SAN DIEGO — What do luxury buyers want in today’s market? Multigenerational living, value and possibilities, according to a C-Suite panel at Inman Luxury Connect on Tuesday morning.
Douglas Elliman President and CEO Michael S Liebowitz, Engel & Völkers President and CEO Stuart Siegel and Sotheby’s International Realty CMO Bradley Nelson joined moderator Jim Dalrymple II to discuss where the luxury market is, and where it’s headed.
One big trend to watch for: Gen X, millennials and Gen Z are taking the driver’s seat, making listing and purchasing decisions.
“We believe that the luxury market will continue to outperform the real estate market at large in this county, but we do think that we are at a tipping point of seismic demographic shifts in terms of who the buyers are and what they value,” Nelson said. “So as you see Gen X, millennials, Gen Z become the primary buyer pool in the high end, they may act differently. They may prioritize different lifestyle interests than prior generations. So we need to be prepared for that shift and how they find aspiration in the luxury space.”
Siegel wanted the Inman audience to be aware of the Silver Tsunami, the transfer of wealth occurring right now from baby boomers to younger generations. “What we’re finding [is that] it’s the younger generation, the generation below the boomer, that’s driving the buy/sell decision,” Siegel said.
For example, the panel pointed to a shift to multigenerational living, which allows for more family time and is also a savvy estate planning mechanism. Buyers are looking for active multigenerational living, ADUs and new options of floor plans where you can have several generations under one roof.
“All of these are very creative solutions, not only in the resale market, but also driving very smart new development,” Siegel said.
Another often-cited shift is from golfing to surfing, and developers are expanding into those areas as well.
“What is interesting about the luxury sector though is a lot of the data points, a lot of the points that most people use to make a decision to buy or sell, don’t really apply in this sector. It’s much more of a lifestyle-driven decision … It’s an opportunity-driven decision. Interest rates don’t really drive the decision,” Siegel said.
One trend that you might be noticing in today’s political environment, though, is fewer foreign buyers.
“Where we see politics impacting buy-sell decisions is with the non-U.S. buyer,” Siegel said. “Even with a declining dollar … we’re not seeing nearly as robust a reaction to that buy opportunity that you might think. It’s still very, very property specific [and] market specific, but there’s not an incoming flood of new, offshore purchasers.”
Siegel also pointed to a drought in parents whose children are coming to the country to study at U.S. universities. Not long ago, foreign buyers were buying apartments or properties for their children to live in while attending school, rather than going the dorm route. “The fact is that that sector of the market has evaporated,” Siegel said.
However, the U.S. has the most stable real estate market in the world, he pointed out, and the most transparent. “There is the ability to take what, in most non-U.S. markets, is an exceedingly illiquid investment, the ownership of a property, and create liquidity. It’s a lot easier to do it here,” Siegel said. “I think the reality is, this is still a safe harbor.”
Nelson agreed that the U.S. is more transparent than most and offered this advice, which was received with light breakout applause from the audience: “Don’t forget that we have a fiduciary responsibility to our clients, and when we do what’s best for them as opposed to what’s best for us, you always win in the long game. So provide all of the data, share all of your expertise and perspective, but don’t try to push someone because they’ll hold that decision against you.”
