The luxury real estate market is one of the most dynamic and growing sectors in the global economic landscape. Despite the pandemic, the financial crisis, and geopolitical tensions, demand for high-end properties shows no signs of abating; in fact, it is showing significant increases in some geographic areas. What are the trends, key factors and forecasts for 2024?
The growing real estate market, between challenges and opportunities.
According to some sources, the luxury real estate market is projected to be a growing but also changing sector due to various economic, social and technological factors. Inflation and changes in interest rates have a decisive influence on financing conditions for luxury real estate, and also the quality of supply has declined due to a definite decrease in both new and existing property. In both cases, it should also be added that, often, we are speaking about properties that do not meet the quality criteria that allow them to be considered prestigious for the 2024 market.
The 2024 forecast: a positive trend.
For 2024, the forecast is positive, with an estimated average price growth of 4 percent, in line with the European trend. However, the Italian market still lags behind other countries, where prices of luxury homes are much higher and competition is fiercer. Therefore, it is necessary to focus on greater transparency, professionalism, innovation and promotion of Italian real estate, which is a unique and unrivalled resource.
By 2024, luxury housing prices are expected to increase, with an average growth of 2 percent, excluding the city of Dubai. Factors influencing the market include economic trends, demographic developments, credit availability, taxation, regulation, safety, quality of life, and tourist attractiveness. In addition, some countries have taken measures to counter real estate speculation, such as raising taxes, banning foreign buyers or limiting building permits.
What studies tell us about 2024.
Studies conducted by the Knight Frank Data Centre on inflation and average wage trends point to the possibility that the Bank of England – BoE – may benefit from a manoeuvre involving an advantageous cut on interest rates, compared to what has occurred in the past. However, this positive sentiment appears to be threatened by the rise in wages recorded at the end of 2023 in the United States, suggesting a cancellation of the interest rate cut by the U.S. Federal Reserve: considering that, generally, the UK avails itself of measures taken overseas, this would imply the impossibility of implementing the economic plan envisioned.
But producers in the manufacturing sphere are optimistic, seeing the UK as a very competitive location for production compared to other European nations, bringing a large number of possible workers to the country. This trend, expected by 2024, already seems to be confirmed by an increasing demand for rentals.
The 2024 trend in the real estate market will be positive because more demand for quality properties is expected, especially in large cities and areas with development potential. In addition, digitalization and innovation will provide new opportunities to enhance the value of luxury properties, making them more attractive to customers. Finally, the real estate market will also benefit from the post-pandemic economic recovery, which will boost investment and consumer confidence.
Housing choices look at quality.
Market analyses conducted, as we discussed in previous articles, show that in 2022 demand for luxury real estate in Italy increased by almost 10 percent compared to the pre-pandemic period, while supply reached about 2.3 percent of the entire Italian real estate market, which is a step behind the American, British and Chinese markets. These figures, however, show a strong resilience of the sector, which has been able to adapt to the new needs and preferences of buyers, increasingly attentive to quality, sustainability, safety and technology.
It should also be said that the way of selling a property has greatly changed: a decade ago, it was common to come across a type of buyer who was interested in buying a house in Italy, usually the second one, to be used mainly during holidays. Now it is very likely that the one in Italy is the first home, a place intended to be a family environment, one for gathering together, deciding to live there all year round with a view towards a better quality of life.
This boom is likely to last, and average prices in some locations will grow significantly. As we have mentioned on other occasions, we now know that the lockdown experience has profoundly affected people's lifestyles, leading them to become more aware of the importance of having an outdoor space to enjoy al fresco activities and natural light, to have an area for hobbies, to spend quality time: in short, to have a place that can contribute to mental and physical well-being. Starting already during the period immediately following the first wave of the pandemic, demand for large outdoor spaces is still growing, and 2024 promises housing choices under the banner of comfort and sustainability.
Among the major sought-after characteristics is the location, where the privilege of being in an exclusive place carries the most importance. This is why properties that can offer breath-taking views or close contact with nature and that, in some cases, can also be repurposed for cultivation, continue to be preferred.
Watchword: sustainability.
Sustainability is among the goals to be pursued by those entering the real estate market in 2024. In an environment of growing environmental awareness and responsibility, making choices in line with certain principles is among the key requirements for being competitive.
Reducing property management and maintenance costs through renewable sources and proposing new business opportunities are just some of the positive distinctive traits for property values. In order to attract new buyers who are sensitive to eco-sustainability and wildlife and animal welfare, it is necessary to focus on the high demand for services related to responsible land use.
In the face of increasing environmental challenges calling for the need for food production to be as sustainable as possible, a viable and functional option is regenerative agriculture.
It is a system aimed at respecting the land, using a holistic approach to agriculture, with a keen eye on the integration of animal husbandry: the preservation of biodiversity, the integration of livestock, i.e., grazing alternated with cultivation, and many other principles underlie this philosophy of life.
Aiming to restore soil health, regenerative agriculture makes use of polyculture, hence diversity, to promote the resilience of crops, which are rotated in soil that is never left fallow in order to prevent nutrient depletion and pest development, so that chemical fertilizers and pesticides do not need to be used.
What are the sustainable choices?
Regenerative agriculture ensures biodiversity because it stimulates the maintenance of healthy ecosystems: monoculture is risky because it exposes the soil to vulnerabilities and diseases linked to a given type of plantation. Making sustainable choices results in healthy, quality products, reducing environmental impact and contributing to carbon sequestration and climate change mitigation, with a view to sustainability.
Eco-sustainability is not only a goal to be pursued by making choices related to the agricultural sphere, but one that is achievable by complying with certain objectives concerning mainly the mode of consumption – hence energy reduction – using renewable materials and sources. For this reason, it is important to address the issue, adopting solutions that can improve the quality of life while ensuring living comfort: thermal insulation to prevent heat loss, installation of solar panels to produce energy and heat, choosing low-energy devices, as well as home automation solutions to manage the property, are among the sustainable choices to be made.
These solutions yield a healthier, more comfortable and environmentally friendly property, as well as allowing to save on energy costs and increasing the value of the property itself.
The forecast for 2024 seems to confirm the trend recorded during the past year, namely that Italy is among foreign buyers’ favourite destinations: owning a property in the Bel Paese is still a great investment resource.
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