Buyers Take Long View in Blue-Chip Luxury Property Markets

Throughout the pandemic, affluent buyers acquired luxury homes at a record clip. However, the buying binge wasn’t for show. Rather the motivations of these buyers were similar to those of consumers two or three decimal places to the left—more space, convenience, privacy, and the prevailing sentiment that you can’t take it with you so you might as well enjoy it today.

The wealthy, along with many other homebuyers, were rewarded handsomely for their indulgences, as the rising tide of pandemic-era real estate made mavens of us all. However, as that tide begins to turn—and markets become increasingly volatile—it is reasonable to wonder whether ultra-high-net-worth individuals will curb their luxury real estate purchases.

The consensus among a group of Christie’s International Real Estate broker-owners and agents who gathered last spring in Aspen for the company’s annual conference, as well as several others who have weighed in since, is that scenario is highly unlikely.

In fact, high inflation, a roller-coaster stock market, and a luxury housing cooldown that has already begun in some regions could motivate ultra-high-net-worth individuals to venture back into the real estate market in search of opportunistic buys, notes Christie’s International Real Estate co-CEO Thad Wong.

“Whether wealthy buyers are looking for value in some locations or paying a premium in others, the overall market will tilt toward the high end for the next couple of years, as it typically does in a volatile economic climate,” said Wong.

This trend puts—or rather keeps—the focus on a handful of blue-chip property markets around the world, where buying activity doesn’t always correspond to the current economy but rather the personal desires and long-term goals of people who can afford to wait out this cycle and the next one.

Part of The Wealth Portfolio

Chief among these locations is New York City, the largest luxury real estate market in the world. Suburban and second-home markets attracted much of the attention early in the pandemic, but the reopening shifted record demand back to Manhattan.

According to Kate Meier of Meier Estates & Ventures Team, Christie’s International Real Estate, a love for city living—along with the desire to maintain a foothold in New York for financial reasons—has endured for many luxury buyers, despite the lifestyle changes of the last two years. “People of generational wealth understand that New York real estate is one of the most secure investments in the world. They understand it’s part of their wealth portfolio. It will gain value and give a better return than almost any other investment they might have,” Meier said.

Aspen, Colorado, is another blue-chip performer that rarely loses its shine. Only 14 percent of Aspen is developable, and the city and county tightly limit new construction. Throw in a bull market, the ability to work from anywhere, and a desperate desire for the outdoors, and, not surprisingly, Aspen’s luxury market exploded during the pandemic.

“Between 2000 and the end of 2021, Aspen saw 40 transactions over $20 million; 26 of those sales occurred last year,” said Alex Jansen, CEO and managing broker of Christie’s International Real Estate Aspen Snowmass, highlighting his market’s unprecedented run.

Today, luxury inventory is finally climbing, but homes continue to exchange for record-setting prices. “There isn’t much sign of things slowing down in our market,” Jansen said.

Generational Mindset

High barriers to entry combined with eight-figure prices are also driving more of a generational mindset when it comes to uber-luxury home purchases. Such is the case in St. Barthélemy, one of the world’s most exclusive and expensive vacation-home markets.

“We are seeing more and more wealthy families buying with long-term ambitions; buying through partnerships in which they will transfer the shares to future generations,” said Christian Wattiau, chairman of Sibarth Real Estate.

St. Bart’s tax laws for foreign nationals—no income tax, wealth tax, or property tax, and a sliding scale on the capital gains tax that reaches 0 percent after 18 years of ownership—support such purchases, as does the island’s highly restrictive development environment.

Wattiau believes these forces will have a long-term effect on the market, creating a persistent lack of supply and consistently high prices. In fact, he reports that the percentage of Sibarth’s Real Estate’s listings over €10 million has doubled in the last two years from 40 to 80 percent. But those listings also make up a bigger piece of a smaller pie. Total inventory is down by roughly 70 percent.

“Who wants to sell on St. Bart’s? It is hard to leave this lifestyle,” says Wattiau.

Generational considerations are also driving purchase decisions in four-seasons markets like Montana and New England. According to Slater Anderson, managing director of Boston-based LandVest, which is active in coastal Maine, Massachusetts, Vermont, and New Hampshire, there is another goal for these distant-horizon purchases among a growing contingent of wealthy buyers—land conservation.

WATCH: Conservation is increasingly on the minds of wealthy buyers who are acquiring extensive acreage.

“A lot of the luxury buyers we work with are very conservation-minded,” says Anderson, whose firm also operates a consulting practice dealing with conservation planning for private clients. “They are looking for properties that meet their use needs but also their environmental and philosophical and sustainability goals around preservation of the land.”

The Most Precious Commodity

The opportunity to “buy low” at the outset of the pandemic could not have worked out better for many high-end buyers. But for others, low inventory, labor shortages, and supply-chain issues have thwarted buying, building, and renovation plans going on two years. And that has cut into perhaps the most precious asset for the wealthy—time.

So, despite being deep in the current cycle, buyers continue to pay a premium for homes that allow them to avoid lengthy construction projects or to gain control of prime-located properties that give them options for the future.

Chris Trapani, CEO of Christie’s International Real Estate Sereno in Silicon Valley, says the high end of his market starts at around $12 million, but that won’t get you turnkey. “You’re seeing people moving from those properties and buying something in the $20 million range that’s more completed, because they don’t want to go through the process of having to update and modernize the $12 million property,” he said.

Earlier this spring, Sereno agent Joyce Romeo of the Joyce & Tatum Real Estate Team helped her clients purchase a $22.5 million home in Atherton, California. The transaction set the high-water mark for the town for 2022, although Romeo says the market has pulled back during the last few months. Still, she says her clients have absolutely no regrets.

“For my buyers, the ability to start enjoying the home today is more important,” she said.

Similar stories are playing out from South Florida to the South of France, and experts say the trend will continue well into 2023.

Banner image is the view from 1020 Fifth Avenue, 12th Floor, listed by Edward F. Joseph of Christie’s International Real Estate Group.