The luxury real estate market will explode in 2022
The world has now accepted the pandemic. The disruptions and adverse effects of unwanted but unavoidable blockages slowly fade away. With the reopening of markets, the economy is also regaining its lost momentum. The real estate sector, in particular, has benefited from the Covid-19 upheaval, and the trend will continue in 2022. While all real estate segments have seen an increase, reports suggest that the luxury segment will receive a phenomenal surge in 2022. HNI home buyers are optimistic about investing in luxury properties.
Last year, the real estate market got off to a good start, but the emergence of the second wave caused it to lose its momentum. The real estate market was momentarily impacted as the country faced a significantly more severe spread of Covid-19 cases. However, the sector rebounded almost immediately with a recovery in demand. The sales momentum continued throughout the year and helped the segment reduce its unsold inventory burden.
At the start of this year, the Omicron threat emerged as a threat to the economy, and experts believed it would have a significant impact on the country and cast its shadow over the real estate sector. However, he is eager to maintain the acceleration of his growth. Shrinking business and lessons from past waves had primed the segment, and it applied them to retain buyer confidence.
The luxury real estate segment saw an uptick last year, and the trend is expected to continue in 2022. The Luxury Housing Outlook report from an international real estate agent suggests that 67% of HNI are planning to invest in luxury homes. Of the 76 percent of survey respondents who said they were interested in buying property, 89 percent were keen on investing in real estate, while 11 percent wanted to buy commercial properties.
Lifestyle improvement: a major factor
Improving lifestyle amid the pandemic is a major factor that has pushed HNIs to opt for houses with better amenities. Luxury homes are closer to nature and provide a resort feel to residents. 46% of respondents believe that luxury homes are a necessity in the current circumstances. The health benefits of living in a spacious and green environment are important factors that attract buyers to luxury homes.
HNIs and Millennials who have traveled extensively and experienced luxury want to live in homes that provide them with an ultra-rich vibe. They are willing to spend on luxury real estate as it promises an improved lifestyle in the city of their choice.
Considerations for telecommuting and the hybrid work model
Working from home and the hybrid working model have mainly changed the way we work. Homes have doubled in workstations, and residents need spacious homes that can accommodate their workstations as needed. Surveys suggest that most progressive organizations have already adopted a hybrid or productivity model everywhere. Employees can continue from the sanctuary of their homes, and thus luxury homes become a necessity.
Investment: an underlying motivation
HNIs buy second homes with investment as the underlying motivation. Around 31% of HNIs think now is a good time to invest in the residential real estate segment as the sector is expected to resume rising prices by the second half of the year. While prices have remained stagnant for the past 18 months, improving market sentiment amid rising demand will soon affect prices. Investing in luxury residential properties seems like a prudent decision.
The phenomenon of price escalation in the country is contrary to developed countries where prices almost froze. Prosperous urban centers like Delhi-NCR, suburban Mumbai and holiday destinations like Goa would be heaven for investors. These regions have given abundant returns to investors in the past. With growing consumer interest, they can once again become revenue generators.
Other Contributing Factors
Several other contributing factors increase the growth of the real estate segment in general and luxury real estate in particular. A report from a leading financial institution suggests that the unexpected rise in disposable income, low interest rates, reduced stamp duties and other considerations have worked in favor of the real estate segment.
The rapid demand for digitization has given an unexpected boom to tech workers. With increased demand, techies, primarily millennials, have secured promotions, higher salary offers, and appraisals, which has increased their disposable income and thus given them the opportunity to invest in real estate. Since millennials who travel a lot have first-hand experience of luxury, they prefer to invest in luxury real estate projects that can help them lead opulent lives.
The release of wealth in the startup ecosystem is another propellant that has pushed the demand for luxury real estate. ESOP monetization is at an all-time high in the startup ecosystem. Employees divert the monetized amount to buy houses as it helps them put the funds to better use through huge tax arbitrage.
The luxury accommodation segment will see a surge in the seven major real estate markets and travel destinations. While buyers would be more inclined to opt for high-rise apartments in Tier I cities, they would prefer low-rise apartments and freestanding villas in other cities, thus giving a complete boost to the real estate market luxury.
The opinions expressed above are those of the author.
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