For many, the current housing market looks bleak. Home prices and inflation rates continue to rise, while inventory faces a gradual decline in the wake of high demand. People doubt the longevity of the market as it currently stands — but amid widespread apprehension and the threat of an imminent market crash is a stalwart contender: luxury real estate. According to a recent study, luxury real estate remains an enduring industry and profitable investment across the entire world, not just North America.
The long-term value of luxury real estate affords several benefits for buyers, sellers, and investors due in part to the versatile applications of real estate itself. Pieces of real estate make for great investments and avenues for profit while simultaneously building home equity over time. Our guide explains the core benefits of luxury real estate, its long-term value, and why you should consider browsing luxury Orlando homes.
A hedge against inflation
Luxury real estate is one such inflation hedge. Due to the intrinsic value of luxury properties and the value linked with the affluent and desirable communities they’re located in, luxury real estate is a prime candidate for maintaining and increasing its overall value over time. It goes without saying that investing in luxury real estate remains an attractive venture and is expected to hold this position for the remainder of 2022 and well into 2023.
Enduring market growth
The report expects the luxury market to continue to grow as international buyers take interest in luxury properties and as newly accumulated wealth encourages luxury buyers to buy additional properties. Approximately 70% of people with a net worth of $5 million or above own at least two properties, if not more. The report also found that more and more luxury buyers are buying vacation homes in highly desirable locations.
A trusted investment
Opportunity for profit
Second-home buyers may discover a new avenue for profit in the beauty and location of their luxury homes. Consider this scenario: you spend most of the year living in your first home while occasionally traveling to your second home for vacation or a much-needed break from your day-to-day life. What happens to your second home while you’re not there? The answer is simple — furnish it into a vacation rental. Especially in touristic regions like Orlando, vacation homes turn a good, steady profit on visitors looking to enjoy their stay in the comfort of a luxury home rather than a hotel.
Increased home equity
The greatest benefit to the long-term value of luxury real estate is the steady accumulation of home equity. Defined as the difference between your home’s current market value and your remaining mortgage balance, home equity is an incredibly versatile and useful asset. It’s good for obtaining home equity lines of credit (HELOCs), home equity loans, down payments for new properties, and cash-out refinancing.
How does a property accumulate home equity? Easy — as market values rise, so does the value of your property. Let’s say you recently bought a home for $1,000,000. Over the next 12 months or so, the market value increases to $1,500,000. Within those twelve months alone, you have generated an equity of $500,000, money that is effectively yours just for owning the property. You can then use this equity as you see fit.
Of course, home equity isn’t a guaranteed increase. If market values decrease, then so will the value of your property. Fortunately, luxury real estate’s position as an inflation hedge enables it to protect against declines in property value. Any piece of luxury property is desirable on its own, even more so in favorable, popular locations.