At the beginning of the pandemic, the luxury real estate market fell faster than any other industry, however, within a few months it rebounded with a vengeance and reconfirmed its resiliency. The V-shaped recovery of luxury is also evident in the public sector, as shown by the S&P Global Luxury Goods Index compared to the S&P 500.
Demand for single-family homes, private outdoor space and enough room to work remotely will drive robust luxury home sales in 2021, benefiting some of the world’s top luxury markets more than others. With economic recovery underway, a vaccine boosting confidence and a strong stock market, the continued “wealth effect” will drive the ultra-luxury market even further. 2021 will thus be a strong year for cities with ample single-family housing stock, preferably on large lots, as is the case in places such as Los Angeles, Palm Beach, and Miami.
In the ultra-luxury real estate market of $25,000,000+, we are not only competing for a piece of ultra-high net worth (UHNW) buyer purchasing power, but also alternative investment allocation in art, rare gemstones, yachts, and private aviation. Real Estate is ranked as the #10 interest of UHNW individuals. In early 2020, UHNW asset allocation in Real Estate remained constant from previous years at approximately 15%, though we expect data for the second half of 2020 and into 2021 to reflect increased focus on Real Estate and Alternative Investment and out of Equities.
The 2020 edition of the Wealth-X World Ultra Wealth Report revealed that the global growth of UHNW individuals (each with more than $30 million in net worth) rose by 9.5% to 290,720 people last year, while their combined wealth grew by 9.7% to $35.4 trillion. The strongest returns were recorded in North America — the world’s largest wealth hub — and Asia, with both regions enjoying double-digit growth of their UHNW populations and collective net worth.
Similar to WealthX, the CapGemini World Wealth Report looks at cities across the globe, assessing them against a number of different metrics that demonstrate each city’s global appeal as a place to invest, live and spend time. New York and London remain in the top spots, with those residents making regular journeys to Los Angeles, Miami, and Palm Beach as evidenced by the yacht and jet activity. Note the elevated level of cumulative UHNW wealth across US metropolitan areas, six US cities feature in the top 10, while Asia and Europe account for two cities each.
At Nest Seekers International, we are preparing for the continued UHNW focus on Real Estate and value-added services. We have recently opened offices in Palm Beach, Monaco, and Portugal in addition to established presence in Beverly Hills, New York City, and The Hamptons, to capture investment in these growing regions and have established partnerships with yacht and art brokerages to create an all-inclusive experience for clients to proactively care for UHNW customer needs above-and-beyond a traditional real estate brokerages.