In the luxury real estate market, as in all else, everything is relative—even the definition of value. So as luxury home prices have soared and inventory has become increasingly scarce, many well-heeled buyers have turned to alternate locations to seek refuge from the luxury feeding frenzy taking place in blue-chip markets around the world.
From North Carolina’s Blue Ridge Mountains to the Algarve region of Portugal, a variety of global destinations have found new favor among high-end buyers. Many of these locales feature unique conditions or circumstances that make them particularly attractive from a value standpoint. Others simply offer an enviable lifestyle at a good price.
Not that some of these markets aren’t seeing impressive price growth themselves. Phoenix, Arizona, for example, has been one of the fastest-appreciating housing markets in the US—notching year-over-year price gains of more than 30 percent in June’s S&P CoreLogic Case-Shiller Index.
However, according to Dub Dellis, Chief Operating Officer of Christie’s International Real Estate affiliate Walt Danley Realty in Paradise Valley, there is still value in the market.
“We’re seeing some softening now, which we fully expected following price appreciation that everyone knows was not sustainable,” said Dellis. “But luxury buyers still have a lot of confidence in our market, and they have the understanding and the wherewithal to know that there are going to be ups and downs, and they are going to enjoy their home through those cycles with the expectation that they will eventually make money.”
Another boon to the Phoenix/Scottsdale luxury market has been the fact that, over the past few years, the area has attracted a lot of former residents of the San Francisco Bay Area, home to about a third of the nation’s most expensive zip codes.
“There is certainly value in the market from those buyers’ point of view,” Dellis said.
A similar dynamic is at play in the New York Metro area. New York City has experienced a quick and spectacular bounce-back post pandemic, with first-quarter 2022 residential sales exceeding $7 billion. However, that has only provided more motivation to buyers looking for a homestead outside of Manhattan.
“Luxury buyers continue to see value pockets in the suburban tri-state markets of New York City, including Bergen County in Northern New Jersey, where we saw record sales in the first half of 2022,” said Sonja Cullaro, Executive Vice President of Christie’s International Real Estate Group.
And luxury markets aren’t just viewed relative to one region or one metro. Global cities are also seen in relation to their international counterparts. That’s one reason Chris Kapches, President and CEO of Chestnut Park Real Estate, sees significant upside in Toronto.
“Notwithstanding the amazing growth we’ve had in our marketplace over the last two years, we have a lot of room to grow on the luxury side because our average sale prices, on a global basis, are much lower than other cities. Luxury is still inexpensive in Toronto,” Kapches noted.
While prices in some markets have experienced “hockey-stick” growth, other markets have inched along, creating opportunities for value-minded luxury buyers. One such market is Tuscany in Central Italy.
One of the most scenic and visited places in the world, Tuscany was nonetheless beset by declining home prices for much of the 2010s. One reason for the slow growth is what makes Tuscany so attractive in the first place—its centuries-old buildings and country houses, many of which have not been brought up to current luxury standards. Today, however, demand is up, and the market has found its equilibrium.
WATCH: Prices in Tuscany are particularly attractive following a prolonged downtrend.
“In the two years since COVID-19, the market has been active like never before,” said Danilo Romolini of Romolini Immobiliare, Christie’s International Real Estate’s Tuscany affiliate. “Sellers are starting to get their asking price, but there are still great deals.”
While the Americas and Western Europe saw buyer interest jump soon after COVID-19 struck, halfway around the world property markets in Asia remained tamped down as governments took a more conservative approach to reopening. But now, just as activity begins to normalize in the West, things are heating up in South East Asia, creating new ground-floor opportunities for luxury buyers.
In Thailand, the real estate market began to revive last spring according to Tim Skevington, CEO of Richmont’s Christie’s International Real Estate in Bangkok.
WATCH: Luxury buying opportunities abound in Bangkok as South East Asia reopens post-pandemic.
“It’s an interesting opportunity to come in at the beginning, as the market is opening up, and see what the choices are,” said Skevington.
Among the newer options are a number of luxury branded residences bearing 5-star hotel flags—a product type especially attractive to international buyers and those seeking a lock-it-and-leave-it second home.
Pandemic-fueled migration patterns are also giving rise to new hotspots among luxury homebuyers, and one destination that is garnering a lot of attention is the Algarve region of Portugal. Again, value relative to other locations in Southern Europe—such as the French Riviera and Spain’s Costa del Sol—is one factor attracting buyers.
WATCH: Weather, wine, and affordable home prices attract luxury buyers to Portugal.
“You can buy luxury property for a very reasonable price,” said Ricardo Alves da Costa, CEO of LUXIMOS Christie’s International Real Estate, which has offices in Algarve and Porto.
But Alves da Costa also cites Portugal’s safety—the Global Peace Index ranks it the sixth safest country in the world—and its Mediterranean climate. He estimates that 70 percent of recent buyers in the Algarve have come from abroad, with Brits and Americans leading the way.
Back in the U.S., another region where luxury momentum has been building is the Carolinas. With a mild four-seasons climate and diverse geography that includes mountains, lakes, coastline, small towns and big cities, North Carolina has been attracting luxury buyers from as far away as California, according to Reed Jackson, principal in the Christie’s International Real Estate offices Ivester Jackson Distinctive Properties in Charlotte and Ivester Jackson BlackStream in Asheville.
“From an investment standpoint, North Carolina is a really attractive option, particularly when you can combine it with a great lifestyle,” said Jackson.
WATCH: North Carolina is seeing an influx of luxury buyers, according to Reed Jackson.
Rapidly rising prices are one indicator of the value luxury buyers perceive in the market.
“I would predict that we will end the year with pricing up something in the range of 15 to 20 percent over last year, although the trendline is flattening as the Federal Reserve works through its rate increase model,” noted Jackson. “We continue to see sell-through in the luxury ranges, with the ultra-luxury range, which is over $3 million in our market, showing an increase in sell-through of over 50 percent year to date versus last year.”
Looking ahead, macro-market conditions for the second half of 2022 and into 2023 are likely to create additional opportunities for home buyers seeking value in the luxury space.
Weakened currencies portend increased foreign investment in the Eurozone and Asia, while the biggest issue frustrating buyers in North America over the past two years—a lack of inventory—is starting to ease as the pace of sales slows and more new listings gradually hit the market.
Second home markets which have seen some of the biggest runups in pricing during COVID-19 are often the first to pull back at any sign of economic distress. And if the employment picture changes and companies start to take a less friendly stance toward Work From Home—as some, most famously Tesla, already have—that could further impact second home sales.
Nevertheless, buyers around the world have shown an appetite for luxury homes that has rarely if ever been seen before. And that will fuel the hunt for value for the foreseeable future.
