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Luxury real estate trends to watch in 2022, according to Sotheby's International Realty CEO

In this article:
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Sotheby's International Realty President and CEO Philip White joins Yahoo Finance Live to discuss the outlook for the luxury real estate market, inflation, and international home buyers.

Video Transcript

[MUSIC PLAYING]

KARINA MITCHELL: Welcome back to Yahoo Finance. Well, the housing market was on fire last year and thanks to low inventory and wealthy home buyers flush with cash, 2022 is set to be an even bigger year according to a new report from Sotheby's International. Here to discuss the outlook for the luxury real estate market is Philip White, Sotheby's International Realty president and CEO. Sir, thank you so much for being with us today, a real treat. You know, there's this famous line greed is good, and you say the only thing that can derail the luxury market right now is greed.

PHILIP WHITE: Well, you know, people do look at it that way. I mean, there's just great opportunity, continues to be great opportunity in the real estate business, particularly the luxury side. You know, what's interesting about the pandemic is that really the luxury side of the market led us out of the pandemic in 2020 and it's really never stopped. So the sellers are taking advantage of a really strong real estate market, yes.

ALEXIS CHRISTOFOROUS: Philip, I know mortgage rates are ticking up. In fact, they hit a two-year high this week, the 30-year mortgage now topping 3.6%. But I'm wondering if higher borrowing costs really have that much of an impact when you're talking about the high-end luxury home market and higher wage earners? What's the correlation if any?

PHILIP WHITE: Well, you know, it's kind of a double-edged sword in a way. Of course, interest rates matter significantly, they matter in terms of the upper-end market because it impacts the stock market, the equity markets. Because many of the buyers for luxury homes you know, they may not be borrowing that much money but they're tapping into their investments and borrowing against those on occasion. So it does have an impact but you know, with the higher rates due somewhat to inflationary pressures, you know, with real estate is a tangible asset, so some of that inflation actually goes into the price appreciation. So you know, it's not necessarily that big of a negative impact, particularly with these historically actually very low interest rates.

KARINA MITCHELL: And overseas investors have always looked to the US to make investments, and China has been very interested in US properties but they have clamped down on overseas properties. So I'm wondering what is the overseas outlook, how much foreign investment are you seeing, and is it coming from different areas now?

PHILIP WHITE: Well, international buyers into the United States last year were down about 27% year over year. So there was-- given the borders being shut, airline travel being curtailed, it really did impact the international buyers. However, we've seen evidence that they are coming back. This latest round of Omicron is not helping that but actually, in 2022 we really think the international buyers will be re-entering the market here in the US.

ALEXIS CHRISTOFOROUS: I'm wondering what you're hearing from clients about some of their biggest concerns? We know there were a lot of folks who want to see the repeal of that $10,000 SALT deduction cap, namely in big states like New York and California. Tell us about what some of their big concerns are right now as they head into the market.

PHILIP WHITE: Well, you know, we still hear that. You know, I don't think it's been as big an impact to the market as maybe we thought it would be. However, it has certainly encouraged people to move to the no state income tax states like Florida, Tennessee, Nevada, other places like that that don't have a state income tax. So that has really fueled that. You know, I know that the big states, California, New York, New Jersey, certainly are trying to fight the SALT and repeal that. So that would be very beneficial to the real estate market if that were to happen.

KARINA MITCHELL: Philip, so I wanted to ask you, are you seeing a lot of wealthy people come in and buy second homes maybe for a family member. And what they're doing is taking out money out of their portfolio, taking a cheap loan, paying all-cash deals, which are also helping driving up the market, and you know, they get out of paying high capital gains taxes?

PHILIP WHITE: Yes, we certainly see that. And the evidence also is that millennials are becoming a bigger part of the real estate market. We've been waiting for them to enter the market. There were about 5-- 4.8 million millennials that turned 30 in 2021. So we really are starting to see much more activity from that group of buyers. So yes, we are seeing families actually buying properties near one another. So there's a lot of activity in that respect.