These luxury markets should get a boost after vaccination
As more people are vaccinated against Covid-19 and governments around the world begin to ease travel restrictions, real estate markets are also waking up. A February report from Zillow found that 70% of homeowners surveyed said they would be comfortable moving to a new home after a large vaccine distribution, and brokers predict spring and summer seasons especially. loaded.
Many high-end secondary markets began to heat up in the early days of the pandemic, as shoppers sought more space and privacy in areas where they used to vacation. And now, the outlook is particularly favorable for a big post-vaccine boost in popular vacation destinations.
âWe have noticed an increase in inquiries, visits and transactions at all resorts from buyers interested in investing,â said Laetitia Hodson, Associate Partner of Knight Frank in Provence and the French Alps . âPeople are looking for an investment in their lifestyle, and well-being is very important. The pandemic has reinforced this.
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Some secondary markets saw increased activity last summer, as Covid cases plummeted and some regions relaxed restrictions. In Hawaii, demand has not declined since, driving inventories to historically low levels.
âDemand took off in earnest this summer and led to stocks down to crisis level,â said Matt Beall, senior broker at Hawaii Life. âThe high end is certainly a lot bigger in terms of volume, but it’s affecting all segments of the market with no signs of slowing down. The vaccine and the reopening of international travel will pave the way for the next step. ”
However, it’s not just the holiday markets that are thriving. In San Francisco, buyers are returning, buoyed by the vaccine and eager to return to city life, especially in luxury condos on the outskirts of the city, like the new development on Yerba Buena Island.
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âPeople yearn to return to an urban lifestyle,â said Jeff Samuels, regional director for Northern California at the agency. âThey might not go back to the office every day, but they don’t want to be two hours away.â
And although stocks are tight, interest rates remain low, making it a good time to buy, he said. But buyers in these hot markets should expect stiff competition and have a plan to stand out from sellers.
âBe aggressive and do as much substantive work as you can,â Beall said. âIf you don’t want to be in a bidding war, you don’t want to buy. You are going to be in competition no matter what. ”
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Despite the many challenges of 2020, house prices in the French Alps edged up 1.2% year-over-year, according to the 2020 Knight Frank Index.
Part of this increase is due to low inventory, as many homeowners in resort towns in the Alps have taken their properties off the market during times of pandemic lockdowns.
âThe Parisians and the Genevans realized that they could go through confinement in a beautiful chalet, so they took their homes off the market for a few months,â Ms. Hodson said. âThere has also been an increase in activity and interest rates have remained relatively low, which encourages people to invest.â
Demand, for now, is mostly coming from domestic buyers and those in neighboring countries, due to travel restrictions, she added. With France now in a third lockdown, there will likely be pent-up demand released once conditions become more secure and the country reopens.
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âLooking ahead, Chamonix and Megeve may be more attractive, because at these resorts you can rent properties not only in winter but also in summer,â Ms. Hodson said. “The double season should make these markets even more attractive in the months to come.”
In Hawaii, indicators suggest that interest will increase in the coming months, especially once buyers from Japan and Canada – historically the biggest sources of foreign demand – can get vaccinated and travel overseas.
âOne indicator is upscale vacation rentals, and we’re almost completely sold out there,â Mr. Beall said. âThe 2020 market was the toughest I have ever seen, and now that travel is slowly opening up, more and more people are considering buying. If rental demand and reservation are any indication, the frenetic demand will only increase. ”
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Luxury condo sales were down in San Francisco for much of 2020, but by the end of the year there were signs of a recovery. In the first quarter of 2021, this segment appears to be on the rise.
“Sales of luxury condos at $ 2 million and above increased 17% in February compared to the previous year,” said Mr. Samuels. “We are already seeing, as people get vaccinated, that they start to feel comfortable with a return to normalcy.”
Advice for investors in hot markets
A common theme across these luxury markets is low inventory and high demand, with competition set to become even fiercer as travel reopens.
It is therefore important that buyers consider the rental prospects of the homes they are considering, to ensure that they are getting a return on their investments. Homes located in areas that appeal to vacationers for more than one season, close to airports and pleasant to work in, will all have higher rental potential.
âAcross the market as a whole, around 90% of buyers are looking to rent out their properties, so that has to make financial sense,â Ms. Hodson said of the Provence and Alps markets. âWi-Fi is extremely important because people are looking to work remotely. The resorts closest to Geneva airport will likely have the highest returns, as it is easier to get to the property.
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Some buyers, however, put rental considerations aside and prioritize homes they will use as more than just occasional vacation homes. Even as more people are getting vaccinated, many investors have shifted their priorities and are looking for second homes with space to work remotely and where their families can spend more time.
âConsiderations of how this would behave as a rental are out of reach, and buyers view homes as residences, if not permanent as long-term residences,â Beall said. “They think more about space, what the yard looks like.”
In San Francisco, which is now showing signs of recovery after a slowdown in the early days of the pandemic, buyers have the opportunity to take advantage of an affordable price.
âAt the start of the pandemic, the immediate reaction we saw was that buyers didn’t want to share their space with people. Fast forward a year, and they want to be close to town again, âMr. Samuels said. âIf I’m a buyer, I think it’s the right time for me. There has been downward pressure on prices and interest rates are still historically favorable. ”
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Buyers considering re-entering the market should make sure to work with a knowledgeable local broker, educate themselves on comps, and be clear on what they are trying to achieve.
And don’t be deterred by the competition, experts say, because it will only intensify in the months to come.
âDon’t be appalled by the foam in the market, because there is still some way to go,â said Mr. Beall. âThere’s a lot of persistence in the recent wave of buying, and I don’t think we’ve gotten out of it yet.â
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