With all the uncertainty that exists in markets today surrounding inflation and rates, luxury real estate remains a top choice for those holding significant levels of cash. I recently spoke with a member of the leadership team at Douglas Elliman and she noted how 8 of the last 10 transactions last week were all-cash buyers, including a $45.5 million home.
Real estate is a great hedge against inflation because typically as prices rise, so do the value of the underlying assets. Owners can collect rental income from their properties, and charge more as inflation rises.
Real estate is also a good choice for diversification, especially when other asset classes are more volatile. A diversified portfolio can help increase stability and reduce uncertainty.
The tangible nature of real estate is another major selling point. It can be seen and used, though perhaps you might have some excess space in the luxury market. People find comfort in owning physical assets, which is especially relevant given recent news in the banking sector.
Finally, the long term nature and potential for capital appreciation are desirable. All cash buyers can often act quickly and decisively when their investments have significantly appreciated.
With all the uncertainty surrounding interest rates, it’s no surprise that many of my clients today are/will be all-cash buyers. As I noted last week, international buyers have made a comeback in the US market. The global cohort of wealthy families and individuals holding large levels of cash still finds luxury real estate to be a desirable asset and investment in the long term.