Crypto has caught the eye of affluent and wealthy investors
Finances of the Luxury Home Buyer, the latest report from Luxury Portfolio International (LPI), has found that crypto currency, of which Bitcoin is the most recognized, is becoming an increasingly popular commodity for affluent global households, now just three points behind gold in a survey of over 3,000 global respondents.
Fifty-seven-percent (57%) of luxury home buyers, and the overall affluent, questioned believe that now is a good time to invest in a safety net – with 41% citing gold and 38% cryptocurrency as their preference. In fact, the probability that the two are considered ‘Buys’ in tandem outstrips gold alone (78% vs. 41% likelihood of a Buy sentiment).
The flurry of positive ‘Buy’ opinion around cryptocurrency stems mainly from consumers in the United States and the United Kingdom, although earlier this month El Salvador became the first country to make it a legal currency.
The interest in crypto currency was among a number of interesting findings, which included the following:
- Luxury Home Buyers are prepared to out-bid other buyers for fine property and residences, thanks in large part to enormous cash reserves and record returns on investment over the past 18 months. As a group, they are extremely confident in their financial situation despite the uncertainty surrounding new strains of the COVID-19 coronavirus.
- Ultra-high-net-worth individuals ($50 million or more in net worth) have increased in number by 73% since 2015 and are conservatively estimated to have consolidated another $4.5 trillion in assets to the class. The number of ultra-high-net-worth individuals added in just one year is 47,000, based on data from Credit Suisse Global Wealth Report 2021.
- There is a 94% probability that a luxury home buyer is already a luxury homeowner (primary residence has estimated value of USD $1 million or more), meaning that current luxury homeownership is a more accurate predictor of future luxury home buying than net-worth only (Luxury Home Buyers’ median-net-worth is estimated at USD $4.5 million).
- Cash is still king, as nearly six in 10 (58%) are funding their luxury home purchase with cash on hand, including 25% who are planning to make all-cash offers.
- Reselling of luxury goods continue at a torrid pace in 2021 and Luxury Home Buyers are taking part in an unusual way. The study revealed that by turning over their excess products, buyers are planning to use the proceeds to outfit their home gym, rec equipment and even art for display. Further into this area, researchers checked in with the experts at TheRealReal.com, the online luxury reseller platform, who noted in their 2020 Resale Report a 26% increase in spending quarter-on-quarter for home items versus apparel, and the fastest-growing category is art consignment.
- There is a trend toward reduced consumption to offset the significant purchase of luxury real estate. One in five buyers plan to delay purchasing in other discretionary categories to free up their cash flow. These buyers have two primary outlets – their work and their passions. To that end, finding properties that blend their access to restorative activities with their demanding work life is a boon.
- The study revealed that the combination of increased wealth during the pandemic through prudent investing, coupled with curbed spending on dining out, travel, and apparel, has built-up a substantial pool of cash and consequently, pent up demand for products and services
Mickey Alam Khan, president of LPI commented: “The booming affluent economy continues to impress and amaze, as the volume of ultra-high-net-worth individuals continues to surge. These individuals are leaders and innovators in all facets of the financial arena, among them the concept of cryptocurrencies such as Bitcoin, the study revealed. While Blockchain and smart currency are still in their infancy in the real estate universe, there are some cases of developers and vendors accepting crypto currencies for payment, but this is of course a niche at present. That said, forward-looking tech-savvy economies such as Dubai (in which there is extraordinary wealth) are leading the charge and may indeed help establish standards in the future. While real estate brokers and developers working with such new technology is a long way from becoming the norm in real estate acquisition, nonetheless the die is cast, even in this arena.”
To access the report, go to: https://www.luxuryportfolio.com/reports
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