Sustainability may drive luxury housing in 2024
This year’s luxury housing market will be dominated by buyers clamoring for sustainable homes, according to a new Luxury Outlook Report from Sotheby’s International Realty.
Based on surveys from 550 of the company’s brokers around the globe, “sustainability showing up in mainstream considerations as part of the home search process feels different in 2024,” says Chief Marketing Officer Bradley Nelson, who spearheaded the report. “These are conversations that didn’t happen on a daily basis in 2020.”
Luxury home buyers are indicating that they’re concerned with two issues, according to the report: whether the house is located in a higher-risk area and whether a house has been built with environmentally conscious considerations in mind, the latter of which can include eco-friendly heating systems or garages with charging capabilities for electric cars.
“There’s either a general consciousness of your environmental impact through homeownership,” Nelson says, “and where you are at risk from a changing environment and how that impacts the real estate you acquire.”
Buyers in Southern California, for instance, now ask about a house’s wildfire risk as a matter of course, according to the report. In hurricane-prone Puerto Rico, luxury homes will often now come with solar panels. Buyers “will pay more for a home in line with environmental goals,” the report says.
A new generation of buyers “are coming into the market where [sustainability] is highly important to them,” Nelson says. Sotheby’s agents, he continues, predict that “you’ll continue to see sustainable properties generate premiums in the future.”
AI for fixer-uppers
Not all luxury properties are created equal. Buyers around the world, Nelson says, show a strong preference for turnkey properties. “The last few years, people were allergic to projects,” he says. “They wanted move-in ready.”
The flip side is that homes that do require work can be “an insane value opportunity,” he continues. Buyers who are willing to put in the work, in other words, could reap the rewards. All that’s required is to convince them that the work is worthwhile, which is where, Nelson says, the biggest recent innovation is going to become essential.
“Generative AI models are going to impact the perspective and capability of buyers to imagine what a property can become,” he says. “We’re seeing these technologies allow people to make rapid-fire material changes: What would it look like if we put a fireplace there? What would it look like if we replaced all the cabinets? What’s the same space in a different configuration?”
Slow and steady
Sotheby’s luxury report comes at a time when the global high-end housing market shows signs of stabilizing. Interest rates are falling, recession fears have dissipated, and even if activity has slowed compared to past years, the top tier has stayed resilient. “In 2023, none of the worst-case scenarios came to pass,” Nelson says.
About 40% of SIR agents surveyed in the report said they anticipated the market to remain unchanged in the first half of 2024; 28% anticipated the market going down, while the same share anticipated it going up.
The survey includes other tidbits: SIR agents reported that nearly 60% of their high-end clients owned two homes; 33% owned three; just 5% owned one.
It’s an environment that will come as something of a relief to wealthy homebuyers and -sellers, Nelson predicts. “Heading into 2024, we’re in the post-pandemic market,” he says. “We’re talking about the market normalizing.”