Remote work and a surge of wealth created by cryptocurrency are fueling demand for luxury homes, according to a report.
The luxury real estate boom is being made possible thanks to low interest rates, record-high levels of inflation, and fat bonuses, according to a report by Sotheby’s International Realty.
This combination of factors “make investing in a concrete, fixed asset like real estate attractive to many as they balance their portfolios,” Bradley Nelson, Sotheby’s chief marketing officer, told Bloomberg.
“The real estate market is now being driven by hybrid work vs. remote work,” Nelson said.
Just how hot is the real estate market? According to Nelson, there were multiple billionaires competing to buy a co-op in New York that listed for $40 million.
The luxury real estate market in Manhattan bounced back last year. Of the 1,877 properties that sold at more than $4 million, some 400 of them closed at prices north of $10 million – a figure that competes with the pre-pandemic boom days of nearly a decade ago, according to Bloomberg.
In the last 18 months, the COVID-19 pandemic triggered a surge in demand for homes in the exurbs. Nelson said he expects that trend to continue.
That means people are looking as far as the Hudson Valley in New York; Trousdale County, which is north of Nashville, Tennessee; and Dripping Springs outside of Austin, Texas, where they are willing to put down north of seven figures for a property.
The Sotheby’s report quoted one Hudson Valley broker as saying that those who can be designated “good buyers” must be ready to pony up somewhere between $1.5 million to $2.5 million—more than double the previous range of $600,000 – $700,000.
Though the area did not experience the buying frenzy that was witnessed at the start of the pandemic in 2020, the Lower Hudson Valley continued to report historic gains in real estate transactions last year.
There was a nearly 20% increase in residential sales in Rockland County in 2021 compared to the previous year, according to the Rockland/Westchester Journal News.
The number of properties sold in neighboring Westchester County rose by 19.1% last year compared to 2020 while Putnam saw an increase of 10.6% versus the previous year.
The median home price also rose. A single family home in Rockland County that cost $500,000 rose to $560,000 last year. In Putnam, the media sale price went from $380,000 in 2020 to $440,000, according to data from the Hudson Gateway Association of Realtors.
Industry observers said that low inventory and sky-high demand account for the surge in prices.
Buyers are also becoming more attracted to low-tax areas like Texas and Florida, according to Nelson.
“That’s really the headline in both the United States and internationally,” says Nelson. “You’re going to see the greatest investments continue to be in tax havens.”
Some 319,020 residents fled New York State between July 2020 and July 2021, according to recent US Census Bureau data—a 1.6% year-over-year loss that made New York the nation’s leading state for population decline.
Texas, which grew by 310,288 people and doesn’t charge its residents any income tax, notched the country’s largest gain.
Just behind Texas, Florida saw the second-biggest increase in population, swelling by 211,196 residents between July 2020 and July 2021.
The Sunshine State has also remained more open than New York during the pandemic—in part by recommending, not requiring, face coverings—and it, too, has lured in business-minded folks.
Nelson said the day isn’t too far off when buyers and sellers complete their transactions using cryptocurrency.
“Transacting in crypto is going to grow in exponential ways,” he said.
“If wealth creation drives a market, and crypto is driving wealth creation, then I think there’s going to be an increased demand for that kind of payment, as opposed to cash.”
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