Luxury home markets ride the pandemic wave
As the pandemic raged on in 2020, a slowdown in economic activity became inevitable. But while many things did come to a standstill, the luxury real estate market has instead experienced a meteoric rise in demand.
Fueled by a wealthier generation looking to weather the restrictions of the pandemic in style, the demand for luxury homes has gone up significantly, since the beginning of the pandemic. Perhaps it’s the flexibility to work from anywhere, or the need to move to a place that has more space, and effectively far fewer restrictions. In either case, the sudden rise in interest is making it difficult for many realtors to keep up.
Dubai – The Luxury Real Estate Hub
UAE has been one of the few countries globally to have rapidly rebounded from the aftermath of 2020. Owning to the government’s swift vaccination drives, easy access to tests, and strict adherence to masking and distancing rules, the country has made a snappy comeback to business as usual.
Moreover, with many countries still dealing with waves of infections and recurrent lockdowns, foreign buyers flush with cash are flooding Dubai’s high-end property market, where business is back to pre-pandemic norms.
This is evident from the 230% growth recorded in the sales of luxury properties, in the first quarter of 2021, compared to the same period last year. With properties in Palm Jumeirah, Burj Khalifa, and even the Marina, being considered bargains compared to global luxury markets, it’s little wonder that the sector has weathered the pandemic rather well.
New initiatives to lure affluent investors like remote work visas, retirement visas and long-term, renewable “golden” permits have also served as the ideal incentive to drive real-estate demand. Add to that Dubai’s unparalleled reputation as a global financial hub, and central connectivity, and the combination has proven to be too attractive to resist.
Global Luxury Market Trends
With the decline in interest rates, popular cities worldwide have recorded similar growth in the luxury home sector. With its enduring appeal, classic heritage and cosmopolitan city vibe, cities like London have seen it become a popular hub, for a home away from home. Elite homes in areas like Hampstead have become a popular choice for wealthier Middle-Easterners.
The hot streak in the luxury market is becoming prevalent even in cities like New York and Paris, where downtowners are increasingly seen decamping to suburban mansions. According to a new report from Redfin, sales of luxury homes in the U.S. rose 41.6% year over year in the first quarter of 2021. By comparison, sales of affordable homes increased only by 7%, and sales of mid-priced homes climbed 5.9%. In fact, cities like Miami have reported a 101% rise in the sales of luxury homes.
Millennials lead the way
Many analysts blame the sudden interest to the K-shaped consumer recovery – where the fortunes of numerous households have continued to improve. In contrast, those most directly impacted by unemployment and income disruption have gone from bad to worse.
Demand is also being driven by the most educated and wealthiest generation of current times. Millennials have always been touted as the commitment-shy age group, who, as compared to baby boomers, bide their time when it comes to homeownership.
But with the pandemic forcing them indoors for inordinately long periods, this generation is now rethinking their options. Spacious homes that can cater to the varied needs of their families, including that of the home office, and access to nature and waterfronts, have become the most popular choice for this digitally-savvy investor.
Of course – certain market factors have also helped. Prices of residential properties have not increased in the last several years. Mortgage levels are at an all-time low. With discretionary expenditure falling dramatically, savings of those who remained relatively immune to economic disruption, have gone up during the pandemic.
Indeed, a home still conforms to the traditional mindset for investing in property for a rainy day and emotional security. But it now has a new meaning – an ideal home is also an entertainment hub, has word-class fitness facilities, a private mind-calming paradise, and if you are really in the mood, then even a chef’s kitchen which can rival a Michelin star restaurant.