Rising number of wealthy worldwide drives demand
Luxury real estate is in demand. Whether it’s a lavish vineyard in Tuscany with an exquisite wine cellar, a castle in Budapest with numerous bedrooms and a luxurious spa, or a villa on Lake Geneva with a miniature golf course – demand for high-end properties in exclusive locations is picking up again significantly around the world.
Although the corona pandemic has hit many sectors of the economy hard, the real estate sector is developing particularly positively. The market for luxury properties is especially noteworthy in this respect. One major reason for this is the significant increase in the number of millionaires: According to a recent study by Credit Suisse, more than five million people were able to significantly increase their assets last year and became millionaires for the first time. The trend until 2025 is rising.
Forecasts for number of millionaires in 2020 and 2025
Source: Credit Suisse, The Global Wealth Report (2021)
According to the latest Knight Frank Wealth Report, the group of ultra-high-net-worth individuals in particular is growing significantly. According to the report, there are currently 520,00 “ultra-high-net-worth individuals” around the globe, people with assets of at least $30 million. That’s 2.4 percent more than last year. More than one-third of them say they plan to invest in real estate. This high demand for luxury real estate is already influencing price trends, which rose 1.9 percent last year, according to Knight Frank’s report.
The Top 20 Countries for the World´s Ultra Wealthy
Source: Knight Frank, The Wealth Report (2021)
Positive outlook for luxury real estate worldwide
According to Knight Frank, the top destinations in the luxury real estate segment worldwide include metropolises such as London, Los Angeles and Paris. The real estate company forecasts a global price increase of between two and six percent for 2021, and even up to ten percent for Sydney. In the coming year, Knight Frank expects prices in Sydney and other places like London to rise by up to seven percent.
Source: Knight Frank, The Wealth Report (2021)
In the first quarter of 2021, Knight Frank was already able to record 1,400 sales closings in the top category for Sydney. The experts see the Corona pandemic as the main reason for this. The limited travel opportunities have made real estate in one’s own country very popular again. Hong Kong’s luxury residential property market is also proving resilient. Martin Wong, Head of Research & Consultancy China at Knight Frank, points out that economic forecasts have been revised upwards, vaccination of the population is progressing well, and sentiment has brightened as capital flows from mainland China are a key driver.
European luxury real estate is more in demand than ever before
Engel & Völkers is also registering rising demand for luxury properties. In June 2020, the global brokerage house already recorded 60 percent more deals than in the previous year in the luxury property segment with a value of between two and five million euros. In the DACH region in particular, transactions in the second half of the year were back at pre-Corona levels. Mickey Alam Khan, President of Luxury Portfolio International, also confirms this trend. However, he sees a challenge ahead for the industry. Since the pandemic, he says, a record-breaking increase in sales of high-end homes has been offset by shrinking inventories. Olivier Peters of Peters & Peters Sotheby’s International Realty shares the assessment, observing a return of decisive buyers.
Top European nationalities looking to buy luxury property in Europe
Source: Tranio, Luxury real estate in Europe (2019)
Potential in German customers
When choosing a fancy property, aspects such as proximity to the city play a rather subordinate role. Rather, it is about an exposed location in nature, by the sea or with a lake or river view, as a survey published by Engel & Völkers in May 2021 revealed. When it comes to amenities, particularly ample space and high-quality leisure and entertainment facilities are at the top of the wish list of international buyers. Aspects that are becoming increasingly important as a result of the pandemic and are likely to remain relevant to purchasing decisions in the future.
It is becoming increasingly clear that this trend not only affects metropolises, but also villas or chalets in vacation destinations and in the countryside. Here, creative project developers are called upon to develop future-proof and luxurious living concepts and thus expand the offer for a strongly growing luxury real estate market. In view of the rapidly growing number of ultra-high-net-worths in Germany, 777 Capital Partners is closely monitoring the luxury real estate segment and examining corresponding investment opportunities.
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