WELCOME MESSAGE

THIS IS YOUR LUXURY MARKET REPORT

MAP OF LUXURY RESIDENTIAL MARKETS

Welcome to the Luxury Market Report, your guide to luxury real estate market data and trends for North America. Produced monthly by The Institute for Luxury Home Marketing, this report

provides an in-depth look at the top residential markets across the United States and Canada. Within the

individual markets, you will find established luxury benchmark prices and detailed survey of luxury active and

sold properties designed to showcase current market status and recent trends. The national report illustrates

a compilation of the top North American markets to review overall standards and trends.

Copyright © 2022 Institute for Luxury Home Marketing | www.luxuryhomemarketing.com | 214.485.3000 The Luxury Market Report is a monthly analysis provided by The Institute for Luxury Home Marketing. Luxury benchmark prices are determined by The Institute. This active and sold data has been compiled by various sources, including local MLS boards, local tax records and Realtor.com. Data is deemed reliable to the best of our knowledge, but is not guaranteed.

NORTH AMERICAN LUXURY REVIEW

Examining the Demand for Luxury Real Estate

Over the last 18 months, the status of the real estate market, in particular the luxury sector, has been a hot topic across all news outlets, multi-media platforms, and within the industry itself.

Conversations have mainly focused on the variety of trends, with reviews covering a multitude of topics from rising prices, falling inventory levels and increases in demand to multi-faceted relocations and migrations and the growing concern about delays surrounding new builds from builders and developers.

There has been, however, one constant agreement throughout — ‘the home’ has officially become one of, if not, the most important factor in today’s decision processes with respect to how individuals choose their way of life.

For the affluent, the question of where to live, what type of property, the features, and amenities that will meet their practical needs and ‘must-have’ requirements all combine in their search for homes that offer security, as well an enhancement in the quality of today’s live, work, and play environments. Many would say that these parameters are not so very different from those that have always been the top search criteria of the wealthy.

While this is true for the most part, it is the actual sheer amount and continued increases in sales volume, diversity of locations and prices that have created some of the most exceptional circumstances in the current luxury market.

We, therefore, seek to investigate what has driven this enormous demand for luxury real estate —are these factors still in play and how will this play out in the upcoming spring market and beyond?

It has been widely recognized that the pandemic drove people, especially the affluent, to change their expectations and aspirations for their goals for homeownership and attitudes towards their lifestyle requirements. It now seems that there are two other factors that, not only played a significant part, but will probably have a longer lasting effect on the demand for luxury real estate.

Recently Wealth-X shared the staggering percentage growth of global wealth in 2021 and, more significantly, the number of individuals who are now classified as high net worth (HNW) - those with over $5 million in net worth.

Wealth-X's researched the growth of wealth globally during 2021 and while their results led to an expected annual percentage increase, of more significance was the rate that it had increased. This nearly unbelievable increase had been unpredictable, even as little as three months prior to the end of 2021, until Wealth-X finally assimilated the data in January 2022.

For the most part, the growth of wealth has steadily risen over the last 10 years, but the results were truly unprecedented for 2021. The volume of wealth increased by 2.1% in 2020 compared to 2019, but in 2021, it grew a staggering 20.4% compared to 2020.

As an extension of this analysis, the source of this growth was analyzed. The consensus was that many of the key reasons included rebounding stock markets, new industries, businesses quick to change their distribution networks and increasing home equity. However, while these factors were all contributors to the overall growth of wealth, it was the rising number of individuals, with their increased wealth, that had the greatest impact on the increasing volume of luxury property sales during the last 12 months.

The global population of individuals with a net worth of $5 million+ reached more than 3.6 million globally in 2021. That was an increase of 19.8% over 2020 and a notable difference from 2020, which saw only a 2.2% gain over 2019. This extraordinary wealthy population growth led to an equally

extraordinary real estate expansion in the luxury market; including opening up a new map of luxury locations as well as greater numbers of multiple homeownership. In January 2022, the National Association of Realtors (NAR) reported that the market share of luxury properties sales had doubled over the last 12 months.

The importance of the number of individuals joining the ranks of the HNW category cannot be overstated.

Wealth itself may increase the demand for more expensive properties and even shift trends within the luxury home market, but alone it would not have created the staggering spending potential that a near 20% growth in the number of HNW individuals has achieved.

As the number of wealthy increased over the last 18 months, coupled with the new lifestyle choice of ‘home’ being one of the most crucial requirements in an affluent’s portfolio, the exponential increase in demand for luxury real estate instantly becomes clearer.

According to Wealth-X, HNW homeownership between 2019 and 2021 increased 180.1% for homes valued at $1 – 5 million and 102.4% for homes valued above $5 million.

In the U.S., ownership of a luxury property above $1 million is now at 85% for HNW individuals, but even more enlightening is their propensity for multiple homeownerships; with 70% of HNW owning at least two properties, and 46% of them owning three or more.