At the beginning of 2009, Forbes reported that 30% of “wealthy” people owned more than one residential property. Breaking this number down even further reveals that 30% of the rich own two or more residential properties, and 37% of the ultra-rich own three or more residential properties. The majority of these second, third and fourth homes were purchased for $500,000 or more, and many of them for more than $1 million.
This means that rich and ultra-rich customers are spending money on their homes almost constantly. What are they buying? According to the 2012 Luxury Brand Status Index survey (LBSI), which identifies the top brands that are truly luxurious, the two primary categories in which the rich are making luxury purchases are home appliances and bathroom fixtures. The reason for this is because the rich regularly modernize their kitchens and bathrooms.
Those participating in the survey were asked which luxury home appliance brands deliver the best combination of quality, exclusivity, experience, and peer esteem? Wealthy participants rated Wolf, Viking, and Sub-Zero the “Best of the Best” out of 20 brands that were mentioned. In response to the same question about bathroom fixtures, Hansgrohe, Showhouse by Moen, and Franke were rated tops out of 16 luxury brands.
The individuals surveyed ad an average income of $345,000, and an average net-worth of $3.2 million. Over 63% owned two or more residential properties. Based on participants’ responses, LBSI concluded that true luxury reflects a combination of design, quality, craftsmanship, and especially service. Successful luxury brands are “radically creative innovators.”
The Rich Keep Buying
According to Business Week (BW) the rich are still buying up real estate, despite the economic recession. Movie stars, hedge fund managers, and corporate CEOs are engaged in a flurry of buying. With such individuals, credit is not an issue. BW states that more than 30% of those buying residential property priced $1 million or more pay cash. BW goes on to note that there is a shortage of houses selling for $30 million and more in Southern California. Many of the current buyers looking for luxury real estate are from foreign countries, according to BW.
In February 2009, TimesOnline (TO) did an interesting article on rich Chinese buyers of U.S. houses. Beijing’s super-rich perceived the depreciating real estate values in the U.S. as the opportunity of a lifetime. A Chinese property company called SouFun Holdings, arranged a tour for 40 wealthy individuals. The purpose of the tour was to purchase residential properties in the U.S.
Members of the tour groups ranged from 35 to 50 years of age. They planned on visiting San Francisco, Las Vegas, New York, and Boston, where they hoped to purchase houses or apartments priced from $300,000 to $800,000. Almost all of the purchases are viewed as investments. Each buyer had at least $1 million in cash to spend on investment property. Each of these buyers was willing to wait 15 to 25 years for a return on their investment.
A SouFun Holdings representative stated that these wealthy Chinese were not concerned with exchange rates or the current credit crunch. Such details were not an issue because $1 million to them was pocket money. Spending $1 million did not affect their lifestyle in any way.