24 Jul Luxury real estate: a segment immune to the crisis
The risk of a financial crisis always dominates almost all areas of business, however, luxury real estate, as well as the category of luxury goods in general, will stand somewhat separately.
The fact is that the crisis itself does not “eat up” square meters of housing, does not make a large set of material goods disappear – the rules of the game are simply changing. The elite segment is only a modest half a percent of the total market for cars, real estate, etc. d. And it is also calculated for only half a percent (very average, but still) of the population. And when during a crisis “everyone gets less money”, in fact, this is a generalization: if somewhere it decreases, then somewhere it increases. And the latter include exactly the indicated half a percent, just one of them can fly out, giving way to a “newcomer”.
All this was said in order to make the meaning of the prospects of luxury real estate more clear. Has anyone noticed that luxury housing suddenly becomes empty during the crisis and ceases to be in demand in Moscow? Or, perhaps, expensive apartments were not needed in the United Arab Emirates? This does not happen, just “expensive segment” is also a conditional concept.
A simple example is business-class real estate in a small provincial town and economy class not far from the center of Moscow. The names are different, comfort in the first case will be incomparably higher, but the price may well be the same, if not higher – in the second case. Therefore, the real elite is more of a price indicator, which starts from a million dollars for an apartment (and sometimes from two).
Housing of this class is always very stable in terms of demand: it did not have a record level of rise in prices during the period of global economic growth before the crisis, it did not fall actively after the crisis (when compared with other classes). But sales activity here is a completely different category.
When the economic situation is favorable, the general financial optimism clearly dominates, and the number of transactions begins to grow: there is no fear of losing in price, there is a desire to maneuver between those options that seem profitable. The thought “if anything, I can sell without visible losses” has the right to life to the full.
As soon as the economy finds itself in a situation similar to ours today, those who successfully overcome the general stagnation will not rush to sell their real estate: you can lose on such a deal, but there is no need for additional finance. They will not rush to buy such real estate: it is not entirely clear when stabilization will take place and it is already unjustified to invest in the elite. For some time, part of the real estate of those losers who have to get out of the most inconvenient circumstances at any cost is being sold.
How do different parties see this process?? Problems are obvious for realtors and developers. The first, also oriented to the secondary sales market, are practically crushed by such circumstances in general. And the owners of elite housing do not observe any critical difficulties.
This is the whole point of the panic around the elite in a crisis. And to succumb to the “analytics” of real estate agencies that draw gloomy prospects for this segment is a mistake. Until this logic is fully understood, it is unlikely that it will be possible to realize how the world of an elite class of goods works in general.