May 16, 2018 / Market Insights

Victoria, BC, & Santa Fe, NM: The World's “Hottest” Prime Property Markets in 2017

Evaluating both demand from affluent buyers for high-end homes as well as growth in luxury real estate sales, the Luxury Thermometer offers an annual ranking of the “hottest” prime property markets worldwide

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Every year, Luxury Defined highlights the influence of social and economic trends on the global luxury real estate market and works to illustrate their impact on luxury housing. Evaluating growth and demand, the Luxury Thermometer has historically been a single ranking of the world’s ten “hottest” luxury housing markets. This year, the Christie's International Real Estate Luxury Thermometer will take a new approach to gauging the hottest luxury housing markets.

Related: Toronto Reclaims the Top Spot as the World’s “Hottest” Market in 2016

Unlike other prime property indicators, the Luxury Thermometer weighs annual changes in days on market and luxury home sales more heavily than year-on-year price shifts. Sales volumes—as numerous studies have proven—are the most reliable predictor of a housing market’s future market health and price increases, barring changes in market fundamentals.

The Thermometer’s emphasis on sales volumes and selling time however, proves challenging when compared across different types of housing markets—sales activity in St. Barths, for example, will never rival the volume in Sydney or San Diego; market conditions for large Asian cities are not necessarily comparative to the market influences of the Bahamas. Consequently, in this year’s Luxury Thermometer we have split the rankings into two categories: primary luxury housing markets and second-home luxury markets, to present a more accurate relative comparison between markets.

"The luxury market remains strong as Victoria offers a rare combination of clean, sea-swept air and outdoor beauty, year-round walking and golfing, an interesting culture and a calm gentility," — Marc Owen-Flood, Newport Realty

‘Hottest’ Primary Housing Markets

As was the case in 2015 and 2016, Victoria in British Columbia ranks one of the hottest luxury markets in the world in 2017. Powered by strong domestic demand and an increase in buyers from the United States and China, Victoria is experiencing the same rapid growth in housing prices and sales volumes that have strengthened Toronto and Vancouver in recent years.

Like Vancouver, the Victoria market has reached a point where additional government cooling measures—taxing foreign buyers, limiting speculative buyers, and adding transparency rules could lead to a cooling in 2018. However, if Toronto and Vancouver can be a measure, it is likely Victoria will continue to perform well despite these regulations. In 2017, the average time to sell a luxury property was only 32 days, down from 41 days in 2016this is among the fastest selling turnover for markets surveyed.

Foreign buyers continue to drive many of the primary luxury markets along the Pacific Rim—in 2016, six of the ten top 'hottest' luxury housing markets in our Luxury Thermometer were on the Pacific coast. This year, three of our five top ranking primary markets follow this trend.

Victoria, British ColumbiaRancho Santa Fe, California

Two Californian markets—San Diego and Orange County—ranked second and third respectively on our list. Luxury home sales in San Diego grew by 26% year-on-year as property prices remained attractive relative to other top luxury neighborhoods in the region. Says Andy Nelson of Willis Allen Real Estate: "What a bargain San Diego's luxury home market provides! San Diego has a great center city, an internationally well-known village named La Jolla and one of the United States' most affluent communities, Rancho Santa Fe...all with fabulous weather. Quality luxury properties with ocean views, contemporary interiors, lush gardens and more are marketed at $1,000 - $1,200 a foot—a fantastic value!" 

Further north in Orange County, luxury property sales posted strong gains and the average time to sell a luxury property declined by 29% annually. Michael Mahon of First Team Real Estate anticipates that prime property prices will remain "fairly flat, due to economic changes involving recent federal tax changes. Area demand pertaining to job growth, as well as international interest, will drive overall luxury sales volume above 2017 in unit sales volume."

Placing fourth on this year's list is Washington D.C., which featured on our "Markets to Watch" list in last year's Luxury Defined white paper. "Washington, D.C., is attracting a growing number of professionals in medical, tech and government-related fields, and demand for luxury housing is strong," said Jeffrey S. Detwiler of The Long & Foster Companies. "Limited inventory is causing a slight drag on sales compared to a year ago, but luxury real estate in the nation’s capital continues to be a solid investment.”

Paris is the only European market in our Luxury Thermometer this year. The city continues to see new buyers from the UK and other parts of Europe because of recent instability, as well as renewed domestic demand, especially since the election of President Macron. Paris saw a 7.9% increase in luxury real estate prices and strong sales volume growth. "It’s as if a wind of newly-found confidence has swept over the apprehension and pessimism that dominated the last few years, a trend seen among both domestic and international clientele,” says Charles-Marie Jottras of Daniel Féau Conseil Immobilier, noting that his firm closed over 50 sales for €4 million-plus in 2017, more than double the prior year.

 

‘Hottest’ Second-Home Markets

Sitting atop this year's list is Santa Fe, New Mexico, with luxury sales volumes not seen since pre-global financial crisis levels. The "City Different's" luxury property market lagged after the 2008 recession and is finally catching up notes David Barker of Barker Real Estate: “Santa Fe’s luxury market has been one of the slower markets to improve but we are finally seeing some solid gains."

“Luxury sales continued marching up the ladder with an 18% increase in 2017 sales over 2016," adds Barker. "We see no change in this trend in 2018 as Santa Fe continues to rate highly in buyers’ minds.” Known to have an excellent quality of life and relative affordability, Santa Fe is seeing a surge of new luxury homebuyers creating inventory shortages throughout the city.

"Santa Fe’s luxury market has been one of the slower markets to improve but we are finally seeing solid gains" — David Barker, Barker Real Estate

Santa Fe, New MexicoPort Carling, Ontario

Despite record low inventory, Ontario’s ‘weekender’ market of Muskoka ranks second on the list, buoyed by an influx of affluent ‘lifestyle arbitrage’ baby boomer buyers from Toronto. Luxury waterfront property prices in Muskoka rose by 13% in 2017 and the average time to sell a home in the area decreased from 75 at year-end 2016 to 59 days at year-end 2017. 

For the Muskoka market in 2018, The major concerns will be available inventory, unduly high seller expectations, and although remote, government intervention," says Chris Kapches of Chestnut Park Real Estate "On the positive side, the Canadian (and world economies) are poised for sustained growth in 2018, although weaker than 2017. Economic growth and prosperity have historically been the main drivers of cottage and recreational property sales. Hopefully there will be sufficient inventory that does become available to meet buyer demand, and that inventory is for sustained reasonably priced.” 

Ranking third on our list of hottest second-home markets is Sarasota, Florida, where luxury property sales soared by 30% year-on-year. “Sarasota has long been the destination of choice for our white sandy beaches, unrivaled cultural amenities and outstanding lifestyle options," says Michael Saunders of Michael Saunders & Associates. "Developers recognized the pent-up demand for luxury bayfront living and have been delivering a variety of condominium communities to our vibrant, urban scene. Baby boomers are leaving the cold weather and choosing to make our slice of the Gulf coast their permanent residence due to the high quality of life and our amazing value compared to other waterfront destinations. The low Florida tax rate is also a driver in motivating buyers of all ages to move sooner rather than later. All of these factors have helped to position Sarasota real estate at the top of the list, offering the most exquisite waterfront living at attractive prices."

[ Excerpt from Christie's International Real Estate's 2018 Luxury Defined white paper on the international prime property market. Read more insights from the latest report here ]

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Monique Sofo
Christie's International Real Estate

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