Changes in the way we work and live since the pandemic have upended the traditional real estate market, and the latest news from around the world has only increased the noise. Mickey Alam Khan, President of Luxury Portfolio International, offers his perspective on where we are headed from here.
What is the overall situation in the international real estate market at the moment?
The prime real estate market is on fire. Agents around the world have seen record levels of activity – but increasingly concern is mounting around inventory, which remains at historic lows even at prime prices. This trend is most palpable in the United States, where bidding wars over certain properties are still rampant and ambitious buyers continue to be sold on lower-tier luxury properties.
According to NRA The figures. This has created an imbalance between supply and demand, causing prices to spike and a change in where people will live. Real estate markets that were once branch offices – that is, satellite towns – have now become luxury destinations, such as areas outside of New York or around Seattle.
Is the shift from city to country we’ve seen during the pandemic still a factor?
Absolutely. The post-COVID landscape – where remote or partially remote work environments remain in place – will continue to amplify this trend. For example, before COVID, a 90-minute drive from Manhattan would have been considered an outlier. But now, if someone has to be in town two or three times a week, a longer commute is no longer considered expensive. This “stretched” the ride to particularly more suburban areas, even rural communities in northern Connecticut.
Where are the major boom areas in the United States?
Atlanta’s luxury real estate sector has become quite expensive as technology companies, such as Microsoft, open new campuses there. Charlotte, North Carolina is also feeling the pressure of a boiling housing market, fueled by banking sector activity and an increase in the number of new residents. Still, the most attractive markets to watch are Florida, which has become the flagship of unbridled growth, as well as Texas and Tennessee – Nashville is currently one of the most sought-after markets for high-end homes.
Does this mean that real estate in the big cities is suffering?
Not at all. While the Sun Belt is certainly a literal home, New York is back. Condo prices in town are up 20% in many cases. And in the suburbs, it’s almost impossible to find a ready-to-move-in home at a reasonable price. There’s a similar story to be told in Chicago, where sales were up 10-15%.
What about hotspots around the world?
Internationally, all eyes are on Dubai, which is seeing record levels of activity, fueled in part by Russian investors. London is also seeing sales return to prime areas.
In the longer term, how do you see the evolution of the market?
The next phase of luxury market growth will be fueled by wealthy millennials, and they are looking for very different things in their properties. They are looking for homes that are fully wired, suitable for remote work and offer more space, as well as “green” access and a convenient location. It’s going to have a major influence on the market, and it’s going to create new opportunities. These buyers are looking to have it all in real estate: wealthy individuals will want to work from home, but will also move seamlessly between residences. That said, the situation will be different in commercial real estate: despite explosive housing growth, office districts in major cities like New York will continue to struggle.
What potential problems lie ahead?
Interest rates are starting to climb around the world, but we don’t expect that to have a deterrent effect on wealthy homebuyers, at least in the United States. However, this will hinder ambitious buyers.
Looking at the global situation, however, the biggest threats on the horizon are geopolitical and related to Russia and China. Affluent people in Europe might consider moving their assets to safer havens, such as the United States. Most foreign buyers of real estate in the United States over the past two years have been affluent buyers from China, Canada, India, the United Kingdom and Mexico.
How much will the situation with Russia cause ripples in the market?
In fact, China accounted for the biggest drop in foreign real estate investment in New York when the pandemic hit, so the lack of Chinese money will have a much bigger impact than sanctions or the withdrawal of restrictions. Russian buyers in the New York market.
Keep in mind that US and EU sanctions only freeze the assets of targeted Russian oligarchs, not seize them. It would be very difficult to fully capture the sanctioned Russian wealth unless there is a paper trail linking the purchase of these assets to the illicit wealth.
Overall, the demand in the market is there, but not the supply. Expectations are high and the coming months will certainly offer intriguing insight into how the industry will continue to adapt to market fluctuations and disruptors globally.
Mickey Alam Khan is the New York President of International luxury portfolioa global network of independent luxury brokers
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