Many experts this year are talking about a changing market with both positive and negative outlooks. Let’s be very clear: being successful in any profession requires a mixture of knowledge, skill, perception and the ability to judge when there is an opportunity and leveraging it. So whether you’re excited for the transitioning market or intimidated by it, one truth is certain: you’ll need to learn how to make the most of it.
It will be those who not only recognize—but seize—the opportunity in this transitioning market who will cement their dominance in becoming or remaining successful real estate professionals.
There are three uniquely insightful perspectives to inspire those ready to navigate through these choppy waters—leaving behind those who remain distracted by fear of a downturn, recession, and slowing markets.
It should be clarified that all references to the luxury market covers a much wider segment than the highly publicized multi-million dollar sale. The reality is that entry-level into the luxury arena, for a substantial part of North America, starts at $500,000.
Growth through luxury
In 2008, the luxury market led real estate out of recession, with demand and price points escalating at almost dizzying speeds. Today, the luxury real estate market has seen the most significant impact of the slowing demand.
However, globally there are more high net-worth individuals (with net assets of $1 million to $30 million) than ever before. In 2018 there was nearly a 2% growth with more than 22 million individuals with a combined net worth of $61 trillion, as per Wealth-X.
This disparity of growing wealth and the perception of a slowing real estate market lies in the difference of their spend on property types, locations, and requirements.
The biggest challenge for real estate professionals is the need to be prepared, in advance. You’ll need to know what the ‘next’ and the ‘new’ will be from the affluent purchaser. Agents will need to learn how to cut through the clutter while becoming more reactive to changing consumer tastes.
Luxury buyers hold the solution
All statistical analysis and subsequent reports indicate that there is an ongoing increase in the level of luxury inventory available. For many real estate professionals, this signals difficulties for their sellers: price points are lowering, there are increased days on the market, less speed in decision making and more favorable terms for potential buyers.
Savvy real estate professionals should look to their past buyers who were not able to close on the purchase of a luxury property during the fast-paced, multiple-offer years. While some of these buyers may have found solutions, many decided to remain in their current properties and may not be aware that they now have the opportunity to step into their desired property type.
While it is important to recognize that these types of opportunities exist during transitioning markets, it is also critical for an agent to learn how to leverage them effectively, as they often require new techniques.
When it comes to real estate, it is the transition of who is generating and holding the wealth that is changing at a rapid pace. While The Americas still lead both the number of high-net-worth individuals and their total combined net worth, Wealth-X predicts that the most significant growth will be in the Asia Pacific over the next five years – estimating an increase of 7.6% for individuals and 7.5% for their total net worth.
But diversity is more than just location. There are other equally important factors that agents need to appreciate. There are significant changes in wealth within age groups, gender, ownership of wealth, and inherited versus self-made wealth. It’s also important to understand what the ‘luxury’ requirements are for each of these groups, as they vary considerably.
Diversity in the development, building, purchase, redesign, and renovation of real estate has become the new barometer by which real estate professionals should recognize that homeowner’s needs are very different from ten or even five years ago.
As historical trends show, real estate will continue to be driven by the diversity of demand from the high net worth – because they not only impact the type of luxury purchase but create demand that will filter down through the other market segments.