial when choosing where to invest in luxury properties.

99 Union St Unit 1202, Seattle, WA. $12.5 million.

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