Luxury Insights

Luxury Market News: Canada & Hong Kong

The Wall Street Journal reports that the International Monetary Fund express concern yesterday about real estate prices in Hong Kong, which are up 30% this year.  Concern is that a bubble may be brewing.

Prices for luxury homes are at an all-time peak in Hong Kong despite a tightening of lending requirements increasing the required down payment on luxury homes to 40%. 

A little closer to home, a RE/MAX Ontario Atlantic Canada report released yesterday is showing some pretty strong numbers in the Canadian luxury market. 

"Twelve months of healthy home buying activity have clearly been crammed into five short months," Michael Polzler, executive vice president of RE/MAX Ontario-Atlantic Canada.

Toronto has seen a boost in sales of "entry-level" luxury homes in the $1M-$1.5M price range, driven primarily by Bay Street banking bonuses.  There have been over 1,700 sales at $1M+ this year in the Toronto area.

Reports from CTV and The Star have more details.

Staging, marketing and storytelling

"The Story Seller" is the title of an article that ran in the New York Times Magazine a couple weeks ago.  If you haven't read it, check it out--it's a nice profile of Meridith Baer whom the NYT calls the grandest of the grandes dammes of home staging.

The piece gets at the heart of good staging, and for that matter good marketing.  It is all about helping the prospect envision themselves living a happy life in the home.  As Baer herself puts it:

“We’re not finding the cure to cancer,” Baer says. “But we are helping people see how they’ll live in the house — where they’ll hang art, where they’ll eat. The kind of thing they’re not good at because they are finding the cure to cancer.”

Whether one is writing advertising copy, staging the home, or planning a real estate soiree, the trick of course is to understand the lifestyles, tastes, and values of your prospects and to craft experiences that satisfy these and at the same time provide a tempting aspirational tickle. 

It is about crafting a compelling and pleasing story or vision into which your prospects can place themselves.  Baer has taken her experience as a screenwriter doing just this and applied it to the staging of homes.

NYT: Hey, Big Spender, You Want Value?

Interesting article in the New York Times on the growing luxury concierge business.  Affluent clients are turning to concierges for convenience (of course) and also to help ensure that they are getting good value for their money spent.

...The economic downturn has not stopped the world’s wealthiest from spending, but it may have made them focus more on value. And as the market gets more crowded with luxury brands, products and services, the rich are increasingly turning to concierge companies for information, recommendations and what they hope will be better deals, because of partnerships with luxury suppliers the world over...

Perhaps less obvious, some of the newly affluent are turning to concierges for their knowledge of luxury products, services, and culture, knowledge which the client may lack.

“Twenty years ago, wealthy people typically inherited their wealth and grew up being surrounded by luxury brands,” Mr. Cohen said. They had well-connected family and friends to help them navigate through high society. But newly wealthy individuals today are less likely to have inherited these experiences and networks. Concierge services provide entry into the luxury world, as well as guidance and advice.

October Wealth Report Newsletter now available

In this month's issue:

• Wealth and Luxury Trends: 2010 & Beyond, by Milton Pedraza, CEO, Luxury Institute
• Luxury Institute WealthSurvey-Current State of the Luxury Industry (synopsis)
• Keeping Up With The Rockefellers: Affluent Spending In A Recession
• The ROI Of Hiring Right In The Luxury Business
• Rebooting Luxury Expectations with Tomorrow's Stewards of Wealth

Members can access this report on our website (login required).  Note that the Wealth Report is published nine times a year and this will be the last issue for 2009.  The next issue will be January 2010.  More on the report and the Luxury Institute here.

AARC Fall 2009 Affluent Market Tracking Study published today

American Affluence Research Center's new survey of the the wealthiest 10% of US households provides insights into "the new normal," "stealth wealth and luxury shame," and December holiday gift spending.

Conclusions are more positive than the many of the anecdotal examples that have appeared in recent media coverage of the luxury market, though the outlook on the real estate front is not so bullish.

Here are 7 questions and answers that highlight the survey's findings:
 
Should you be concerned about the prevalence of the concepts of "stealth wealth" and "luxury shame"?
Short answer: No. These concepts apparently apply to less than 7% of the affluent.

What is the "new normal" and will the affluent return to pre-recession levels of spending?
Short answer: The "new normal" is not new to the affluent. Most have been careful spenders and aggressive savers who live within their means. They say they will return to pre-recession levels of spending when the economy has recovered and they have recovered the recent losses in their net worth, which they estimate will take 18 to 24 months.

Which segments of the affluent have been reducing/deferring expenditures, which segments will do so over the next 12 months, and which segments are not cutting back?
Short answer: Age and net worth are more important factors than level of income. There is some variation depending on the type of product.

What are the spending plans for December holiday gifts?
Short answer: 9% will spend nothing and among those that will buy gifts, the average expenditure of $2,400 is a 5% decline from 2008.

Which of 8 major expenditures do the affluent expect to make during the next 12 months.
Short answer: Only the building of new homes has not risen since the Spring 2009 survey.

How do the affluent expect to change their spending for 17 products and services during the next 12 months?
Short answer: The spending indexes for all 17 categories have increased from the Spring 2009 survey.

What do the affluent expect of the stock market, business conditions, and their personal income during the next 12 months?
Short answer: They are more positive on all three than in the Spring 2009 survey.

Some other key insights:

• Acquisition plans for all of the 8 major purchase items, with the exception of building primary and vacation homes, rose slightly from the Spring 2009 survey. Plans for a major home remodeling showed the most substantial increase.
• About one in five report they have not changed their spending since the recession began. Of the 80% who have changed their spending, about a quarter do not plan to return to pre-recession levels of spending. This equals roughly 20% of the wealthiest 10% of US households. The two major factors that will influence the respondents to return to pre-recession levels of spending are the recovery of their savings/investments (54%) and the recovery of the stock market (49%). These two factors are important across all demographic segments but a bit more important to those age 60+.  Certainty of job security and/or compensation is relatively more important to those under age 50 and those in the lower level of net worth.

You can find more details and purchase the results on the AARC website.

NYT: Market for Luxury Goods Shifts Further to the East

Interesting article in the New York Times a couple days ago about the growing importance of Asia as a luxury market. 

While this is  not a new trend, as the NYT notes, "Asia’s role in the market for super high-end luxury goods is mushrooming, reflecting an underlying shift in consumer spending power that has been creeping along for years, but which received a boost from the global economic crisis."

They go on to note some interesting facts (excerpted and listed below as bullet points):

• Christie’s and its rival Sotheby’s say that in the last few years Hong Kong has emerged as a top location for sales of expensive jewelry, gems and fine wines. Asians have also become major buyers of ultraluxury goods at their auctions in London, New York and Geneva.
• Christie’s said that in the spring season, Asian buyers accounted for 61 percent of the total sales value at its New York, London and Hong Kong wine auctions. Four years earlier, the figure was 7 percent.
• Rolls-Royce, which did not even have dealerships in Asia until 2003, immediately received 20 orders for its new $250,000 Ghost when it presented the car in Hong Kong last month — despite taxes that double the price.
• China, the world’s most populous nation, has already become the biggest global car market, having overtaken the United States earlier this year.
• The number of known billionaires in China has grown to 130 from 101 in 2008.
• China’s population of “high net worth individuals,” those worth $1 million or more, surpassed that of Britain for the first time last year
• Christie’s said that in the spring season, Asian buyers accounted for 61 percent of the total sales value at its New York, London and Hong Kong wine auctions. Four years earlier, the figure was 7 percent.

You can expect a continued and increased focus on Asia and affluent Asians from the purveyors of luxury goods and services.

Findings from the Future Wealth Report

The world’s future wealthy are optimistic, sensible, family-focused

Scorpio Partnership is a London-based strategic consulting firm which took on the task of going out and finding the world’s future wealthy and asking what makes them tick.  They identified the usual suspects – professionals, business owners, early-stage entrepreneurs, and used some “creative profiling techniques” to broaden their search.  The study's findings were published this month in the The Future Wealth Report (PDF 400k).

Those contacted were asked, “Do you plan to be wealthy one day?”  The average wealth of those who responded was $2 million USD. They aspire to a total wealth goal of about $7.4 million. Achieving four times what they are worth today is how most future wealthy define “making it.”

Of the group surveyed, the future wealthy in North America reported having taken the biggest financial hit during the last 12 months. 

• 40% said their net worth had decreased
• 24% said their wealth had stayed the same
• 36% reported a wealth increase. 

They are optimistic about their ability to maintain their assets.

• A full 80% of the North Americans do not expect to lose any money in the next 12 months.
• Only 4% thought their wealth might decline in that period.

The world’s aspiring wealthy are contributing to their coffers as a result of these “very important” income sources (they could identify three):

•     Jobs (83%)
•     My business (25%)
•     Listed investments (21%)
•     Marriage/partner (19%)
•     Sale of real estate (17%)

Here is a broad brush list of a few other key findings from "The Future Wealth Report (PDF 400k)," published this month.  The world's aspiring wealthy:

• Focus on brands that deliver quality experiences with a hint of understated luxury
• Simple pleasures, rather than up-market brands, appeal to this group
• Want to be known as generous and hospitable more than known for professional and financial acumen
• Are willing to talk about money openly with their friends
• Prefer to make donations anonymously
• Choose a car that feels great to drive over one with a Wow factor
• View money as a means to an end
• A majority view being a good person as the top priority for how they want to be remembered
• Home life is the source of greatest happiness and fulfillment
• Measure success in terms of achieving specific personal and professional ambitions
• Ethical, moral and family values matter

Asked what they’d spend their money on if their income doubled, the report says the “only lavish glint in the eyes of the future wealthy is the desire for a second or perhaps third home.  Only property moves seriously up the list of spending whims when buying power is boosted.”  Good news for those in real estate. 

New Wealth Report features interview with Laurie Moore-Moore

The independent ratings and research organization the Luxury Institute has published the September issue of The Wealth Report Newsletter.  It features an "Excellence In Luxury Leadership Interview" with our founder and CEO, Laurie Moore-Moore.

Here's what you'll find in the September 2009 issue:

Summaries of Recent Research by the Luxury Institute

• Luxury Retail – Customer Experience Excellence
• Wealthy U.S. Consumers - Wine and Liquor Preferences
• Wealthy Chinese Consumers – Luxury Brand Status

Excellence In Luxury Leadership Interview

• Real Estate: Q&A with Laurie Moore-Moore, Institute for Luxury Home Marketing (ILHM)

Industry Insights

• The Rise Of The Legacy Brand In "The New Economy" By Mathew L. Evins, Evins Communications
• A Culture Of Service: Becoming A Client's Trusted Advisor By Robert C. Elliott, Bessemer Trust
• Camper & Nicholsons – The (Super) Yachting Index

Luxury Institute Research Listings 

Members can download this issue, and past issues on the Document Downloads page of our website.

Annual Gathering: Special Short Sale Summit

Members have been asking us,“Can you help? We’re losing luxury listings to short sale agents who don’t understand how to market luxury homes.” 

So… although Leaders in Luxury will be back in 2010, this year (in response to member requests) we’ll host a special meeting through our new ILHM Center for Asset Preservation division: 

Short Sale Summit 2009
October 7 - 8
Houston, Texas
Hilton Post Oak Hotel

Even if you are experienced with short sales or have already earned a short sale or distressed property designation, you'll want to attend this event.  This is the industry’s first Short Sale training covering government’s new Making Home Affordable Program, which totally changes the rules for short sales (and the whole foreclosure/foreclosure avoidance process).

With jumbo loans defaulting at twice the rate of conforming loans and almost half of residential sales falling into the distressed category, understanding how to make short sales successful at all price points is more important than ever.

Just to give you an idea how different the new standard MHA process is:

• There is now only ONE point between default and foreclosure when a short sale will even be considered.
• The loss mitigator approves the short sale attempt in advance.
• The loss mitigator sets the list price. 
• Whoa!  Those are big change and that's just the start!  There's good news about the commission...

This two day meeting will:

• Provide the Institute’s usual great networking.
• Give you the information you must have about the government’s New Making Home Affordable program which covers 9 out of 10 loans, totally reinvents short sales, and is mandatory.
• Arm you with the checklists, forms, web links and other required tools for successful short sales, regardless of price (there will be special info on luxury short sales).
• Provide you with first hand advice from servicers’ loss mitigators.
• Give you essential information on luxury short sales, to help ensure that you don’t lose luxury listings to “short sale" agents!
• Reward you with a Short Sale Achievement Certificate
• Texas agents receive 15 hours of continuing education credit

On both days, you'll hear from speakers and panels of officials, loss mitigators, and other agents.  You'll have the opportunity to network and will leave having earned a Short Sale Achievement Certificate from the ILHM Center for Asset Preservation, indicating you have received Making Home Affordable training.

This event is open to both Members and non-Members, so bring your whole team.

More info on the CAP Short Sale Summit 2009

Register now and save!  "Early Bird" discounts end the 17th.

• Registration for Institute Members
• Public Registration
  

Great new benefits for Members from UNIQUE HOMES Magazine

Our friends at UNIQUE HOMES MAGAZINE have always been a great resource for and supportive of our members.  

We're happy to announce that they are extending some great new benefits to Institute Members.  You can find all the details here in the Members Only section of our website (login required, members only).