A new generation of rich homebuyers powered by a surge in inherited wealth is driving the luxury-home market in the United States, demanding larger spaces and fancier finishes, according to a report heralding “the rise of the new aristocracy”.
Prospective homebuyers younger than 50 account for most of those shopping for homes priced at US$1 million or more, according to the report. Nearly a quarter of high-net-worth consumers aged 25 to 49 said they would look for at least 20,000 square feet when they made their next home purchase; it was just 6 per cent for respondents 50 or older. The report is based on a survey of more than 500 consumers with at least US$1 million in investible assets, conducted last month on behalf of Luxury Portfolio International, a network of real estate brokerages.
Other home features deemed “essential” by a large share of these new aristocrats include hot tubs, at 45 per cent; commercial-grade kitchen appliances, at 52 per cent; and multiple-view security cameras, at 54 per cent. Proximity to good restaurants was the most important community amenity in the survey results – followed by proximity to family.
Three of five respondents younger than 50 said they expect to inherit at least US$1 million, with an average inheritance of US$3.8 million. Thanks to a tax provision passed under George W. Bush, a lot of that wealth is available sooner to today’s heirs. More than 171,000 families gave gifts of at least US$1 million from 2011 to 2014, according to the report, a giant leap from about 7,600 families who made US$1 million gifts from 2007 to 2010. Another boost will come from the new tax law, which cuts taxes on the rich, and a booming stock market that is translating into demand for luxury homes.
The housing market has already responded to the demand for larger homes. In the years following the foreclosure crisis, builders focused on erecting larger, higher-end houses and condominiums, exacerbating a shortage of homes that entry-level buyers could afford. Median homes sizes have pulled back slightly since a peak in 2015, but today’s new homes are still nearly 50 per cent larger than when the US Census Bureau started keeping track in the late 1970s.