At Lion Property Group, our focus for upcoming projects is on luxury property development. This is because developing luxury homes provides additional benefits that don’t exist when developing other types of property.

To start with, let’s clarify what we mean by “luxury properties”. When we say luxury homes, we are referring to homes whose price is in the top 5 percent within a market. Basically, these are homes with price tags well into the seven-digit range or even higher. These types of homes may also be referred to as “prime real estate”.

We already have some projects on the go which fall into this category, such as Zenith, Waterpoint, and Eminence.

Why focus on luxury property development?

Luxury real estate is more resilient to market forces than traditional housing stock. This resilience means that luxury real estate is more consistent and predictable. To understand why, you need to think about the different types of people who buy different types of property.

The target audience for luxury real estate is High Net Worth (HNW) Individuals, meaning people with more than US$30 million of wealth.

The ultra-wealthy do not have the same reliance on finance that most purchasers do. A typical family purchasing a home will take out a mortgage of 80-90% of the property’s value. As a result, macroeconomic forces that affect lending, such as interest rates, have a tremendous impact on housing markets. Since ultra-wealthy people are not as reliant on finance, homes that are intended for ultra-wealthy purchasers are not as impacted as homes intended for typical purchasers.

If the intended buyer of a product is not affected by economic conditions, then products aimed at those buyers should also not be affected by those conditions.

When developing cheaper stock there is a chance that your target audience can be priced out due to rising market forces, and yet the stock you have developed isn’t appealing to the demographic which could afford to buy it. In these instances, the developer would have to undercut their own product to match what the target market can afford to pay.

This is not a concern with luxury real estate and HNW buyers. They can afford to buy the home if they want to, if they think the value is there.

Rather than interest rates, economic factors that are more likely to impact the ultra-wealthy are levels of business investment, company profits, and the stock market — that’s where their wealth comes from.

What’s the future of luxury real estate?

Knight Frank’s global research network expects global luxury real estate prices to rise by 2% on average in 2023. One of the major factors behind this forecast is that High Net Worth individuals now consider residential property to be the safest asset class, surpassing gold.

So in an economy which is still far from stable and where there are lingering questions about inflation, the ultra-wealthy will be wanting to store their wealth in the safest asset class they can. Which by their own admission is residential real estate.

According to Knight Frank, 62% of HNW individuals in the Asia-Pacific region will be purchasing their next property for the purposes of investing.

Luxury real estate in Australian capital cities was performing higher than the global average, with Gold Coast being the best performer in this country.

In summary.

Luxury real estate is more resilient to market forces, doesn’t have an upper limit on asking price, and allows us to focus on smaller-scale projects to make a profit, rather than having to scale upwards and achieve profitability through volume.

By developing properties aimed at High Net Worth Individuals, we can achieve higher returns for our investors while delivering a product to market that we can be proud of. ∎