In every level of residential real estate, emotions play a role in determining which property someone buys.
"A home is often the most expensive purchase someone makes in their lifetime," said agent James Harris, of Los Angeles-based brokerage The Agency. "It’s so personal, and it needs to feel right."
But while buyers at lower levels of the market are focused on their needs—more space because of a new baby, or a new location because of a job transfer—in the luxury market, emotions are more about wants, said Ryan Serhant, a broker with Nest Seekers International in New York. "No one needs a $20 million home—they want it," he said, "so, the emotions are much, much different."
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"Luxury buyers purchase properties that make them feel wealthy or sexy or like they’ve made it," he continued, adding that in Manhattan, light and views often elicit the greatest emotional pull. "But they also want to feel like they’re making a good investment."
Elizabeth Stribling-Kivlan, president of New York brokerage Stribling & Associates, agreed that every luxury buyer wants to make a smart investment, but added that the more money someone has, the easier it might be to justify an emotional spend.
"No one wants to live somewhere with their partner or their children without feeling some sense of home," she said. "Are you really going to walk away over $10,000 or $50,000?"
Sometimes, that emotional connection is so strong that the buyer imagines themselves living there regardless of the cost.
"If it’s a one-of-a-kind property and there’s that emotional connection, some people will pay anything for it," said Dottie Herman, the president and CEO of Douglas Elliman.
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But while emotions are almost always part of this decision-making process, they tend to be more important when the real estate market is doing well, said Martin Bikhit, the managing director of London-based Kay & Co.
"When stock is thin, buyers are more emotional because they panic and think, I’m not going to get what I want," he said.
But because of the principles of supply and demand, when there are more options, people can be choosier and know that even if they lose out on what seems like the perfect property, something else will likely come along that ticks off all the boxes. "If we’re looking back three years ago," Mr. Bikhit said, "everyone was more emotional then than they are now."
While it may seem counterintuitive, many experts said that emotions become even more important when buyers are purchasing second or third homes.
"A second home is about leisure time," Ms. Herman said. "It has to have the amenities that the buyer wants, and be an oasis where they can have peace and get away from everything."
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It can also be a place, Ms. Stribling-Kivlan added, where you forget about function a bit, and fulfill that lifelong dream of owning a house with an incredible waterfall, expansive outdoor entertaining area, or in her case, room for a big pool table. "You can let your heart get involved in the transaction a little bit more when it’s a vacation home," she said.
An exception, however, is when someone is buying a second or third property purely for its investment potential. "You’re not saying, ‘I really like the fireplace and the ambiance," Ms. Stribling-Kivlan said.
That same emotional remove and focus on the numbers also holds true for a few additional parties. "If you’re a developer and you’re emotional," Mr. Harris said, "that’s probably not a good start."
Same with sellers, Ms. Herman said. "Although they lived there and may have loved it, their main concern is getting the right amount of money."
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A final area in which emotions come into play—although not to the same extent as they do for primary or secondary homes—is in high-end rentals, said Mark Tunstall, the managing director of London’s high-end rental agency, Tunstall Property.
While people tend to rent on a more practical rather than emotional basis, some use a rental period to try out a neighborhood they might not consider right for the long-term, or lease a place that’s more flashy or cool than functional.
"At the same time," Mr. Tunstall said, "it’s important that they connect with the apartment in their heart, because this is where they’re going to be living."
Here’s a look at other news from around the world compiled by Mansion Global:
U.S. Housing Investors Should Set Their Sights on the South in 2017, Report Finds
Buyers looking to max out their potential investments would do well to take their search to southern states in 2017, particularly Texas and Florida. According to a joint analysis from Forbes and Local Market Monitor, Dallas topped the list of investor-friendly cities for the year, with a projected 31% average home price growth, based on population, employment, and housing data. Jacksonville, Florida, is next on the list with 30% projected growth, followed by Orlando, Florida (28% projected growth); Seattle (26% projected growth); and West Palm Beach, Florida (26% projected growth). Southern cities including Tampa, Florida; Nashville, Tennessee; Fort Worth, Texas; and Raleigh, North Carolina; continue to dominate further down the list. (Forbes)
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While Other Australian Markets Slow, Canberra Home Prices Expected to Peak in 2017
Thanks to a bustling job market, low supply, and ever-increasing demand, prices in Australia’s capital are expected to grow faster in 2017 than those in pricier spots like Sydney and Melbourne. CoreLogic data shows Canberra home prices up by 9.3% in 2016, while the Australian Bureau of Statistics indicated 5.5% growth, compared to Sydney’s 3.2% annual growth. The boom is attributed in part to a low unemployment rate and a proliferation of solid, full-time jobs in the area, compounded by limited housing supply. "Canberra’s population has been growing year-on-year," says Real Estate Institute of ACT Chief Executive Officer Ron Bell. "We simply do not have enough properties to sell." All told, CoreLogic expects nine to 10% price growth in the city over the next year. (news.com.au)
New Luxury Development in Texas Features Apocalypse-ready Shelters
Though representatives brush off the designation of "doomsday shelter," they’re also quick to tout the "DEFCON 1 preparedness" at Trident Lakes, a $300 million luxury condo development currently underway near Dallas, with move-ins slated to begin as early as 2018. The 700-acre project will include 400 subterranean, six-figure condos built from reinforced steel, and accessible to one another via an underground tunnel system. In addition to features such as a security wall, helicopter landing pad, vault for DNA storage, and off-the-grid system for food, water, and electricity, residents will find more typical amenities including a golf course, spa, gun range, equestrian center, restaurants, and shops. The developer has pledged to provide discounted options for teachers, law enforcement officials, and other civil servants in order to foster a self-sustaining community. "Our residents will enjoy a piece of paradise and peace of mind," as the project’s communications director puts it. (Business Insider)
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The Bulk of Dubai’s New Development Is Being Built in Its Southern Region
Thanks to oversaturation to the north, the majority of Dubai’s new development deliveries in 2016 were located further south, according to real estate consultants JLL. All told, 14,600 new homes came on line in Dubai in 2016, including 1,000 townhouses in Reem Community by Emaar, and 1,200 apartments in City Walk phase 1 by Meraas. Among the expected deliveries for 2017 are 3,000 units at Akoya by Damac, 2,000 units at Dubai Investments Park, 2,000 units at Dubai Silicon Oasis, and 2,000 units at Dubailand. "A significant proportion of residential units expected to be delivered in Dubai over the next couple of years is located in proximity of the Sheikh Mohammed Bin Zayed road corridor," said the head of real estate at GRMC Advisory Services. (Khaleej Times)
Average U.K. Home Prices Jumped By Close to £4,000 in December
The average price of a U.K .home reached an all-time high of £222,484 (US$271,179) in December, according to Halifax, marking a 1.7% increase for the month, and the most rapid increase since the Brexit vote. All told, Luton, an hour outside of Central London and the site of one of the city’s airports, saw the nation’s most dramatic price increase, with a 19.4% total increase in 2016. Other suburbs of London saw significant growth as well, including an 18.6% spike in Barking and Dagenham, and a 17.9% rise in Dunstable."The chronic imbalance between demand and supply is playing a big part in driving up prices," said Jonathan Hopper of Garrington PropertyFinders. Yet growth is expected to slow to between 1% to 4% by the end of 2017, and the total number of transactions in 2016 isn’t expected to be significantly different from 2015 or 2014. (The Guardian)