Home purchases fell in much of the country in March, but wealthy Americans appear to still be interested in buying luxury homes.
Liam Bailey, Head of Global Research at Knight Frank, has joined Wealth! He details why luxury real estate remains a popular investment among high net worth individuals.
Mr. Bailey details some surprising trends in luxury real estate. “From a portfolio perspective, there's continued interest in real estate. Of course, the challenge is that interest rates have delivered so far. So interest rates are under pressure.”But for accommodation I think there is still a demand for it. I think perhaps the biggest surprise is the fact that even though interest rates have risen, prices for residential real estate, not just the luxury market, have increased over the past six to nine years. A lot of that is due to the fact that entries are currently very limited. [starts] This means that demand is pushing up prices. ”
For more expert insights and the latest market trends, click here to watch the full episode of Wealth.
This post was written by Nicholas Jacobino
video transcript
– Once you've bought all your luxury goods, you'll need a nice, big luxury home to house it all, perhaps with a California closet. High interest rates are a hurdle. However, wealthy people can jump more easily than others, and many plan to do so. According to the Knight Frank Wealth Report, 22% of wealthy people want to invest in residential real estate this year, and 19% want to invest in commercial real estate.
We hear more from Liam Bailey, Head of Global Research at Knight Frank and Editor of the recently released Wealth Report. Here are some of the things we discovered. What was the statistic that really surprised you after knowing this in this report?
Liam Bailey: got it. So I think the biggest takeaway from this year's report is the fact that wealth creation is back. So a year ago, we were reporting that $10.1 trillion would disappear from an asset portfolio perspective. Because of what has happened in the last 12 months with stock markets, cryptocurrencies, etc., wealth creation has been bad and the global economy is doing well, so there are more wealthy people on a global level. You mentioned statistics about continued interest in real estate from a portfolio perspective.
The challenge, of course, is that while interest rates have been doing what they have been doing and therefore the pressure on the market, the demand for easing is still there. Perhaps the biggest surprise is the fact that despite the fact that interest rates have risen, prices for residential real estate have increased over the past six to nine months, not only in the luxury market but even in the mainstream market. I think. A lot of that is due to the fact that inventory is currently very limited. So a lack of inventory actually means that real demand is pushing prices up.
– Of particular interest is the wealth of anecdotal evidence regarding people applying for passports, as wealthy and affluent individuals tend to buy international real estate. What do you see beyond that?
Liam Bailey: The whole world of luxury real estate is becoming more global. Interestingly, if you go back five years, you were meeting American buyers in London, for example. In the last couple of years, all of a sudden, we're seeing American buyers starting to operate in a big way in Lisbon, Portugal, Spain and Italy. There are many luxury markets in Europe, and U.S. buyers are starting to influence demand and pricing.
– That's one way to achieve a four-day work week. Remember to take naps and cut out some of that time here. Liam, we're here too, but we're looking at some of these CRE, some of the commercial real estate, especially the extreme movement that we're tracking right now, especially the reduction and revaluation of office time spent. Please point it to There are also many assets.
Liam Bailey: Yes, you can't do that, please take a step back. There is no doubt about the significant challenges facing the office sector around the world. I think people in the United States are probably a little more delayed in returning to public office. I think the UK and Europe are a little further ahead. I think the direction of travel will return over time. I don't think we'll go back to five days a week, but we're getting back to a more normalized business.
But the biggest change we're seeing is the fact that the office market is split into two. There is a huge demand for top class offices. So if you run a professional services firm, 10% of your costs will be office space. Most of the costs are labor costs. You're in the talent business and want to attract talent. And the best way to do that is to actually build a nice headquarters building somewhere with training facilities, entertainment facilities, etc. And the reality is that those buildings are not in decent supply.
As a result, there is actually a shortage of accommodation facilities. If you're looking to move to London right now, just to give you an example, there are currently 80 Powers of Attorney in London that are above 50,000 feet above sea level. It is said that it will take two, three, four years to actually move into a new building. We currently do not have stock of this quality available. So I think the market is split into two. Best-in-class companies are doing very well, but weaker sectors are struggling.
– Delve into more insights. That's all we have time for now. Liam Bailey, Knight Frank Global Head of Research. Thank you very much for your time.
Liam Bailey: thank you.
