Real EstateBrokerage

Luxury real estate favored as hedge against inflation, says study

Luxury real estate’s favored status as a practical hard asset, providing a hedge against inflation for both primary and second-home buyers and investors, according to a recently released report by Christie’s International Real Estate.

According to the 2022 Mid-Year Luxury Trends Report, the strong luxury real estate market of the past two years will continue for the remainder of 2022 and into 2023 despite high inflation, rising interest rates and a stock market that has posted double-digit losses on the year.

The report includes interviews and insights from 20 independent Christie’s International Real Estate affiliates across Mainland North America, the Caribbean, Europe, the Middle East and South East Asia, as well as Christie’s International Real Estate co-CEOs, Thad Wong and Mike Golden.

In addition to investment in luxury properties to hedge against inflation, the report identifies two other major trends driving luxury for-sale housing markets around the globe:

  • The anticipated strength of blue-chip luxury markets, as high-net-worth buyers look beyond down-cycles
  • The quest for relative value in luxury housing after two years of epic price appreciation.

In fact, high inflation, a roller-coaster stock market, and a luxury housing cooldown that has already begun in some regions could motivate ultra-high-net-worth individuals to venture back into the real estate market in search of opportunistic buys, notes Christie’s International Real Estate co-CEO Thad Wong.

“Whether wealthy buyers are looking for value in some locations or paying a premium in others, the overall market will tilt toward the high end for the next couple of years, as it typically does in a volatile economic climate,” said Wong.

This trend puts — or rather keeps — the focus on a handful of blue-chip property markets around the world, where buying activity doesn’t always correspond to the current economy but rather the personal desires and long-term goals of people who can afford to wait out this cycle and the next one.

“The strength of luxury real estate around the world in the first half of 2022 took a lot of observers by surprise. But throughout our network – certainly not in every market, but in many – brokers are predicting a strong finish to the year with momentum carrying into next year,” said Wong. “The motivations of luxury buyers vary by location and situation, but overall, we expect the market to tilt toward the high end for the next couple of years, as it typically does in a more volatile economic climate.”