After the past few years’ frenzied market, we’re hitting more of a buyer-seller equilibrium, with inventory levels moving up ever so slightly, buyers getting used to a new normal of interest rates, prices generally holding steady, and high-end home seekers expanding their reaches to more parts of the globe.
There are lots of changes happening, and we explore them in depth—everything from the newest tech tools currently disrupting the real estate market, from artificial intelligence to smart-home technology, to pinpointing the parts of the world where tax incentives are increasingly enticing wealthy citizens.
We look at emerging markets such as Saudi Arabia and Mexico City, as well as the tried-and-true high-net-worth enclaves such as New York and Miami. We explore the strength of these markets, the effects of fluctuating currencies there, and much more.
We also look at the growing importance of sustainability and climate resilience to home builders and buyers, how hybrid work has shifted the world’s real estate needs, and how provenance can help homes sell.
This is a difficult time when it comes to geopolitical challenges, with several conflicts raging around the world at once. That makes it difficult to predict what the future will bring, and whether an intensification of conflict could affect financial markets.
For now, there continues to be economic uncertainty into 2024, despite some sporadic positive news. In the U.S., for one, economic growth accelerated in the fourth quarter of 2023, according to the Commerce Department.
While many experts are torn about the effects the conflicts are likely to have from a financial perspective, many market watchers predict an overall positive 2024 for the real estate market. As Sotheby’s International Realty CEO Philip A. White Jr. points out in his interview, Freddie Mac is forecasting prices rising by 0.8% between August 2023 and August 2024, followed by another 0.9% gain in the following 12 months, pointing to “tremendous” demand for houses relative to supply, continuing “to keep upward pressure on prices.”
For now, at least, most of the worries about the real estate market stalling due to rising interest rates haven’t come to fruition, with demand strong, as people move both because they’re going through major life events—such as new children and new jobs—or simply because they want to upgrade their homes and, with it, their lifestyle.
Speaking of the lifestyle factor, as always, we explore the high-end purchases people are making outside the real estate realm, including art, collectibles, and more.
We know that luxury buyers and sellers want to spend wisely, and staying well-informed is just the way to do it.
What was the big real estate story of 2023, and what do you think that tells us about 2024?
The story of 2023 was about the postpandemic real estate market adjusting to slightly higher inventory levels and ever-increasing interest rates—a bit of a market reset. The demand was there if the frenzy wasn’t.
But we still saw some very big-ticket sales in 2023. For example, we sold a waterfront estate in Greenwich, Connecticut, for US$138.83 million, the most expensive residential property ever sold in the state, and we set a record in Washington, D.C., for the Bouvier compound, for US$52 million. We also sold a Palm Beach, Florida, teardown for US$50 million, and we had a lot of sales in the US$30 million–range in San Francisco, California, and Manhattan. And the strength at the upper end is not just in the U.S.; we sold the most expensive property in Dubai for over US$100 million. In September in Sydney, a trophy property in the Bellevue Hill suburb sold for A$40 million.
We may not be seeing as many bidding wars, but standout properties in desirable areas still tend to sell, and at a premium, too.
I’ve always said that the high-end leads us out of an economic downturn, and that’s what we see now. I see it continuing into the new year.
Large sales seem to be happening in the auction world, too.
These real estate transactions correlate with the fine art and luxury categories, too. We recently saw Princess Diana’s sweater sell for US$1.1 million and Sotheby’s had a [Queen frontman] Freddie Mercury exhibition in London with 140,000 visitors.
What are your thoughts on the effect of still-increasing interest rates? How is that affecting both demand and inventory?
Rates are likely to stay higher for a while longer. At first the higher prices meant homeowners took pause before moving unless they had to, because they didn’t want to part with their 3% rates (remember, many people refinanced over the past few years)—that has created a bit of a lockdown effect.
At this point, though, many consumers are becoming accustomed to new interest rates and making moves when they see a property they really want, or when they have to. There are always going to be the primary life changes/motivations that cause people to move—marriage, divorce, downsizing, retirement.
Are the same locations — Florida in the U.S., for example — seeing increased interest internationally and from people coming in from other states?
Overall we’re seeing that, around the world, areas with tax advantages are becoming increasingly attractive to the affluent. They’re expanding their scope as long as it makes financial sense to do so.
And some areas, like Florida, as you mention, have such tight inventory that people are expanding their searches to new areas within the state. For example, there’s not much inventory in Palm Beach, Florida, so people look further to Jupiter or West Palm Beach. West Palm Beach, for one, is a hot market, with a lot of new towers, which you couldn’t build in Palm Beach. We opened an office in Wellington, Florida, too, where people look for equestrian properties. People increasingly want properties that feature access to amenities like golf and horseback riding.
Sotheby's International Realty is always expanding its reach. What's on the docket?
We’ve recently expanded in London, opening a new space that’s right behind the Sotheby’s auction house. We also opened 64 new offices in 2023, and we recruited top agents around the world to ensure that our clients receive the same consistent service, no matter where in the world they are transacting.
Sotheby’s Concierge Auctions is a growing part of the business and there were a lot of exciting developments there in 2023. We sold a Malibu spec home for US$26.5 million, and in October 2023, we held the Sotheby’s Concierge Auctions’ Exceptional Global Properties auction, honoring Sotheby’s 50th anniversary and marking the first-ever exhibition of real estate to gavel live in Asia.
During your tenure at the helm of Sotheby's International Realty, what have been some of the most significant and long-lasting changes you've witnessed?
The world has gotten smaller, with feeder markets expanding all over the globe. I never thought we’d be in 83 countries, but our international market is more relevant than ever.
And, of course, there’s the digital transformation we’ve seen. Our agents have had to embrace so many new technologies, from the early days of the internet to virtual showings to artificial intelligence.
Those who embrace it, and see the opportunities new technologies offer, do well.
What are you most excited about in 2024?
There’s a lot of excitement at the high end of the market. Demand remains high despite those higher mortgage rates, which also don’t tend to affect the high-end market as much as the rest of the market.
Many forecasts for 2024 are positive. Freddie Mac is forecasting prices rising by 0.8% between August 2023 and August 2024, followed by another 0.9% gain in the following 12 months, pointing to “tremendous” demand for houses relative to supply, continuing “to keep upward pressure on prices.” In October 2023, Fannie Mae said that in 2024 they expect “purchase volumes to grow 10% to US$1.4 trillion, an upgrade of US$7 billion from [September’s] forecast, as our stronger home-price expectation outweighs minor downward revisions to the sales forecast.”
We’re hopeful that everything we’ve done to expand the business and cement our strength around the world will lead to a strong 2024 and beyond.
