What are the expectations of Luxury Real Estate Market & How To Prepare for the second half of 2020?

Amy Leong

November 19, 2020

The Current Stance of Luxury Real Estate Market

Have you been thinking about investing in a larger, more expensive property in the luxury housing market this year? If that’s the case, then now is the perfect time to take a look at the luxury real estate market trends and forecast for 2020

That said, there are two things that we believe make the luxury buying experience more achievable right now. The first is that all predictions seem to be that COVID-19 is a temporary shock to the economic system, and that once we’re back up and running, there will be pent-up demand, and those who were waiting in 2019 will continue to come off the fence and look to take advantage of the lowest interest rates ever offered.

Promising Indicators

All early indications are in line with that short-term shock and bounce-back in the market. In China, the real estate market is back to about 50% of where it was, but moving in the right direction. At the height of the SARS outbreak, the real estate market was down by as much as 72%, but it was back up and healthy within months of the ending of that epidemic. This is promising as we look ahead to what the rest of 2020 could look like for the North American Luxury Real Estate market. According to top real estate investors, Canadian real estate is looked at as a safe haven in comparison to the more volatile stock market. Wealthier people are looking for safer bets, and Canada, especially British Columbia has flattened the Covid 19 curve quickly. We are predicting big money will continue to look to safer, resource rich Canada and it's economic hot spots.

Election Years

Secondly,  election years inject hesitancy in real estate, especially when it comes to discretionary purchases in luxury. The upside is that we were already prepared to face that and, in comparison to the unexpected shock from the pandemic, a few months of hesitancy around an election does not seem so bad.

When consumers are unsure or uncertain in any way, the first thing they reconsider is discretionary purchasing. This is particularly true if the purchase is substantial. Keep in mind that selling or buying a luxury property can be both a substantial decision and a non-necessity — everyone needs a home, but no one needs an estate or penthouse.

So what is the crystal ball saying for 2020? It's hard to say exactly, but considering the amount of buyers and renters wanting to get into the housing market, from our experience, summer is going to be the new Spring market. We will likely be busier closer to the Fall than we normally would. We will recover from this, just as we have from previous short-term shocks, and come out the other side wiser than we were before. Properties under the $1 million dollar purchase price threshold will be the most desirable due to affordability by both single purchasers, couples, and families. For those in search of more luxurious properties north of the $1.5M price range, there will be more negotiation power and deals to be had if you act when the opportunity presents itself.

Here are 3 main updates about the luxury real estate market that you should consider prior to purchasing in today's market.

1. Prices of Luxury Properties

Luxury real estate investors laid low in 2019 as economic uncertainties and fears of a housing market crash were amplified by many changes in mortgage rules, added taxes, and then the pandemic. However, the world’s richest investors are beginning to spend money in the real estate luxury market again this year as the prices of high end homes dropped into bargain territory. What’s more, is that this drop in home prices happened in relatively stable economic cities where experts predict prices to rise in 2020. With the unexpected pandemic of COVID-19 taking over the world’s economy, investing in luxury real estate has become one of the top solutions to a lot of investors; based on future projections that are following economic trends and shifts in demographics, immigration and a myriad of other factors. Ensure you are speaking to your top advisors to make sure you are positioned to take advantage of these economic fundamentals that always hold true amidst both up and down markets.

Available inventory is another key element that has an impact on the prices of luxury properties. Luxury housing market trends in the US show that the inventory of high end homes is greater in comparison to entry-level homes. Hence, breaking into the luxury real estate market is becoming a growing reality for many investors in 2020.

2. Activity in the Luxury Housing Market

With more opportunities for buying luxury properties in the US and Canadian housing market, real estate experts predict an increasing activity in the market. Those who have laid low in 2019 will start to come out as high end home prices are more appealing and increasing inventory means they have more options to choose from. This tells us that buyers in the luxury housing market 2020 now have the upper hand in negotiations with sellers. Plus, due to the current low interest rate, buyers can get more for their money with greater purchasing power.

Millennials are also another segment that’s giving the luxury real estate market a boost this year (and for the next decade!). As their wealth increases, so does their desire for owning and buying luxury properties. Think INHERITANCE money and where this particular demographic will want to invest and live.

According to Coldwell Banker Global Luxury’s report, A Look At Wealth 2019: Millennial Millionaires, the vast majority (93%) of millennial millionaires have a net worth between $1 million and $2.49 million. Plus, 45% of them are between the ages of 34 and 37, and 15% are business owners. This will contribute to the increased activity in the luxury real estate market as the report also shows that millennial millionaires show a strong interest in real estate investments where their business is located.

3. A Buyer’s Market

Dropping home prices, increasing inventory and demand for luxury properties are trends that point to the fact that the luxury housing market 2020 is a buyer’s market. This explains why buyers now have the upper hand in negotiations and more purchasing power – and it’s another reason why you should consider investing in luxury property. Whether you’re a foreign real estate investor or a local one, experts say this is the best time to break into the luxury real estate market in Canada.

We hope this blog is helpful in clearing some of the confusion in your investing mind. Make sure to share your thought and opinions in the comments. Also, if you have a specific real estate related topic that peaks your interest, share it in the comment and our team will appropriately deliver to your requests!

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