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Sustainability, shifting global policies and technology are some of the top things luxury agents will want to keep in mind when working with buyers and sellers in 2024, according to the Sotheby’s International Realty 2024 Luxury Outlook Report, which was released on Wednesday.
Coming out of 2023, the luxury market is in a stable position, A. Bradley Nelson, Sotheby’s International Realty’s chief marketing officer, told Inman.
A. Bradley Nelson | Sotheby’s International Realty
“None of the worst fears about the luxury real estate market in 2023 came true,” Nelson said. “If we were to look back to headlines a year ago, there was a vigorous debate as to whether the bursting of the high-end housing market bubble was to happen. And what we saw was last year, even as interest rates rose, demand stayed really strong. And as a result of that, prices have also remained quite strong.”
Of course, a new year will bring new challenges, trends and more to the luxury market and its clientele, as Sotheby’s International Realty’s report shows, which includes insights from a survey of 1,000 of the brand’s top luxury agents across the globe.
“As we look forward to 2024, I do think, even in this post-pandemic market, we’re seeing affluent homebuyers act differently, and that was really fun to explore,” Nelson said.
The extensive report highlights everything from global regulations to demographic shifts, emerging tech tools, trending international markets, and more. As AI tools continue to be developed and refined, Nelson said that a key thing agents can do to keep up is to continue to “experiment” with these tools. “That’s very different than ‘using’ or ‘depending on,’ [AI tools],” he added.
Additionally, Nelson said that to succeed in 2024, agents should continue to build and refine their professional networks across the real estate industry and other industries that intersect with it.
“My second piece of advice would really be continuing to build robust professional networks,” he said. “And why I say that is, obviously it’s not only an extraordinary source of lead generation and business development — if you are a broker in New York City, it might obviously be very important for you to have an active network of agents in the Hamptons or in Miami because your clients may often be interested in buying in one of those other markets and it’s wise to be well educated — but, I also think that you should be well-networked in the design and architecture world, [and finance and fiduciary communities].”
Inman has pulled out eight of the biggest topics from Sotheby’s International Realty’s 2024 Luxury Outlook Report to highlight below so that luxury agents can plan accordingly in their businesses this year.
Sustainability
Sustainable homes are becoming more expected by luxury homebuyers, Sotheby’s International Realty’s report noted, and are certainly something they will seek out in 2024.
“One of the first things that really jumped out this year was how sustainability and climate concerns have really become a mainstream part of the homebuying process and conversation, as opposed to being an outlier,” Nelson told Inman.
“The most frequent [buyer request] is there’s a growing percentage of affluent individuals who are driving electric vehicles, and so we’re getting asked not only how many cars [fit in] the garage, but is there electric vehicle charging capability? And that could both be very specific in terms of, I’m looking for a Tesla port, etc., that can charge my car faster, or, it might just be, is there an electrical connection so that I can install an EV charger of my choosing in the future without having to do home renovations to do so?”
Homes that use renewable energy and reduce their carbon footprint are some features that are top-of-mind, in addition to e-vehicle charging stations, solar energy, eco materials and eco amenities. Ground-source heat pump geothermal systems that can heat and cool a house, as well as supply it with hot water, are also becoming more in demand. Location within an environmentally friendly community is something else buyers are starting to prefer.
Global policy
Shifting global policies can make a significant impact on the luxury market, and they are poised to do just that in 2024, Sotheby’s International Realty’s report explained. The topic has also risen to the top of luxury clients’ concerns in the last three years, the brand’s agent survey shows, as shifting interest rates, global conflict, regulation changes and other related factors become more pressing issues this year.
Many Golden Visa programs, whereby individuals invest in a country’s real estate in order to gain citizenship, have started to dwindle in recent years and more may follow, in response to an influx of international investment. Portugal is one such country that saw a huge influx of demand in response to its program and is now phasing out the real estate investment part of its Golden Visa.
The UK and Ireland have also closed their programs, and some reports say that Spain could be next, all of which is a sign that these types of opportunities may become fewer in the near future for American buyers looking abroad.
In the U.S., an effort by the Treasury Department to enact tighter regulations on reporting luxury home sales could also have a significant impact stateside. The Treasury is expected in early 2024 to roll out nationwide rules that make it much more difficult for an individual to purchase property through anonymous entities, like LLCs or S Corporations, which may dissuade some foreign buyers.
Shifting government policies in response to international conflicts like the war in Ukraine, the conflict in Gaza and tensions between the U.S. and China are also factors that will continue to impact luxury clients as these situations evolve, the luxury report noted.
Emerging and evolving markets
A luxury property in Queensland, Australia | Provided by Sotheby’s International Realty
When it comes to luxury markets that show the most potential for growth in 2024, those emerging markets are truly scattered all across the globe.
Mexico City and some of Mexico’s beach markets, as well as select areas of Turkey, like Istanbul, Bodrum and Izmir, have all picked up momentum in recent years as international buyers have come to appreciate these regions for their history and culture, as well as the quality of life that can be had at a more affordable rate.
Meanwhile, the laid-back lifestyle in Queensland, Australia, as well as the currently favorable exchange rate for both the Euro and the American dollar, has drawn more international attention to the region.
Saudi Arabia is also poised for an influx of foreign real estate investment, as a new law is currently being finalized to allow for foreign investment in real estate, something that has been severely restricted in the past.
International buyer activity is transforming in new ways across select markets, like Greece, which has begun attracting new inbound buyer pools from Central Europe, Australia and Egypt. Likewise, new government initiatives in Hong Kong, which offer two-year visas for applicants who meet specific education and wealth criteria, are creating a demand for luxury housing.
Overall, current exchange rates globally have left American buyers in a favorable position to invest abroad this year.
“If you are a U.S.-based client looking to acquire a second property internationally, it’s never been more affordable to do so,” Nelson told Inman.
Stateside, the ULA tax in LA, which places additional taxes on sales of properties priced above $5 million and above $10 million and went into effect last spring, has driven more luxury homebuyers to other parts of California, like San Diego, or to tax-friendly states like Texas, Florida, Tennessee and Wyoming, the Sotheby’s International Realty’s report notes.
Technology
Technology has increasingly been incorporated into luxury homes over the last several years, but virtual and augmented reality are now allowing real estate agents to more seamlessly show their clients the possibilities of a home.
Virtual reality platforms are allowing potential buyers to “walk through” a home, while augmented reality tools are helping clients see how home renovations or other changes to a home might play out visually.
In certain markets like Turks and Caicos, where there are potential listings on 40 different islands at any given time, agents like Joe Zahm, of Turks and Caicos Sotheby’s International Realty, are using technology to more easily winnow a buyer’s options. Zahm now uses an “immersion theater,” a 3D platform fully integrated with the MLS, to preview properties with clients before deciding whether or not to make a trip by car, boat or plane to a far-flung area of the islands. The technology projects 3D images and drone shots onto a 9-by-16-foot screen so that potential buyers can get a better feel for the property before making a trip out to see it.
Anton Danilovich, of Golden Gate Sotheby’s International Realty, also decided to take tech solutions into his own hands by co-developing with software developer Dennis Khvostionov TopHap, a company that creates 3D topography models for properties and layers in data sets as a navigable heat map online. The maps, which include data like market updates, environmental factors and rental potential, were a solution to Danilovich’s own time-consuming research that went into potential investment properties.
New in-home design
To determine the top design trends for 2024, Sotheby’s International Realty enlisted five designers who were named by Architectural Digest as top talents in its AD100 rankings. Overall, these designers’ insights pointed toward more introspective luxury design.
Mirroring the sustainable home trend, Young Huh of Young Huh Interior Design said that sustainability is becoming more important in home design, particularly when choosing materials that are less wasteful and support the natural environment. Similarly, Huh said that home colors also lean towards those colors found in nature.
Brian Pinkett of AIA added that there’s also an emphasis now on family space and having plenty of it, which includes adding features like the double kitchen island — a feature that allows for more congregation space in an area where people naturally gather, but still gives the cook(s) their own space, too. Indoor-outdoor connections in the home also continue to be important post-pandemic, he said.
Additionally, comfort is another big theme throughout the home today, Robert Stilin of Robert Stilin Interiors said. “They want to be comfortable everywhere … I have a client who wants to have a sofa or some kind of chaise in his office and in his bathroom in every home that he owns,” Stilin said.
Strengthening luxury rental markets
A luxury rental property in the Hamptons | Provided by Sotheby’s International Realty
Amidst a slower for-sale market, some luxury homeowners are putting their homes up for rent so that they don’t sit idle, like in Southwest Florida, the Sotheby’s International Realty report noted. As a result, luxury rents are up 50 percent from what they were two years ago, Giovanna D’Alessandro of Premier Sotheby’s International Realty in Naples reported.
Likewise, Italy has seen a huge boost in luxury rentals recently with more demand coming from Americans, Brits and Saudis, Lodovico Pignatti Morano of Italy Sotheby’s International Realty said. People want to experience the Italian lifestyle, arts and culture, often via long-term rentals. However, it’s also not uncommon for those luxury renters to eventually become buyers, too.
“If a renter has an amazing experience, they can become a buyer,” Morano said.
In Colorado, luxury clients are using luxury rentals to test the waters and determine which market they want to live in before they buy, Valerie Forbes of Aspen Snowmass Sotheby’s International Realty said. Renters (and buyers) largely come from Texas, Florida, California, Colorado and Illinois, she said, and demand has been extremely strong overall.
“We still continue to excel in our numbers, year over year,” Forbes said. “I hit my end-of-year goals [for rentals] by the end of September 2023.”
The celebrity connection
It’s hard to place an exact price on a celebrity’s connection to a property, but it’s certain that any kind of tie that can cultivate an elite provenance with the estate helps with a home sale, Sotheby’s International Realty luxury agents said.
A celebrity tie to a home helps to create a narrative about the property and often elevates a home’s status in the eyes of a potential buyer, even if it has a few quirky features that they might change later.
Each agent will need to make their own decision about how to reveal a property’s provenance when marketing it, but Sotheby’s International Realty agents said it’s often more effective to be discreet about celebrity ties initially, as Frederic Barth of Côte d’Azur Sotheby’s International Realty did with a villa that was a vacation destination for John F. Kennedy.
“When we were contacted through digital marketing, we would send an expanded brochure, which included some photographs of JFK’s family, and JFK playing in the garden when he was a child,” Barth said in the report. The actual listing itself had no mention of JFK.
Suburban popularity
It’s no surprise that the lasting effects of the COVID-19 pandemic have given rise to a changed suburban landscape, which will likely buoy suburban areas for some time to come. The luxury brand’s report noted that suburban areas outside of cities like San Francisco, Dublin, Boston and New York City received a huge boost during the pandemic. This has boosted commerce and services in those areas, as well as created a demand for work-from-home spaces which continues as many workers now engage in some kind of hybrid work arrangement.
Such migrations of workers are also giving rise to tech hubs in unexpected places, the Sotheby’s International Realty report explained. Houston, Miami, Phoenix, San Diego, Charlotte, Boston, LA, Chicago and Tampa all saw double-digit growth in salaries year over year, according to tech job postings data from a report by tech jobs website Dice. Detroit has also seen investments from companies like Amazon, Microsoft and Apple, which will likely give rise to new classes of homebuyers in the area.
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