Luxury Real Estate Review: Key shifts, strong growth and future outlook

Key points are:

· While interest rates impact the broader economy, the luxury real estate market has remained comparatively unaffected

· 2024 saw renewed growth amidst lower inventory

· A notable shift in 2024 has been the resurgence of luxury properties valued between $1 million and $2.5 million

· Dubai rises as the leading market for ultra-luxury transactions outperforming traditional real estate powerhouses like New York, London, and Paris in terms of $10 million+ property transactions

· As prices in central luxury districts reach record highs, many investors are now looking at adjacent regions for more opportunities, leading to rapid price growth in neighbouring areas.

· The most significant buyer demographic in the global luxury real estate market remains Americans.

· Florida is the Post-Pandemic U.S. Luxury Market Winner

· With limited inventory and continued global wealth expansion, luxury real estate will likely maintain its position as a premium asset class

The global luxury real estate market is in a robust and stable period of growth, showing resilience and adaptability even amid economic shifts. This segment differs notably from the mass market in its relative immunity to traditional financial constraints, with most luxury property transactions being cash-based rather than mortgage-dependent.

Up to 70% of $1 million+ purchases are cash in most regions, while lower-priced segments typically rely more on financing.

This structure means that, while interest rates impact the broader economy, the luxury real estate market has remained comparatively unaffected.

Eric comments: “In 2024, the luxury real estate market regained momentum as interest rates began to stabilize or decline, restoring buyer confidence and attracting more investors back into the market. However, one of the biggest factors sustaining high property values is limited inventory, particularly for unique, high-demand luxury properties.”

Market Evolution: From Boom to Stabilization

From 2019 through the Covid years, luxury real estate saw a significant boom. The pandemic accelerated demand, pushing up transaction values as high-net-worth individuals sought properties that enhanced their lifestyle while serving as valuable assets.

During this period, both transaction volumes and average prices climbed to new heights. However, by 2022 and 2023, rising market volatility, particularly in stocks and investments, combined with high interest rates to temper this growth. While luxury buyers are not traditionally reliant on credit, many HNWIs felt indirect effects through business financing and investments, leading to a dip in transaction volumes in late 2023.

2024: Renewed Growth Amidst Lower Inventory

In 2024, the luxury real estate market regained momentum as interest rates began to stabilize or decline, restoring buyer confidence and attracting more investors back into the market. However, one of the biggest factors sustaining high property values is limited inventory, particularly for unique, high-demand luxury properties.

During the Covid period, new construction slowed dramatically, and rising material and labour costs have further restricted supply. This has left prime real estate markets with limited availability, keeping prices elevated. Particularly in new or nearly new properties in top locations, inventory remains extremely low, creating a seller’s market where demand outpaces supply.

Surging Demand in the $1M–$2.5M Segment

A notable shift in 2024 has been the resurgence of luxury properties valued between $1 million and $2.5 million. This segment, which was more impacted by economic conditions over the past two years, is now rebounding 50% faster than the $5 million+ segment, thanks in part to declining interest rates.

This is a significant trend because it suggests that the luxury real estate market is broadening again, with a wider base of affluent buyers entering the space. As financial conditions ease, more high-net-worth individuals are seeking investment opportunities, fueling growth across multiple price points.

Dubai: The New Leader in Ultra-Luxury Real Estate

One of the biggest global shifts in recent years has been Dubai’s rise as the leading market for ultra-luxury transactions. The city has now outperformed traditional real estate powerhouses like New York, London, and Paris in terms of $10 million+ property transactions. Dubai’s luxury real estate market is highly dynamic, benefiting from both domestic and international demand. While oceanfront properties remain the most sought-after, the city’s rapid expansion has also led to the emergence of new, smaller luxury hotspots, catering to a diverse range of buyers. This broad appeal is a key factor behind Dubai’s dominance in high-end real estate.

Eric comments: “One of the biggest global shifts in recent years has been Dubai’s rise as the leading market for ultra-luxury transactions. Dubai has outperformed traditional real estate powerhouses like New York, London, and Paris in terms of $10 million+ property transactions.”

European Hotspots and the Shift to Emerging Luxury Hubs

In Europe, key luxury destinations such as the south of Spain, Portugal’s coast, the French Riviera, and the Italian countryside continue to attract global buyers. However, as prices in these central luxury districts reach record highs, many investors are now looking at adjacent regions for more opportunities.

This trend has led to rapid price growth in neighboring areas, where values are rising at double the pace seen in central luxury hubs, albeit from a lower base. We see this happening in Lisbon’s surrounding areas, Marbella’s outskirts, and other prime European markets, as buyers seek more accessible but still prestigious locations.

This movement highlights the scarcity of inventory in traditional top-tier luxury markets, which is pushing demand outward and driving significant price appreciation in previously overlooked regions.

American Buyers Drive Global Demand

The most significant buyer demographic in the global luxury real estate market remains Americans. While most U.S. luxury buyers still focus on domestic properties, particularly in California, Florida, and New York, there has been growing interest in international purchases.

Over the past few years, affluent Americans have increasingly invested in Portugal, Spain, Italy, and Dubai, drawn by favorable tax environments, attractive real estate opportunities, and desirable climates. Following the presidential election on November 5, 2024, JamesEdition observed up to a 30% week-over-week increase in traffic from the United States.

Americans remain one of the fastest-growing groups of international buyers, and demand for luxury real estate in warm-weather destinations similar to the southern U.S. remains strong and sustained.

Eric comments: “Americans remain one of the fastest-growing groups of international buyers, and demand for luxury real estate in warm-weather destinations similar to the southern U.S. remains strong and sustained.”

Florida: The Post-Pandemic U.S. Luxury Market Winner

Within the U.S., California, Florida, and New York remain the top three markets for luxury real estate in terms of both transaction volume and property values. However, Florida has emerged as the clear post-pandemic winner.

• The state benefits from a combination of factors:
• Favorable tax policies that attract high-net-worth individuals
• A growing number of high-end new developments
• An appealing climate that aligns with luxury lifestyle preferences

Additionally, the rise of remote work has empowered affluent buyers to prioritize lifestyle and tax advantages, further solidifying Florida’s dominance as a leading U.S. luxury market.

Future Outlook: Long-Term Stability and Growth

​Looking ahead, the luxury real estate market is expected to remain stable, given its low dependency on credit and sustained demand. Over the next decade, an average annual growth rate of approximately 7% is projected, reinforcing the market’s long-term strength.

With limited inventory and continued global wealth expansion, luxury real estate will likely maintain its position as a premium asset class, offering both lifestyle benefits and financial stability for investors. The combination of high demand, constrained supply, and the enduring appeal of prime real estate suggests that prices will remain strong, particularly in top-tier and emerging luxury markets.

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