The Luxury Real Estate Market Is Expanding
Luxury home sales are on the rise. That may come as a surprise with an uptick in interest rates and questions over tax reform. But, according to Christie’s International, luxury home sales increased by a whopping 11% in 2017.
Why? One big reason is the upward trajectory of equity markets - giving investors a sense of confidence to invest in luxury real estate. There’s also an international appeal. Luxury real estate is a global market. Foreign investors bring their money to the States and vice versa – so there is a large pool to pick from. As you might imagine, these pickings aren’t cheap. At Ali Safavi Real Estate we recommend having upwards of a million dollars cash on hand. With so much money at play be sure to get your financial advisor on board, this isn’t a decision you want to make on your own.
The draw of luxury real estate is the return on investment. It has higher yields compared to the stock market without all the volatility. Plus, there’s no reason to think that high-end real estate won’t continue to increase over the next ten years. They also tend to hold up better when the traditional real estate market tanks. You may have some trouble unloading it in the short term, but its intrinsic value and unique attributes will allow it to bounce back much faster.
Beware of location saturation. Not all cities are created equal when it comes to luxury home value. You’d think a place like New York would be at the top of the list, but you would be wrong. Luxury saturation is causing stagnation in the market. You want to look or emerging cities like Seattle, Denver and Dallas. Of course these cities are well established, but the luxury market is booming. Remember, if you’re planning on getting more than one property it’s always a good idea to diversify locations as well.
Like most real estate investments, you have multiple options: direct ownership, investment trusts, exchange traded funds, and crowdfunding. It comes down to preference and cash flow. Whatever road you chose make sure to do your due diligence.