How The Pandemic Changed Where The Rich Live, And Boosted Markets In These Cities
Global wealth boomed during the pandemic, as did the number of wealthy. A new study shows that the number of individuals worth over $30 million jumped by nearly 10% last year, driving one of the largest demands for prime real estate ever witnessed.
Knight Frank’s Prime International Residential Index (PIRI), which tracks the value of the world’s 100 most expensive houses, increased by 8.4% in 2021, up from just under 2% in 2020 and the highest annual increase since the index was launched in 2008.
“Of the 100 luxury residential markets tracked, only seven saw prices decline in 2021 while a staggering 35% of locations saw them increase by 10% or more,” says the Knight Frank Wealth Report, published on Tuesday (1 March).
Initially this was driven by the demand for second homes. There are now more than 200,000 second homes around the world that belong to the wealthy. But that behavior is now changing: “The use of second homes for longer periods was supercharged in 2021 as flexible working grew and homeowners looked to decamp for several weeks,” says the report.
Second homes have become first homes as “digital nomad” visas encouraged global mobility. And those homes then had to be upgraded as their owners sought more space during the pandemic.
This behavior sent real estate prices spiraling in the most sought after towns and cities. One of the five highest performing prime real estate markets in 2021 is the US, specifically San Diego…
San Diego And The U.S.
The U.S. had the highest growth in the number of new UHNWIs last year. By the end of 2021, there were around 23,000 more individuals worth $30 million than at the beginning of the year, a growth of 13%.
Thanks to this soaring wealth, prime real estate markets boomed across the U.S. In country terms, the U.S. tops Knight Frank’s PIRI for 2021. There were, however, some parts of the country that did better than others.
San Diego ranked first in the U.S. and third globally on Knight Frank’s PIRI index in terms of prime real estate price increases, with a 28.3% surge.
“The inventory is at an all time low. It’s at 15% of what it was last year, it might even be lower than that,” says Jennifer J. Janzen , partner at Brizolis Janzen & Associates. This, combined with buyers coming from Los Angeles, San Francisco Bay Area, and even areas like Seattle and Portland, has driven the market upwards.
“Metropolitan buyers come in and they've got incredible budgets. And they're basically paying whatever price to get into these homes because they want to be here now,” says Janzen.