With money to burn, affluent homebuyers will continue to shuffle in 2022

By LISA KLEIN

The real estate market was turned on its head throughout the past two years, with buyers scrambling to find more space in strange locales and sellers in low-inventory markets naming their price.

In 2022, experts expect that this rearrangement of people will continue, and luxury homebuyers will be looking to spend the wealth that has built up during the pandemic, no matter what the market looks like.

“I don’t believe there’s a bad market,” said Amir Korangy, founder/publisher of real estate trade publication The Real Deal, during a Luxury Portfolio International webinar. “There’s always different opportunities but it’s never a bad market play within the market.”

The Real Estate Outlook 2022 Luxury Hour was hosted by Mickey Alam Khan, president of Luxury Portfolio International. Almost 700 agents, brokers and industry observers registered for the hour-long event.

Pockets full

An enormous amount of wealth was added globally during the pandemic, thanks to the increasing value of stocks, bonds and real estate, one of the Luxury Hour’s panelists pointed out.

“Last year, in the middle of the pandemic, global wealth increased by $28.7 trillion,” said Marci Rossell, chief economist for the Leading Real Estate Companies of the World,© during the webinar.

“And if I’m forecasting correctly – what’s happened to the value of real estate this year, what’s happened to the value of stock market – basically I expect to be probably another $30 trillion at least added to global wealth this year,” she said.

“If you, like me, believe that people’s purchases are grounded in their perceptions of how wealthy they are, they got a lot more wealthy in 2020 and then they got even wealthier in 2021.”

The cost of nearly everything seems to have gone up, but the affluent have extra funds and are willing to pay.

“I think that, in general, people’s spending muscle has gotten a lot stronger,” Mr. Korangy said, adding that $1,000-a-night hotels have become the norm and a New York caterer’s prices have doubled without so much as a ripple.

“People on the high end have no problem paying for what they want,” he said.

What they want includes assets, especially real estate, which is driving prices up globally.

“There’s all this wealth that was created and those people want asset – they want nice homes and luxury apartments,” Mr. Korangy said. “In Palm Beach in Florida, there’s zero inventory, and people are buying a house for $25 million and selling it a few months later for $40 million.”

According to Ms. Rossell, consumers have the money to buy these homes, so there is no real estate bubble to burst this time around.

“In terms of the real issue facing us right now, it’s supply at every level,” she said.

Bags packed

So, when affluent buyers are able to snag a property, where are they purchasing?

Per the experts, look for areas that are experiencing population growth and where property is appreciating the most to find the answer.

“What I see is really a great rearrangement of people,” Ms. Rossell said.

One of the largest areas to be affected directly by COVID-19 was office real estate, which emptied out suddenly and has yet to fill back up as most companies opt for a hybrid work model in the near future.

Per Mr. Korangy, 70 percent of office space in New York still sits empty.

This means that homebuyers still do not need to live as close to their place of work as they did before, escalating the millennial generation’s exit into the suburbs and exurbs, a trend that was slowly beginning pre-pandemic.

Boomers, too, are trading locations, retiring early and heading for second-home markets.

“One of the surprising developments of 2020 was the escalation of the retirement of the baby boomers – 1.3 million excess retirements above what we would expect,” Ms. Rossell said.

Next year “the escalation of purchases in the second-home market, I think, very much continues because the escalation of retirements continues.”

Others are buying homes in those markets as investments, and in some areas properties are being marketed specifically for second-home and investment buyers.

“It used to be that you had two homes [but] now people have two, three, four homes and they’re totally comfortable with it,” Mr. Korangy said, adding that home-sharing sites and management services allow those with multiple properties to easily turn them into self-sustaining vacation rentals.

“The biggest testament to that is how the prices of those assets have gone up,” he said. “It continues to go up. I put four offers on properties in upstate New York and I can’t get one. They’re gone in a weekend.”