Luxury Real Estate Is the Safest Investment One Can Make, Says New Report

A recent report indicates that real estate remains in a strong position for the remainder of 2022 and heading into 2023 as more affluent consumers are turning to real estate to diversify their portfolios and as a long-term investment strategy. In fact, 80% of U.S.-based high-net-worth consumers agree that real estate is a safe investment, and over one-third agree that it is the safest investment one can make when compared to stocks, bonds, cryptocurrency and pensions, according to "The Trend Report," released Monday by Coldwell Banker Real Estate and the Coldwell Banker Global Luxury program.

Additionally, consumers are over three times more likely to think that 2023 will be a better time to invest in real estate compared to 2022 – rising a whopping 42% from only 11% a year ago.

The Trend Report, paired with a survey conducted by Censuswide of over 2,000 U.S.-based high-net-worth consumers, insight from Coldwell Banker Global Luxury Property Specialists and data collected by the Institute for Luxury Home Marketing and Wealth-X, provides an in-depth analysis of what's driving real estate investment, emerging worldwide luxury real estate market trends, market growth opportunities and global wealth.

The top trends shaping the 2022 luxury real estate market:

1. An Unconventional Buyer's Market
2. Smaller Square Footage
3. Reconsidering Relocations
4. Searching for Stability
5. Moving Beyond Borders
6. Creative Financing

A consistent theme throughout The Trend Report, as found through the survey findings, is that investment is continuously top-of-mind for the wealthy, no matter the market environment. Affluent consumers consider real estate a prime asset for building, maintaining and growing wealth.

Key survey findings featured in The Trend Report include:

Property investment is a priority

Traditionally seen as a hedge against inflation, real estate has the ability to provide financial, emotional and psychological stability in the face of rising uncertainty. Over time, most home values typically appreciate, underscoring how much affluent consumers play the long game when it comes to financial and lifestyle investments today.

• The top reasons respondents purchased real estate as an investment:
  • Diversify their portfolio (46.7%)
  • Long-term investment (46.1%)
  • Financial gain from rental income (45.9%)
  • Inheritance for their children (45.3%)
• The top five types of homes respondents own as an investment property:
  • Multifamily Home (39%)
  • Single-family home (34%)
  • Apartment/Condominium (34%)
  • Townhome/Duplex (33%)
  • Fractional ownership (28%)
• 77% of U.S. luxury consumers surveyed for the report own an investment property. Of those, nearly two-thirds own two or more properties.

More opportunities for buyers on the horizon

The luxury real estate market has shown resilience, leaving buyers with plenty of purchasing power to still acquire the home they desire. Affluent buyers remain bullish as most continue to see the value of property investment.

• 75% of respondents noted that current market conditions have changed their mind about buying a home or investment property in the future as luxury consumers remain optimistic about the market. The top three reasons?
  • More inventory (42%)
  • Rising rents (38%)
  • Stock volatility makes real estate a better hedge against inflation (38%)

Secondary homeownership trumps purchasing a primary residence

With their primary residences accounted for, luxury buyers are turning their attention to building generational wealth by investing in multiple, often lesser-priced, secondary-plus properties.

• 40% of respondents who are planning on purchasing a home in the future anticipate doing so in the next 1 – 3 years.
• Of those planning to purchase a home in the future, 72% stated that their new home would either be a second residence, rental property or vacation home.

Affluent buyers get creative with financing

Rising interest rates are inspiring a new generation of high-net-worth buyers to get creative with their real estate financing.

• Over half of luxury consumers plan to finance their next home purchase via cash offers (51%) or with a private wealth mortgage (48.1%).
• Buyers are also using nontraditional bank loans, seller carryback financing and rate buy-downs.

"While the luxury property market is now trending towards balance, there is still insatiable demand from wealthy buyers looking to diversifying their portfolios and build long-term wealth through investing in real estate. This strategy powered by the wealthy is the driving force that we see throughout The Trends Report and really underscores the power they still have when it comes to purchasing the properties that they desire," said Michael Altneu, Vice President, Coldwell Banker Global Luxury.