Luxury real estate is a broad category of investment that evades a one-size-fits-all definition. Everyone knows luxury real estate when they see it, but there are many different components that can give a home luxury status. From swanky Park Shore condos to gated mansions, here are six things worth considering if you’re looking into luxury real estate.
1. Luxury is not defined by size alone
Real estate buyers may associate luxury with size, especially if they are new to the luxury market. In a general sense, there is some truth to this. If you are looking at a four-story home with a furnished basement and a dozen bathrooms, it is most likely a luxury home. However, luxury is not defined by size alone, as there are some very large houses that are not luxury homes. For instance, there are some large middle-class families that need a lot of living space but nothing fancy. These families tend to buy nice homes that are larger than average but not necessarily luxury homes. Some larger homes are designed to accommodate buyers that require a lot of space but are not looking for luxury in particular. On the other hand, there are smaller condominiums that are not especially large but are quite luxurious nonetheless.
While luxury homes certainly do tend to be large, there are several other factors that constitute luxury for the purposes of the housing market. The quality of the building materials, the intricacy of the design, and the addition of premium features such as pools and saunas are among the factors that bring real estate into the luxury category. Some developers are even rolling out branded properties, such as condos that bear the brand names of luxury hotels. While the word “luxury” does not have a legal or even a formal industry definition, you will certainly know luxury real estate when you see it, thanks to the added “wow” factor that is distinctively present in such properties.
2. Luxury homes are valued differently than regular homes
At any given time, home buyers can go online and find reasonable estimates for the price per square foot of purchasing or building real estate in their area. Numerous variables can bring this rate up or down, including the specific neighborhood, proximity to quality schools, supply and demand conditions, etc. These factors apply to luxury real estate, but there can also be an immense premium on luxury. Luxury homes do not necessarily follow a clear set of rules as far as price per square footage. The more luxury features, the more of a premium price there will be.
3. Luxury home prices fluctuate on their own timeline
The real estate market fluctuates over time due to a variety of economic factors, including mortgage rates, employment levels, and the health of the overall economy. When a roaring economy or super low-interest rates cause buyers to pour into the market, home values go up. When a faltering economy or rising interest rates cause buyers to pull back, home values tend to drop. This is true for the real estate market generally.
Luxury home values, however, tend to fluctuate with a relative degree of independence from the overall market. As the National Association of Realtors (NAR) mentions, economic fluctuations have less of an effect on luxury real estate than they do on other homes. This is likely due to the higher level of financial padding that luxury buyers typically have, as well as the fact that luxury homes are more likely to be purchased with cash than other homes are.
With that said, it is often the case that as the overall economy is improving, both middle-class and wealthy homebuyers are becoming more active. The main takeaway is that you cannot necessarily expect luxury homes to become cheaper during an economic downturn or to correspond to the overall economy at all.
4. Wealth creation drives up the value of luxury homes
As people become more affluent, they naturally want to own bigger and better homes. As such, the growth of wealth is one of the main drivers of the luxury housing economy. For this reason, luxury properties may still increase as the economy booms and drop off at corrections occur. While the timeline is not exactly the same as that of regular homes, luxury home prices will sometimes change proportionally to the market average. In some cases, luxury home prices may lead or trail the momentum of the general market.
5. Features of luxury homes vary
No single feature is mandatory for a home to gain luxury status. Luxury homes may have a wide variety of different premium features that offer additional value to homeowners. Certain luxury features are particularly popular. For instance, these features are recorded as the top ten most common in celebrity-style homes: swimming pools, sports courts, spas/saunas, guesthouses, theaters, gyms, wine cellars, bars, libraries, and game rooms. Music studios and other niche spaces can be found in some luxury homes. Outdoor features may also include ponds or even golf courses. Some extravagant homes even have elevators.
A luxury home could have any, all, or none of the features listed above. However, even the standard features of a home, such as appliances, can become luxury features. Picture a home with premium wood flooring, kitchen and bathroom tile, and fine trimming. High-end appliances, such as smart appliances and large stainless steel refrigerators, can be found in luxury homes. In this way, the difference between luxury homes and other real estate could be measured just in the quality of the standard features without adding too many extra bells and whistles.
6. Look for a realtor who specializes in luxury homes
Realtors who predominantly work with luxury properties tend to have more specialized knowledge and expertise, as the clientele and their interests are markedly different from the real estate market in general. When approaching the real estate market with luxury properties in mind, it’s important to seek out the services of a realtor who has experience working with this type of property in particular.
John O’Neill is a Naples and Chicago real estate agent who is well-versed in the ins and outs of luxury properties. John’s portfolio of listings includes high-quality Park Shore, Naples condos for sale, as well as other luxury Park Shore real estate. To get started exploring the best Park Shore condos and other luxury real estate in the area, get in touch with John O’Neill and O’Neill Residential.
