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September 2007
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November 2007

October 2007

The Upside of a Down Market

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The end result of a slowing market? More one-of-a-kind properties, exceptional locations, great values and, most especially, more time to decide. Nothing could be a better match for a group of buyers who are somewhat immune to the interest rate and credit cycles that typically drive real estate.

So says an article in the new October/November issue of Unique Homes that quotes, Robert Frank, Greg Furhman, and Laurie among others...


Canadian Luxury Market goes from Hot to Hotter

Canadian luxury home activity gives new meaning to global warming – this part of the world is enjoying a hot upper tier market. 

The first seven months of this year have seen Canadian luxury home market sales jump in major markets from Victoria to Toronto.  “The consumer appetite for luxury property has been insatiable,” says Michael Polzler, Executive Vice President and Regional Director, RE/MAX Ontario-Atlantic Canada. “Unabated demand throughout the year has created tight market conditions in a number of blue chip neighborhoods.  Limited availability of product has, in turn, placed mounting pressure on housing values.  As a result, the million dollar home no longer holds the same cachet it once did and in larger markets such as Vancouver, Calgary, and Toronto, it’s simply a starting price.” 

The table below reflects the strength of the upper tier housing market in six major Canadian cities.

Canada


The Masculine Kitchen

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There's a new Porche in town, but you won't be taking it for a test drive.  It's the P' 7340 and it's not a car, it's a kitchen. 

The product of a collaboration between Porche Design Group and Poggenpohl (the oldest furniture brand in Germany), the new kitchen is designed specifically for men. 

As their press release notes:

With their new kitchen, both companies intend to live up to the trend that shows an increasing number of men displaying an interest in ‘kitchen and cuisine’. “In recent years, kitchens have turned into event and representation areas frequently equipped with audio systems”, explains Elmar Duffner, Managing Director of Poggenpohl. “Our co-operation with Porsche Design enabled us to design a kitchen whose sleek and functional design language specifically addresses male customers.”


Mega-mansion news

Yesterday Reuters ran a story ("Credit crunch ripples into mega-mansion market") looking at the luxury market in Greenwich, Connecticut with some comments on trends in the luxury market in general. 

A quote from Laurie closes the article and sums it up nicely:

"The luxury market tends to be a little isolated from the market swings. This time around it's a little different because the bottom half of the upper tier is softening a bit," said Laurie Moore-Moore, founder of the Institute for Luxury Home Marketing, a trade body for high-end property brokers.

The bottom tier is comprised of homes that sell for $2 million or less, she said. "As the market softens I think we are seeing that segment of the market falling out."


Luxury Gets Less Flashy

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Gorbachev in the new LV ad campaign

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An image from the LV fall fashion campaign

Back at the end of July there was an article in the International Herald Tribune that highlights a new series of Louis Vuitton ads. 

The campaign, developed by the agency Ogilvy & Mather, reflects a move by some luxury companies to connect with consumers on a more human level. In the past, many fashion houses and other luxury brands relied primarily on the so-called product-as-hero approach, featuring their products, perhaps accompanied by a model, in a stylized, static way.  The new approach integrates the products into more lifelike scenes.

The ads are an example of luxury brands trying,

to broaden the appeal of the brand, particularly in relatively new markets like Russia and China.

Yes, another example of luxury brands seeking to position themselves with the New Rich (or Newly-Accessible Rich) from China and Russia.  But more interestingly, this highlights the fact that these luxury retailers have realized that they can't effectively reach all of the affluent with the same message and that the affluent are NOT homogeneous in their  attitudes.  This isn’t just an acknowledgment of the cultural differences between the affluent in the West and the East, but rather an acknowledgment that the rich people that relate to Gorbachev are different than the rich people who relate to a sexy supermodel with a very nice shoe on her head.  They have different values, and you can’t sell to them in the same way. 

They've recognized that unless they align their brand and offerings with a different segment within the luxury market than they have traditionally targeted, they will be leaving a good-sized slice of "affluent pie" on the table.

This is true whether you are selling nice luggage or luxury homes.


Lessons from Las Vegas and Macau

There was an interesting segment called "Las Vegas Loves Asians"  on the radio show Marketplace this morning.   I knew that gambling was a popular pastime with wealthy Asians, but was surprised to learn that, 4 out of 5 of the high-rollers in Vegas are Asian.

In the casino industry, it's well-known that of every five high rollers who come to Vegas, four are from Asia. They're known as "whales" -- players willing to bet 50 grand on a single hand, or risk a couple million over a single weekend.

Not surprisingly, the casinos are following the money.  The casino company Las Vegas Sands has recently opened the largest casino in the world ($24 Billion, 10.5 million square feet) in Macau with another on the way. 

Greg Shulman, the VP of international marketing for MGM Mirage, which owns Bellagio and MGM Grand notes,

Currently, the Asian segment of our international gaming revenue stream comprises a very healthy 75 percent. That's where all the money is right now.

When thinking about the demographics of the affluent, this is worth remembering.  Many traditionally Western-focused luxury companies are re-orienting themselves and getting better acquainted with the emerging wealthy in China, India, Russia, and other countries and their different cultural habits and buying preferences.

Here's the comment Shulman made that really caught my attention (emphasis mine):

These people live lifestyles that most of us can only fathom. They have butlers at their beck and call. They have chefs that travel with them. So really, what it comes down to is when they travel to Las Vegas, we're really attempting simply to replicate the level of service that they're accustomed to having at home. And it's a very, very difficult task.

Regardless of culture, delivering an exceptional level of service is often one of the core challenges of dealing with the affluent.  Level of service is more than just nuances or value adds that enhance customer experience--at the core of service is competency.  The uber-rich surround themselves with the best.  Whether it's attorneys, business consultants, financial advisors, or Realtors, they seek the most competent and professional folks they can find.   The challenge for the real estate professional who wishes to work this niche is creating the perception that you are the best at what you do and then delivering on that promise.