12 Dec Oversupply Of Luxury Homes A Growing Trend In North America
It’s that time of year and that means the Prime Global Forecast 2020 by Knight Frank is out and as always, has more than a few highlights to take note of. The one we’re going to focus on today however is the North American luxury real estate market and just what they’re predicting will go down in the coming year or two. While these reports cannot be taken as gospel, the Knight Frank team has a solid track record with these based on their data collection methods and partnerships.
The Knight Frank Prime Global Cities Index’s sole purpose is to track the movement in prime prices across forty-five cities worldwide. The average annual rate of growth in the year to Q3 2019 was 1.1%, meaning prime prices are rising at their slowest rate in a decade which means making your next investment moves should be thought out carefully.
Here at Luxury Branded we work with a lot of North American luxury real estate brokers and with the suggestion of oversupply being a problem now and going forward, it is something we think should be paid attention to sooner rather than later. An oversupply of luxury real estate means one thing, competition is going to get fierce and agents are going to have to stand out even more to move homes.
We’ve already seen some budgets drop with some of our clients here in Canada out in the west, and we’re adjusting out marketing strategies to help counterattack the potential drop in sales some will see.
Luxury Home Oversupply
So back to the focus of our article and the oversupply of luxury homes in the North American market. We know that NYC has being praised as a buyer’s market with insane amounts of supply, Vancouver luxury home prices are falling after so many surges in foreign buyers and people are fleeing California for other parts of the country.
The supply of luxury homes over $2M rose 14%, marking four straight quarters of annual increases in the inventory for these kinds of homes. Sales of homes listed at $2 million and above fell 16% in the first quarter, the sharpest annual decline since 2010, according to Redfin. So some areas are getting hit harder than others while new areas will become hotbeds for buyers because the UHNW population is only getting larger.
Global trade disputes are definitely playing a role in the oversupply, as is the vast amount of builders expecting the buyers to still be flooding certain areas in North America. It certainly will be interesting to see how this all plays out in the coming 2-3 years and one thing is for sure, marketing strategies are going to need a slight adjustment. In markets like Vancouver and NYC, brokers have had it quite easy over the past decade as buyers flooded the market.
Now with a luxury home oversupply, some brokers are not going to be nabbing clients as easily as the buyers market gives people a lot of options. Not only that, but new luxury real estate “hotspots” area always popping up so what can brokers do to keep the business flowing into their area, even in a downturn?
Rethink Your Luxury Home Marketing Strategy
So what can be done to tighten up and brave the coming storm? With marketing that could be a plethora of things so knowing where the ROI is, as you should already, is where to continue the focus while cutting the fat. If you’re in a market that is headed for rougher times, you know you’ve got to be prepared to outsmart and outsell many other luxury brokers in town. Here in Vancouver for example or NYC, that is literally thousands of other agents all within the luxury sector.
I recently wrote about how luxury real estate video marketing needs to be stepped up in 2020, and doing so will continue to set you apart from the pack. Doing better videos beyond the “drone tour” is what’s needed and it comes with an extra perk that I feel is most important. What is that perk you ask? Great videos go viral and that means the less you pay in PPC spend which is a win/win.
Dial In Your Ad Targeting
Facebook and LinkedIn make it very easy to target very specific demographics and from the vast majority of campaigns we see, the rules are set way too loose. A large problem I see when campaigns are being setup is the fact they are setup to get large reach, and when it comes to targeting HNW individuals, you need to reign it in a bit. Less is more in this case
It might also be a time to target other platforms outside of just Facebook, Instagram, LinkedIn and Youtube. The advantages here are usually less of a advertising pool, smaller budgets needed and you can get access to some very niche crowds. For example Houzz and Nextdoor put you right in front of homeowners, typically those that are more affluent and very social media savvy.
Reach UHNW Individuals In Emerging Markets
Back in January of this year I wrote briefly about a new real estate website in India and how that opens up more marketing opportunities. This is a topic I’m going to dive more into in the coming year, but for now just think outside the box and about emerging affluent markets. The demand for marketing North American properties to China has been all the rage as of late, but the number of UHNW individuals in India is growing at a very rapid rate.
There is a lot of options for reaching affluent people in India already, and it is not just through social media. Luxury lifestyle publications both online and off exist, there are many events here and even an international real estate expo to reach potential buyers happens yearly. There is some serious potential to get in advertising in front of buyers who have international desires and a whole lot of money in the bank to spend. There will always be a draw to cities like LA, NYC, Vancouver and Toronto for foreign buyers so don’t miss out on new avenues of targeting.
UHNW Event Networking
When we onboard a new luxury real estate marketing client we always ask and talk about their local and international networking in the physical realm. It has become quite clear that this type of networking has not high on the radar for a lot of these luxury brokers, and we always aim to change that. While the world has gone mostly digital, those personal relationships are what still thrive and drive the UHNW population.
Firstly, on a local scale, there are so many different ways to connect more deeply with affluent filks in your city. There are typically private clubs you can apply to, join luxury car groups attend high end dealer events. Private golf and country clubs are always a spot, but
One client who recently attended the Shanghai Luxury Property Showcase this past weekend and had some very interesting things to report back. First of all, this is not an easy event to attend as it is an invitation-only exclusive event specifically designed for the China market. It is however an incredible opportunity to network with UHNW buyer’s agents and others in the industry at a level you want to connect with.
Two main benefits that made the trip more than worth it:
1) Real life connections with contact information of buyer’s agents and potential buyers wanting in the area of California he serves.
2) One of his connections added him to a private WeChat group that is only for exclusive access to hype properties in key locations…exactly what he sells.
That’s just a couple of outcomes and there are many amazing events to hit globally that are either real estate and or luxury focused. Ones we recommend typically are events like the Miami Art Basel, Watch Basel, Monaco Yacht Show and similar shows like it in other key cities aground the globe. However, dig a little and you’ll find events all over so think about your target market and start packing that suitcase.
Are You Ready?
Hopefully you won’t be too discouraged from the report and what it might mean for certain luxury real estate markets in North America. Start preparing now and look forward to getting creative, networking better and potentially even brining your sales to a whole new level despite economic circumstances surrounding you. This is what makes a luxury broker a leader in their area and really allows you to set yourself apart from the pack. The marketing strategies discussed here also only scratch the surface of what is possible, so keep following here for more or ask any question directly via email or Twitter as I love helping even if you’re not a client.