By LISA KLEIN
Affluent consumers are confident about their finances and have plenty to spend on their next luxury home, according to a report released this week.
Finances of the Luxury Homebuyer, the third and final installment of Luxury Portfolio International’s State of Luxury Real Estate 2021 series, paints a picture of where affluent homebuyers have their assets and what they plan to do with them.
“This report gives you a glimpse into the mindset of how such a meaningful purchase as the luxury home is financed from the consumer’s point of view,” said Mickey Alam Khan, president of Luxury Portfolio International.
The study was part of research conducted by the Affluent Consumer Research Co. for Luxury Portfolio International.
The affluent class is growing, with a 73 percent increase in ultra high-net-worth individuals – those with $50 million or more in net worth – since 2015.
Wealth, too, is growing.
In the United States alone, cash deposits grew 21 percent year-over-year in the first quarter of 2020 to $17.4 trillion – the largest increase since recording began in 1952.
Prudent investors were also able to take advantage of stock market fluctuations over the past 18 months. Companies that score high in sustainability and social responsibility are a priority, with 64 percent of those surveyed looking to buy stocks in them.
All in all, affluent consumers have high confidence in their overall financial wellbeing, according to the report.
However, they also believe now is a good time to invest in financial safety nets and include cryptocurrency in that category, perhaps with good reason. Bitcoin experienced a 561 percent increase in value in just 6 months, skyrocketing to $63,500 per coin in May 2021.
Seventy-eight percent reported planning to invest in cryptocurrency and gold instead of gold alone, although the medium is losing steam in China thanks to government threats to regulate it.
When it comes to purchasing a luxury home, priced at $1 million or more, most buyers are already luxury homeowners – just 6 percent are new to the market.
Cash is a major source of financing for home purchases. Twenty-four percent of buyers plan to make an all-cash offer on their next home and 58 percent said they will use at least some cash on hand.
Other sources of financing include selling off high-performing bonds and stocks and taking on a mortgage thanks to the current low interest rates.
The largest non-financial asset being used to fund a new luxury home purchase is real estate, although selling other high-end goods, art and precious metals and stones is gaining traction, especially with the under-50 set.
Selling luxury goods has shown an uptick with all consumers, and affluents are using the windfall from doing so to buy home gym equipment, home décor and art.
Luxury resellers also tend to have a higher frequency of new luxury purchases, so may be selling their old items motivated by change rather than finances.
While 20 percent of those surveyed said they were delaying other purchases, especially club memberships, to finance their next home purchase, things are looking up for the high-net-worth buyer.
“The booming affluent economy continues to impress and amaze,” Mr. Alam Khan said.