What Constitutes Luxury Real Estate?

  In my inaugural posting of this luxury property blog one of the questions I posed was constitutes or designates a luxury property?  For years, the general rule-of-thumb has been anything that is in the top 10% of a given market from a value perspective which in the case of the southern Georgian Bay market would be $750,000 plus.  But is this simple definition enough?  In my opinion the answer is no, and this is shared by some of the top REALTORS® elsewhere that are actively engaged in the luxury property market.  

  Housing data accumulated in a U.S. Census some years back indicated that there were approximately 314,000 owner occupied homes in the U.S. valued at over $1 million.  A secondary study by the U.S. Federal Reserve came up with a higher number which illustrates the difficulty in trying to obtain accurate data in this regard.  Taking into account the conflicting results, it is very safe to say that the $1 million plus housing market is less than 1% of the total number of homes in the U.S.  and there is no reason to think Canada would be much different.

The issue here is the fact that markets differ widely from one are of the country to another.  In some locales such as Toronto or Vancouver for example, $1 million will buy you nothing more than a lot or a home that gets torn down in order for the buyer to build their luxury dream home.  In others, $1 million may allow you to buy the ultimate home on the water or on a large acreage.  

  In 2011, I attended the National Association of REALTORS® conference in the U.S. and met two of the leading luxury property REALTORS® in the U.S. whom I have kept in contact with.  Based on his years of experience listing and selling luxury properties, David Michonski has developed his own definition of what constitutes a “luxury property” which is reflected in the following formula:

Luxury Real Estate = two to three times the average price in a market+ requisite qualities.

  As of the end of August, the current 12-month average price for single family homes sold through the MLS® system of the Georgian Triangle Association of REALTORS® is $332,512.  Using a multiple of 3 times this average price would define luxury homes in our market as having an approximate value of $997,500 or greater which is about as close to $1 million as you can get provided they also have the requisite qualities or features that further contribute to the definition of what constitutes as luxury home.

  In my next posting I will explain the concept of “requisite qualities” as it relates to the value equation when defining luxury real estate.

Luxury Buyers Want Smaller High Tech Homes

  According to a recent survey conducted by Better Homes and Gardens® Real Estate, today's luxury homeowners and buyers are smarter and more confident about investing in luxury properties than ever.

  High net worth individuals know what they want and have the resources and capabilities to get it, allowing them to transform luxury living spaces into ultra-comfortable, high-tech homes.  Properties consisting of vast amounts of square footage no longer equate to their idea of the ultimate dream home.  Today’s affluent consumer now has a desire for multiple homes to fit their lifestyle needs with an emphasis on high-tech features and amenities.  Having sold several million dollar plus properties in our market, I know from personal experience that many buyers find homes of 6,000 and 7,000 square feet plus, are simply too large. 

  Whether the concern is about the size of their carbon footprint or that a smaller property is easier to maintain especially if they own several homes, less square footage combined with high tech features is the order of the day.  Further findings in the survey also found that 75% of luxury home buyers believe home ownership is a more sound investment than the stock market while 57% percent of employed luxury homeowners believe that luxury home ownership is more indicative of their success than either their job or title.

  The mechanics of buying and selling of luxury real estate does not differ to any significant degree than buying a home, condo or cottage at the mid or lower price range of any given market.  Today’s consumer and relying heavily on the Internet to locate a property and more importantly a REALTOR® they can trust and work with.  However, information gathered as part of the Better Homes and Gardens survey reflected that 96% of luxury home buyers are depending on their REALTOR® more than ever before to provide relevant information such as market trends and neighbourhood data that will help guide them through the purchasing process.  This is ultimately why I am writing this blog on luxury home owenrship.

The World's Ultra Wealthy Are On The Rise

  According to the recently released “Wealth Xand USB World Ultra Wealth Report,” 2012 saw the global population of Ultra High Net Worth (UHNWI’s) individuals grow to a record number of 199,235 individuals.  On a global basis, their combined net worth is reported to be a staggering $27.8 trillion.

   One of the key areas, which has and will continue to benefit from this growth in the number of HNWI’s is the luxury, upper tier real estate market.  Unlike Muskoka for example which has drawn wealthy visitors and property buyers since the turn of the last century, the southern Georgian Bay region has only just recently started to attract wealthFrom time to time we’ve all heard the phrase “the haves versus the have-nots.”  As the global economy regained traction after the 2nd world war via rapid growth in the manufacturing sector, jobs became plentiful, the middle class grew and along with it their overall prosperity.

  Fast forward into the 1980’s and with much of their activities fueled by junk bond financing, corporate raiders became overnight millionaires if not billionaires setting a new benchmark for personal wealth.  Other noteworthy events and or milestones that similarly defined a new level of what constitutes “high net worth individuals” (HNWI’s) was the short-lived dot com era and the emergence of the middle-east as the major source for the world’s oil needs.  More recently we’ve had the stock price manipulation and other financial high jinx by companies such as Enron, Worldcom, Tyco and to a degree Canada’s own Bre-X and Nortel.  Lastly the explosion of the technology sector has brought us the likes of Microsoft, Apple, RIM and others all of which enjoyed immense success, albeit some have withered.  Lastly, let’s not forget the professional sports and entertainment industries which have also enjoyed substantial success in recent years.  Throughout this era, a new level of unimaginable wealth has been created for those fortunate to have participated in these once-in-a-lifetime opportunities.

y buyers looking for either a recreational or potential retirement property.  As of yet, we are hardly a destination for wealthy International buyers but this too may change.  Overall, Canada is viewed as a safe haven.  Our economy has outperformed many other countries throughout the latest global recession making us attractive to foreign investors.  Time will tell how well the local luxury real estate market will fare in the years ahead. 

  In my next post I will report on the current luxury market in general including what the wealthy are currently feeling relative to luxury real estate as an investment. 

Southern Georgian Bay's Luxury Property Market

Welcome to my newest blog, Southern Georgian Bay Carriage Trade Homes.  With upper end, luxury properties becoming an increasingly important segment of the local real estate market, I decided it was time to share with you, the distinctive aspects of luxury home ownership.  Whether you currently own a luxury, upper end property, are intending to purchase one or just like dream,  I will try to offer something here for everyone. 
  What constitutes a luxury property? From a monetary perspective we typically consider anything that falls in the top 10% of the market as being as being an upper end luxury property.  In the southern Georgian Bay area that is any home or condo that is valued over $750,000.  But value alone does not necessarily make a property worthy of a luxury home Carriage Trade designation.  
  The accompanying graph illustrates southern Georgian Bay luxury home and condo sales during the past 5 years.  Just like the overall real estate market in general, this segment of the market took a downturn during the 2008 recession by has bounced back significantly since then. 
  In future postings I will  share with you what today's luxury property buyers are looking for.