The only thing that can slow the global luxury market in 2022 is ... greed.
“It’s impossible to underprice a property in this environment,” says Bradley Nelson, chief marketing officer of Sotheby’s International Realty, which released its 2022 luxury outlook report on Monday.
A potent combination of sky-high bonuses, accelerating intergenerational transfers of wealth, low interest rates, and the specter of inflation “makes investing in a concrete, fixed asset like real estate attractive to many as they balance their portfolios,” Nelson says. The environment is such that, no matter how low a property is listed, demand and competition will push its price to the top of the market.
“We brokered a co-op sale in New York,” Nelson says. “The asking price was $40 million, and there were multiple billionaires interested in purchasing it at the same time,” he continues. “The market is a living, breathing thing, and it’s going to give you feedback when fresh, desirable inventory comes on the market.”
Conversely, Nelson warns, aspirational pricing won’t be rewarded.
“It’s certainly possible to overprice a property,” he says, citing the Los Angeles market, where multiple houses have recently taken more than $50 million price cuts before they sold. “But ultimately, with some of these ambitious asking prices, I think it’s a strategy of price discovery.”
Overall, the report found that trends that began in 2021—cooling demand in the suburbs, accelerating prices in the exurbs, and a resurgence of sales volume in urban centers—will extend into this year.
“You’re seeing a return to normalcy in suburban markets,” Nelson says. “It’s now being driven by those traditional life events that have fueled the suburbs for generations.”
Longer, But Fewer, Commutes
Instead, he continues, the impassioned demand has shifted farther afield, as buyers who need to commute only a few days weekly look for more land in such areas as Trousdale County, north of Nashville; Dripping Springs and Cedar Park, to the south and north of Austin, Texas; respectively, and the Hudson Valley, north of New York City.
“The real estate market is now being driven by hybrid work vs. remote work,” he says.
The Sotheby’s report quotes one Hudson Valley broker who says that people looking to spend between $600,000 and $700,000 “used to be considered a good buyer,” but that now that designation has been pushed up to the “$1.5 million to $2.5 million range.”
New Horizons
Tax considerations continue to drive luxury purchasing decisions.
“That’s really the headline in both the United States and internationally,” says Nelson. “You’re going to see the greatest investments continue to be in tax havens.”