GLOBAL LUXURY MARKET REPORT - January 2023

The January 2023 Institute for Luxury Home Marketing monthly trend report is out now! CLICK HERE to download the full report. We are happy to share this information to you from our resources! The following is per the Institute for Luxury Home Marketing January 2023 Market Report:

​A Year in Review - 2022
The best way to describe 2022 might be that it started with a ‘boom’ and ended with a ‘fizzle’ – certainly this is an apt description when looking at the declining sales each month over the last year. At the start of 2022, new inventory, especially for property types in high demand, flew off the shelf, but by the end of 2022, sales had all but stalled in comparison.
Predictions versus Reality
2022 had been predicted to be a calmer year, with trusted trends, such as the spring real estate market returning with increased inventory levels, that would help plateau price increases. Demand was still predicted to be strong for luxury properties, but with the frenzy of 2021 replaced with a more discerning consideration of the property’s value.
What had not been predicted was the influence of variables such as Ukraine, inflation, interest rates, and speculation about recession, which created a year of contradictions, uncertainty, and unexpected consequences.
However, despite all these mitigating factors, the overall luxury real estate market remained resistant to any dramatic or negative change and still retains its safe investment appeal to the affluent. Even though there has been a continued slowdown in sales activity in the last quarter, prices have not only remained stable in most luxury markets but at near-record levels.
Sales activity and price growth at the rate seen from March 2020 to March 2022 could not continue indefinitely, and although the slowdown may have felt dramatic compared to these last two years, the reality is that the market has returned to the more normalized pace of pre-pandemic days rather than there being a significant correction.
Inventory A Major Player in 2022
Inventory levels certainly controlled much of the buying narrative during 2022. The number of sales in the first quarter of 2022 was only limited by the lack of new inventory entering the market, as the number of homes for sale hit a 20-year low.
While there was a significant increase in the listing of properties in the market in the second quarter of 2022, this only served to bring the level back up to the point that gave buyers a little respite–the result of which was an increase in the number of sales.

By the third quarter, interest rate hikes saw luxury sellers hesitate to put their homes on the market as they were unwilling to give up their low interest rates. According to Jim Egan, Morgan Stanley’s U.S. housing strategist, “Over 90% of the market is fixed rate, for one. Most people have locked in their affordability.”
Inventory, especially new inventory, is critical in the luxury real estate market. The lack of it helped stabilize the price and saw many markets remain more favorable to sellers. Consequently, by the end of 2022, the market had all stalled. Luxury sellers chose not to enter the market because they saw that rising inflation and interest rates were causing hesitation in buyers, and they feared they would not get the same price their neighbors had received the previous year.
Outside Influences Impact on the Luxury Market
Three key influences played a significant role in the slowdown of sales.

• Interest Rates
  Luxury buyers, for the most part, are less affected by the rise in interest rates. However, the dramatic increases in 2022 saw that potential sellers chose not to list their homes, realizing that they would double their interest payments if they secured a mortgage on a new property.
• Stock Market
  Corrections in the stock market made luxury buyers more cautious – especially if they were looking to leverage their equity portfolio. The downturn saw corrections of more than 10% as the starting point that had many real estate investors hunker down and wait for stability to return.
• Inflation
  Rising inflation and constant predictions of recession also gave affluent sellers and buyers a reason to pause. With so much uncertainty and speculation, especially in the last six months of the year, as to the possible implications on the value of homes, those who did not need to sell didn’t, and buyers hesitated to commit for fear of paying too much.

CLICK HERE to download the full report.
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