The immunity of luxury residential real estate
2023 has been a tumultuous period for real estate, with property investment affected by rising interest rates and persistent inflation, among other factors. However, and despite this challenging economic context, there’s a segment that goes against the tide and not only has not suffered but also shows signs of growth. We’re talking about prime assets, particularly the luxury residential market.
Engel & Völkers Iberia, one of the leading real estate companies in Spain, explains the reasons why the premium segment remains completely unaffected by the macroeconomic situation. “The luxury market operates with rules independent of the standard and is more stable to economic and political changes since many transactions exceed two million euros and rarely involve bank financing,” says Juan-Galo Macià, the president of the real estate company, in statements to The Objective. The more exclusive the real estate offering, the less financing the buyer will need. This reality reaffirms the immunity and resilience of luxury in real estate, establishing itself as a more strengthened, dynamic market with more consolidated growth.
Leading consultancies and real estate firms focused on designing and promoting high-end homes agree that the appeal for the prime segment has increased dramatically and will continue to rise in 2024. The growing interest from foreign investors will be one of the constants this year, alongside the presence of national buyers. Furthermore, the supply and demand for this type of housing, with prices ranging from one to 15 million euros, proliferate especially in major cities like Madrid or Barcelona.
Luxury residential in 2024
According to the real estate network The Simple Rent, specialized in luxury asset management, luxury properties will indeed experience one of the highest growth rates throughout the new year, around 43%. Cities like Madrid and Barcelona concentrate 78% of luxury demand. Coastal areas, specifically Andalusia and the Levant, are the preferred locations for international buyers.
The demand for luxury homes from foreign citizens has played a crucial role throughout 2023, representing 17% of all transactions in the third quarter of the year. For the current year, a record number of purchases by these clients is also expected. Regarding prices, the average cost of prime homes will experience a 41% increase and a 54% increase in the value of these transactions.
According to The Simple Rent, buyers of luxury homes in Spain primarily come from European Union countries, the United Kingdom, North America, and Asia. Meanwhile, 26% of newly built homes are intended for this market, a trend that will continue growing in the coming years due to the incessant increase in demand.
Madrid on the rise in luxury residential
If Spain is the fourth global destination for buying luxury homes, Madrid is its main attraction. In addition to attracting Latin American capital, the capital is increasingly drawing the interest of European and North American buyers and investors with very high purchasing power, according to Colliers.
In its report “Luxury Homes 2023 Madrid,” the consultancy analyzes the stock of new-build luxury multifamily housing, considering the available supply in the most exclusive residential areas of the city (Barrio de Salamanca, Chamberí, and El Viso) with a sale price exceeding 2 million euros. Of the total homes on the market, 35% are in the ultra-high-end segment, the highest category of luxury, with a sale price exceeding 5 million euros (25,000 euros/square meter). The premium category, ranging from 2 to 3.5 million euros, accounts for 39% of the available supply, while the intermediate range, considered high-end (between 3.5 and 5 million euros), accumulates 26% of the marketed luxury homes. In 2024, the luxury residential market will continue to grow in Madrid, with an offer concentrated in the Barrio de Salamanca.
Moreover, according to forecasts by the consultancy Knight Frank in its report “Prime Global Forecast 2024,” luxury housing prices in Madrid will rise by 5% in 2024, consolidating the interest in prime properties in Spain. Among the 25 cities analyzed, Madrid stands out as the best-ranked city in Europe.