2018 Luxury Portfolio Affluence Forum in New York City
Luxury has moved far beyond a label and a logo in the modern world. Luxury is increasingly about providing what is new, unique and memorable. At the recent Luxury Portfolio Affluence Forum held in New York City, we met with Luxury Portfolio members in marketing and operations roles from across the U.S. as well as representation from Portugal and Mexico, and together delved into the world of today’s luxury from several different angles.
The Forum substantiated much of the research that was delivered in the Luxury Portfolio whitepaper “The Rise of the Aristocracy,” published earlier this year. The rising young affluent consumer is savvier and more discriminating than ever before. Traditional marketing techniques are less effective in reaching this consumer who is hyper-conscious of being “sold” to. Instead, sophisticated luxury brands are repositioning themselves as:
Where once luxury was about joining the ranks of the elite, now luxury instead reflects the travel-centric and experience-driven life of the consumer. Luxury is fun, different and creative; words that wouldn’t have been associated with the luxury market of a decade ago.
The overall luxury market can be compared to the luxury real estate market. Both are seeing consolidation of major brands as well as new competitors emerging. As special guest Mickey Alam Khan, editor-in-chief of Luxury Daily pointed out, no brand, no matter how esteemed, can trade on name alone anymore. Brands like Gucci, are repositioning their value, combining history with a sense of playful creativity designed to attract a younger consumer.
The importance of a high-touch experience
Across all verticals, luxury brands must straddle two worlds. They must deliver a blend of both seamless convenience and multiple options for purchase, together with the unusual and unforgettable. In luxury real estate, clients expect a streamlined purchase process along with high-touch service that makes an experience truly memorable.
An example of an up-and-coming brand existing in this world is Homepolish, an on-demand design service that connects designers and clients. Homepolish, also a special guest at the Forum, offers both premium interior design services, as well as renovation support, to deliver not just a flawless end-result, but also a design journey where the client feels that they are actively participating in the process to create a custom result that is uniquely theirs. In a panel on design trends, Homepolish designer Jae Joo said that one of the first things she asks clients is what they want their level of involvement to be.
Noa Santos, founder of Homepolish and also on the panel, shared that savvy real estate brokers are using Homepolish to provide a concierge-level experience by having one of their designers visit an active listing and show a potential buyer how a home could be re-imagined. The spaces that Santos and Joo showed as examples of Homepolish work included artwork and unique objects that reflect not just the style but the personal life journey of the owner.
The personal connection between the home and owner was something master architect and speaker at the Forum, Peter Pennoyer also explored as he displayed some of the projects he has worked on. Pennoyer works with some of the most prestigious clients in New York and combines a respect for the history and authenticity of the local architecture with a deft understanding of the latest techniques in design. One of his most interesting techniques is to use 3D printing to help clients imagine how a particular piece will look before it is fashioned. Pennoyer is also a student of history, delving deep into Art Deco archives to revive design elements that were never built and can be fashioned using the latest technology.
Respect for the past combined with a vision for the future seems to unite all luxury worlds currently. As younger affluent consumers mature, they demonstrate an incredible understanding of luxury as well as a desire to explore beyond what is traditional.
Luxury in a changing real estate landscape
Stephanie Anton, President of Luxury Portfolio International, also provided an update on the status of luxury markets around the world. She reported that U.S. prices have continued their upward trajectory in recent years, driven by the growth in the West. At the end of the second quarter of 2018, data from Realtor.com showed that 19 of the top 91 major U.S. markets saw double-digit growth at the top 5% of the market and sales of properties over $1 million were up by 13% year-over-year in May. Much of this growth was seen in the Bay Area where tech companies continue to take more and more office space.
Luxury real estate has separated out into two stories:
- Hot markets driven by low inventory
- Cooler markets with many homes on the market.
One of the biggest changes has been the way that tax reform has changed values in certain markets. Sarasota, Florida has become one of the hottest real estate markets in the country, partly due to New York residents seeking a more favorable tax base. While in Westchester County, New York, the fact that property taxes soar above the new $10,000 deduction, has led to price reductions as homes remain on the market longer. Of the top 20 markets where prices rose on the Luxury Portfolio website, six were in California, four were in Florida and three were in Colorado in popular resort destinations.
The global luxury market has seen slowing due to a combination of political uncertainty, changing regulations and rising financing costs. Top markets have seen growth of approximately 2.6 percent as prices stabilize. London, which has struggled in the wake of Brexit and tightening capital controls, now appears to have reached a stable point and local brokerages are reporting increased deal making.
Chinese buyers are still moderately active on the residential side but have dramatically curtailed investments in large commercial projects overseas. They are keeping much of their money close to home as is shown by the fact that in Hong Kong, 82 homes over $40 million have been sold within the last 30 months. Chinese buyers are seeking property in Montreal but also purchasing in Cambodia and Singapore as well as Germany and Switzerland.
Our 2018 Global Luxury Real Estate Report, publishing in September, will focus on the interests and buying habits of affluent consumers around the world and provide more insights into what the future holds for the luxury real estate market.