The Preferred Home Buying Spots for the Wealthy: A Guide
In the exclusive world of $10 million-plus home sales, coastal cities and low-tax havens reign supreme. But what’s driving the rich to invest in these specific locations? And what are the top markets for ultra-luxury home sales as of June 20, 2023? Let’s dive into the details.
Greater Los Angeles Leads the Way
In the first half of 2023, Greater Los Angeles emerged as the pinnacle of opulence, according to Compass’s mid-year ultra-luxury report. While the allure of sunshine and Hollywood glamor may be tempting, other significant factors are boosting sales in the area.
Among the key drivers for ultra-luxury deals in Greater Los Angeles was the mansion tax deadline. This impending fiscal change stirred buyers into action, leading to the sale of 160 ultra-luxury homes during the first six months of the year, with a jaw-dropping total sales volume of $3.21 billion.
The Mansion Tax: A Key Motivator
Los Angeles’s mansion tax, approved by voters and activated on April 1, 2023, adds 4% more tax on properties selling for $5 million or more, and 5.5% for properties selling for $10 million or more. These additional tax revenues are earmarked for affordable housing and programs to combat homelessness.
Coastal Charm and Low-Tax Appeal
Historically affluent coastal areas like Greater Los Angeles and Manhattan continue to lure wealthy buyers. In the first half of 2023, $13.85 billion in ultra-luxury real estate changed hands across 806 transactions nationwide.
“Despite thriving traditional coastal markets, we are witnessing a burgeoning interest in unique homes and estates in markets that had little to no activity at this level a few years ago,” said Felipe Hernandez Smith, head of the Compass luxury division.
The Allure of Vacation Spots and Low-Tax Areas
Other than coastal cities, Compass’s ultra-luxury report highlights that properties in vacation and second-home markets, as well as low-tax areas like Florida, are selling at higher rates than last year. This trend is noteworthy despite obstacles like limited inventory and higher interest rates. Emerging locations such as Scottsdale, Arizona, and Jackson Hole, Wyoming, are climbing the ranks of the top 20 ultra-luxury home destinations.
The Minimal Impact of Interest Rates
High-end buyers are seemingly unaffected by interest rates, as most clients with budgets exceeding $10 million opt to purchase properties using cash, remarked Nick and Kari Giuffre, agents at Compass Real Estate in New Jersey.
These discerning clients often favor fully furnished, turnkey residences, streamlining the typically lengthy process of architectural planning, construction, and design.
Top 10 Markets for Luxury Home Sales Over $10 Million
- Greater Los Angeles, California – 160 transactions.
- Manhattan, New York – 124 transactions.
- Miami Dade, Florida – 61 transactions.
- Palm Beach County, Florida – 54 transactions.
- The Hamptons, New York – 34 transactions.
- Aspen, Colorado – 32 transactions.
- Silicon Valley, California – 31 transactions.
- San Diego, California – 30 transactions.
- Southwest Florida – 28 transactions.
- Hawaii islands of Hawaii, Kauai, Oahu, and Maui – 27 transactions.
The first half of 2023 has painted a vivid picture of the luxury real estate market in the United States. With coastal cities and low-tax areas leading the way, the rich and famous continue to invest in properties that offer not only status but also financial advantages. The appeal of turnkey residences and unique homes in emerging markets adds an extra layer of complexity to an already fascinating landscape. The trends highlighted in Compass’s report are likely to guide the preferences of America’s wealthiest in the months to come. If you are part of this exclusive club or aspire to join it, these insights may well shape your next investment decision.