How to Define Luxury Real Estate and What Price Defines a “LUXURY HOME”
Updated: Mar 28, 2018
HOW TO IDENTIFY HIGH-END PROPERTIES IN A WORLD WHERE THE TERM "LUXURY" HAS BECOME CLICHE.
Too many real estate practitioners are using the word “luxury” for properties that should in fact not be called a luxury home. If you say a word enough times, it starts to lose its meaning. And in real estate, where the right description can draw buyers to a home on the market, using the right terms is crucial.
So, when half the homes on the market are suddenly marketed as “luxury,” the definition of the word starts to melt away.
Much like beauty, luxury can be said to be in the eye of the beholder. Often elusive, generally overused, but always out of the ordinary, “luxury” means different things to different people. In its broadest sense, luxury connotes quality, refinement, and exclusivity. But in the rarefied world of prime real estate, its definitions also encompass changing lifestyles, shifting economic hubs, the need for greater privacy, and other individual concerns.
Luxury real estate is defined differently across different markets, as property values, median resident income and area development varies widely depending on the metro area. For example, the Los Angeles area has a significantly higher top end of the market and a higher cutoff point for buyers to afford these properties compared to smaller markets in other states.
The idea of luxury is consumer specific. It varies from one individual to another. So, what a luxury real estate property should constitute of is quite subjective and depends on how you look at luxury. The general understanding of premium homes for sale are those properties which are made for and bought by affluent people. The amenities are top notch and providing a one-of-a-kind experience to the residents.
FURTHER, LUXURY IS SO MUCH MORE THAN LOCATION, LOCATION, LOCATION
Prominent addresses and prized ZIP codes are no longer the defining baseline concept for luxury homes. High-net-worth-individuals are expanding the borders of traditional luxury locations and are willing to pay a premium in emerging luxury areas if the amenities and lifestyle offerings are right. The desire for more privacy is also driving this phenomenon. Younger and more cosmopolitan affluent buyers have embraced non-traditional areas where they can disappear and enjoy a much more private environment.
Today’s new wealthy home buyers are more informed, more globally exposed, and more sophisticated than previous generations. Baby boomers in particular are now less materialistic and more experiential.
What qualifies as a “luxury” home differs significantly around the world, in terms of both price and attributes of individual properties. Based on international independent studies, the average starting price for a luxury home across all international housing markets is $2 million, ranging from $750,000 in markets such as Durban in South Africa, to an astounding $50 million (and more) in Beverly Hills, California.
But the term luxury has been used to describe everything from the ultra-luxury homes of the world's wealthiest 1 percent to a modest kitchen with new appliances. How can you interpret how luxury is defined in your area, and how can you leverage that information to better express your expectations as a home buyer?
Whether or not you fall into the real estate definition of luxury living, knowing how your market defines high-end properties will allow you to better understand the qualities you need and want in a home.
WHERE DOES LUXURY BEGIN AND WHAT MAKES A HOME LUXURY?
There’s no checklist for labeling a property as luxury, although many features are common among upscale properties. In our North East Florida area, the typical luxury price point is $1 million and above. But in certain micro areas like Ponte Vedra Beach, which attracts a high number of investors seeking property along the ocean shore line, +$4 million typically become the going rates.
Regardless of whether the property is $1 million or $15 million, the purchasing and sales processes for these high-priced homes are different from the majority of property sales – and they also differ among each other.
Whether you’re buying or selling, it’s recommended to work with an agent who truly speaks your language. Somebody who understands this market niche and has the right foundation and expertise to assist you as home buyer or seller. Be aware, a short 10-hour on-line course and a designation certifying the completion of such seminar is generally not cutting it. Too many real estate practitioners in today’s market use the word “luxury” and adorn themselves with designations that really don’t guarantee expertise. Unique skills and years of high-value asset re-marketing experience are required to be a serious real estate services provider in the luxury home market.
Michael Turwitt has long represented buyers and sellers in the purchase of fine properties and high value assets. Specialized in extraordinary quality homes and luxury property, Michael Turwitt enables clients to successfully navigate the complex North East Florida – First Coast Real Estate Market. For more information, visit www.turwitt.com