Luxury Buyers Keep Cities Thriving Despite Pandemic

For hundreds—or sometimes thousands—of years, cities around the globe have defied predictions of their death, including alarms set off during the start of the Covid-19 pandemic.

In fact, many global cities began to rebound as early as the summer of 2020. Luxury-home buyers returned to expand their stake in cities from London to Madrid, from São Paulo to San Francisco, and from Hong Kong to Tokyo. Real estate agents anticipate sales and prices to continue to rise in 2022, as international buyers return.

“The real estate market was one of the sectors that recovered the fastest from the economic crisis generated by the pandemic,” says Renata Victorino, partner-director, Bossa Nova Sotheby’s International Realty in São Paulo, Brazil. The hot market, she says, “has attracted investors who are looking to get away from more traditional financial investments and prefer the security that investing in real estate provides.”

In New York, luxury buyers returned to the market beginning in January 2021, says Wendy Arriz, associate broker, Sotheby’s International Realty–East Side Manhattan Brokerage.

“The most recent Wealth-X report found that New York City was still the number one city in the world, with the most ultra-high-net-worth households in 2020,” Arriz says. “People love the city, and they want to be here for the culture and the energy.”

Demand Rising From Domestic Buyers

While urban luxury markets typically include buyers from around the globe who own multiple homes and prefer to invest in safe-haven economies, pandemic travel restrictions kept many of them in their home countries.

In San Francisco, domestic buyers have dominated of late, but there are “rumblings” that international buyers are beginning to return, says Carrie Goodman, real estate specialist, Sotheby’s International Realty–San Francisco Brokerage.

“The confluence of finance and tech money, plus the generational transfer of wealth, have kept the market strong, especially for condos priced from US$2 million to US$3 million,” Goodman says.

In Los Angeles, Robin Walpert, senior global real estate advisor, Sotheby’s International Realty–Santa Monica/Venice Brokerage, says her buyers were mostly locals purchasing a second home or upgrading their living space.

Luxury buyers and owners in Hong Kong tend to own multiple local residential properties, says Franky Cho, chief operating officer, List Sotheby’s International Realty, Hong Kong. “The majority of the ‘superrich’ are mainland Chinese with permanent residency in Hong Kong, who bought properties in their own names or the names of their children as first-time home buyers,” Cho says. Many are “business owners, CEOs of a listed company, or have a high-paying job, such as bankers and lawyers.”

He anticipates rising prices in Hong Kong to continue, especially in the superluxury property segment, once the border with mainland China reopens.

In Japan, international buyers often choose the Niseko area in Hokkaido, which became popular for Japanese buyers during the pandemic, says Mugi Fukushima, branch manager, List Sotheby’s International Realty, Japan in Ginza, Tokyo. “They want an area where they can feel like they’re abroad,” Fukushima says.

In New York City, Arriz says she hasn’t worked with any international buyers in the past 18 months. But she’s expecting them to pick up as travel restrictions are lifted.

Upsizing Indoor and Outdoor Space

While cities continue to lure luxury buyers, their priorities have shifted in favor of locations with single-family homes or larger condos, particularly with outdoor space.

“It used to be that big homes in the city languished on the market, but now people want a grandiose home with as much space as they can get,” says Tim Salm, real estate agent, Jameson Sotheby’s International Realty in Chicago, Illinois.

Chicago buyers quickly shifted from wanting high-end condos to single-family homes in the city with office space and room to entertain and exercise, says Ryan Preuett, real estate broker, Jameson Sotheby’s International Realty.

Even the empty nesters who were able to sell their big suburban family home during the pandemic are looking to “downsize” into as large a condo as they can find, Preuett says.

In San Francisco, there are similar trends. “We’ve seen an incredible interest in places like St. Francis Wood in San Francisco because there are big stately homes there,” Goodman says. Sales were up 175% in that neighborhood year over year from January through August 2021, and prices rose 18% in that same period, she says.

“The interest for larger homes with open and functional areas, and condominiums with leisure spaces, should continue even after the pandemic,” says Victorino in Brazil. People have adapted to being home more and having more space, and that isn’t likely to change, she says.

“After selling for over 25 years, the evolution of this real estate market has been a head-turning experience,” Walpert says of the Los Angeles area. “The amount of ‘out-on-the-town’ pandemic money saved and profitably invested, combined with pent-up demand for housing, resurrected and expanded our luxury market.”

The Lure of Excitement

“Once the lockdowns eased, the draw for culture to come back into people’s lives was important,” says Guy Bradshaw, managing director, United Kingdom Sotheby’s International Realty. “Restaurants, theaters, cinemas, galleries, and sporting events had all been missed. We’ve seen a renewed interest in buyers wanting to be closer to the city and to experience all their pre-pandemic luxuries.”

In New York, buyers who left for the suburbs or their beach homes want to be back in the city because they missed it, Arriz says.

The same is true in Chicago, Preuett says. “We’ve had lots of buyers say they miss their city life and that’s why they’re moving back.”

“If you want to be a mover and shaker, you need to be where the action is,” Goodman says.

Opportunity Seekers Find Few Bargains

While some luxury buyers hope to find a bargain, few are available. Even in New York, which saw a steep decline in luxury prices early in the pandemic, prices are climbing.

“That window is over,” Arriz says. “Now it’s a seller’s market.”

Most agents reported steady or rising prices in 2020 and 2021 in their cities, partly due to short supply.

“Pricing remained steady as the choice of homes is simply not there in London,” Bradshaw says.

No Slowdown in Sight

While domestic buyers kept the market strong in most cities, the reinvigorated demand from overseas buyers is expected to grow, Bradshaw says.

“People will begin to move around the world for work, which means demand will inevitably increase,” he says.

The 2022 outlook on the real estate market is positive in São Paulo, and Rio de Janeiro, too.

Because of the perceived security of investing in real estate, “even with the high unemployment rate and low projections for the recovery of the national economy, and political uncertainty, the market should remain heated in the first half of 2022,” Victorino says.

In Los Angeles, low interest rates and a “ravenous appetite” for upgraded housing bode well for a strong luxury market in 2022, Walpert says.