The New Luxury Home Buyer
People have been drawn to the finer things in life since antiquity, as evidenced by the ruins of once grand palaces, treasure-filled tombs, and exquisite works of art. To the leader-class of the past, luxury was a birthright, the possession of which was proof of rank. Many of today's wealthy would describe their access to luxury in a very different way. By and large raised by post-World War II working parents, the new “affluent class” grew up believing in hard work, education, and reward-by-merit. The wealth required to pursue contemporary luxury more often follows than precedes study, hard work, pursuit of passion, and the seizing of opportunity.
The number of high net worth individuals (HNWI) has been growing faster since the 1980s than at any other point in history. Since the point in time when U.S. tax rates were lowered, the number of millionaires has surged from 574,000 in 1980 to more than 14 million today. According to financial services company Credit Suisse, the global annual growth rate of HNWI since 2010 has been 6.85%. Global personal wealth went from $130 trillion in 2000, to $250 trillion in 2015, an annual growth rate of 4.86%. For affluent consumers around the world, discretionary spending on travel, entertainment, fashion, and, most notably, real estate, is on the rise.
The luxury housing market was the first to recover after the 2008 crisis and has been going strong ever since, benefitting from a booming stock market, low interest rates, and over- seas investment. The U.S. is both the largest luxury market in the world, and offers a high standard of living, excellent educational opportunities, and access to business hubs. Personal wealth through real estate investment is growing and many of the HNWIs of today own multiple properties all over the world.
The Evolution of Luxury
Every generation gets the opportunity to place its imprint on the continuously evolving concept of luxury. As the influence of maturing baby boomers (born 1946–1964) begins to diminish and the buying power of affluent millennials in- creases (born 1980–2000), a new kind of luxury home buyer is emerging, one with different concerns and expectations. The average size of a luxury home today is only 3,800 square feet, down from 5,000-plus just a few years ago. The mantra “bigger is better” has been replaced by “smaller and smarter,” and that trend is evident even at the very high end of the price spectrum. Demand is also growing for sustainable living and homes with integrated smart technology. A healthy and smart environment is here to stay, and it’s becoming increasingly important to today’s consumer. As home builders and tech companies race to satisfy these demands, here is a closer look at a few of the criteria influencing luxury home buyers’ choices:
GREEN LIVING — Fabrics that don’t hold dust, quartz stone countertops that are durable, lower maintenance, and have antibacterial properties, under-mount- ed sinks that don’t trap bacteria in the lip of the sink. Imaginative plans for drought-free landscaping, and an overall clean design aesthetic all appeal to the environmentally-conscious.
SMART HOMES — Discerning home buyers seek smart home features that can be broken down into three main categories: practical use items such as thermostats, kitchen appliances, and lighting systems, entertainment systems ranging from next generation TVs and whole- house radio to wireless connectivity, and cutting edge security features, all activated and monitored from one’s smart phone.
SIMPLE AND EFFICIENT DESIGN — Buyers are looking for well-designed homes with plenty of space in the central living areas, great ow, and clever, built-in storage. Luxury home buyers don’t like clutter. What is displayed is done so thoughtfully and purposefully, whether it be a stunning mountain view or a priceless piece of art.
LUXURY LIFESTYLE AMENITIES — Today, those include outdoor showers, procedure rooms, and in the very high end, private museums. The millennials and Generation X-ers that will make up the largest portion of homebuyers in the coming years look for pet-friendly facilities, observatories, luxury spa services, valet parking, and on-site workspaces.
Sources: Inman, Luxury Portfolio International, Redfin, Credit Suisse