By Patrick Clark
(Bloomberg) --A new generation of affluent homebuyers powered by a surge in inherited wealth is driving the luxury-home market, demanding larger spaces and fancier finishes, according to a report heralding “the rise of the new aristocracy.”
Prospective homebuyers under 50 account for most of those shopping for homes priced at $1 million or more, according to the report. Nearly a quarter of high-net-worth consumers between 25 and 49 said they would look for at least 20,000 square feet when they made their next home purchase; it was just 6 percent for respondents 50 or older. The report is based on a survey of more than 500 consumers with at least $1 million in investable assets, conducted last month on behalf of Luxury Portfolio International, a network of real estate brokerages.
Other home features deemed “essential” by a large share of these new aristocrats include hot tubs, at 45 percent; commercial-grade kitchen appliances, at 52 percent; and multiple-view security cameras, at 54 percent. Proximity to good restaurants was the most important community amenity in the survey results -- followed by proximity to family.
Three of five respondents under 50 said they expect to inherit at least $1 million, with an average inheritance of $3.8 million. Thanks to a tax provision passed under George W. Bush, a lot of that wealth is available sooner to today’s heirs. More than 171,000 families gave gifts of at least $1 million between 2011 and 2014, according to the report, a giant leap from about 7,600 families who made $1 million gifts between 2007 and 2010. Another boost will come from the new tax law, which cuts taxes on the rich, and a booming stock market that is translating into demand for luxury homes.
The U.S. housing market has already responded to the demand for larger homes. In the years following the foreclosure crisis, builders focused on erecting larger, higher-end houses and condominiums, exacerbating a shortage of homes that entry-level buyers could afford. Median homes sizes have pulled back slightly since a peak in 2015, but today’s new homes are still nearly 50 percent larger than when the U.S. Census Bureau started keeping track in the late 1970s.
To contact the reporter on this story: Patrick Clark in New York at [email protected] To contact the editors responsible for this story: Daniel Taub at [email protected] Peter Jeffrey