Many commentators are conflicted when it comes to making a definitive statement on the recovery of the economy. Although many financial markets seem to be recovering and stabilising after the pandemic, there are high rates of inflation and a cost of living crisis. This can make knowing when to invest in property and where to invest your money difficult, as the economy is still quite unpredictable. This has resulted in many property developers holding back on their projects, cancelling housing development projects, and even leaving property development – but there are certain types of property development that are still thriving.
There are many different sectors within property development that have been described as ‘recession-resilient.’ Some of the most popular types of these sectors are affordable housing, student property and luxury homes. However, student housing can be very competitive and can come with a lot of risks, and affordable housing is also competitive. Many property developers are investing in luxury homes and housing, as it is the sector with the most positives in many aspects. There are many benefits that come when developing luxury property that can’t be seen as much as in other sectors. But is luxury property development the right choice for you?
What is Luxury Property Development?
Luxury property development is like any other type of property development, including building new property or renovating existing homes and enhancing their value – except it usually only involves the top 10% of property on the market. Luxury apartments in big cities and large homes are usually some of the most popular types of luxury housing, often in desirable areas and constructed with high-end materials.
This means that more work and effort will usually take a lot more time and money when it comes to the design, planning, and development. Many people shy away from luxury property development for this reason, however, the return on luxury property development can be well worth it.
As you can imagine, the market for luxury property is usually aimed at individuals with a high net worth, usually in the top 10% of earners. This means common strategies you may use to market other types of property may not work, and you may need to change your sales plan. Aspects of property development that may work in different forms of property development may not always work in the luxury property market.
What Are the Benefits?
There could potentially be a lot of benefits when it comes to luxury property development. One of the primary benefits of luxury property development is that there is no upper limit on the sales price like there is in other sectors. For example, in affordable housing and student housing, there will be a limit on how much you can charge as your target audience will have limited funds. Although these sectors have been described as ‘recession-resilient,’ there is a cap on how much you can make, unlike luxury housing.
Luxury housing, as aforementioned, also tends to survive times of economic hardship. This means long term, your investment is less likely to be affected if the economy takes a sudden dark turn, like what happened to the property market during the pandemic of 2020. Because of the nature of your target market, they are less likely to be priced out by a rising market, as everyday affordability doesn’t really factor in. If you’re in the market to buy a home that is worth $10 million, a market changing slightly won’t make that much of a difference. This makes luxury property development one of the most economically water-tight choices within the property development sector.
Are There Any Negatives?
With any type of property development, there are potential pitfalls and things you may need to think about when it comes to considering luxury property development. For example, some of the things that could be beneficial could also have downsides. The fact that luxury property development is unaffected by market changes as it is marketed at the top 10% of earners is great – however, there could also be some pitfalls to this. Wealthy buyers aren’t rushing to buy somewhere, so you need to make sure your luxury property stands out. Rich people don’t stay rich for long if they waste their money – so you need to make sure that your property development is displaying ‘the best of the best.’ Potential buyers of luxury housing need to be able to see the value in the property, so it’s important that you get it right.
Furthermore, while this may seem obvious, many people forget about this. Luxury property development can yield a higher return, but it also requires a larger investment. There could be many hidden costs that you may need to think about, so make sure that you are prepared for this if you venture into luxury property development.
What Do You Need To Think About?
There are many things that you need to think about when it comes to developing luxury property and making a sale. For example, before you begin you need to do your research. Finding expert builders, experienced luxury living architects and a fantastic project manager are crucial to your venture going smoothly. Sourcing great materials is also a key part of developing prime property that will quickly sell to the top 10% of earners.
There are also many job roles that are essential in luxury property development that you may not have considered. For example, interior designers who are well-versed in dressing and staging luxury homes for the market are a key part of successful luxury property development. Ideally, they will have experience in staging luxury homes and finding luxury homeware that will suit your property perfectly. This is very important for the market, as high earners will need to be able to envision the value of your property, and good interior design can make your property more attractive.
Marketing luxury property can often differ from marketing other property – the top 10% of earners won’t be looking in the windows of estate agents and on budget property websites. Consulting someone who is well-versed in marketing luxury property and where to target will allow your target market to find your homes much better.
Should You Consider Luxury Property Development?
Although developing luxury property can come with a larger investment, larger risk and more work, it could possibly be well worth it. The luxury property market can possibly make you a lot of money, survive through times of economic hardship and allow you to have more creative control over your development. Make sure you do your research and create an extensive development plan and be realistic about your financial investment possibilities to limit any risks.
Image by Pexels.com