Who among us has not drooled over the gorgeous homes that line some of Hawaii’s prime communities? Photo spreads of these unique and otherworldly tropical castles fill local and national magazines, and a pang of envy is likely to mingle with our admiration. Open Houses lure us for a close up view, to feel the gleaming wood trim and cool marble counters and floors.
Luxury real estate has always been a beautiful part of the Hawaii real estate landscape. Not so long ago, Hawaii boasted the highest average real estate prices in the nation. Other states have since outpaced Hawaii for having the highest-priced homes, and the Islands remain a very popular place for wealthy individuals to live, invest, and enjoy the good life.
Even if you are not among them, it is gratifying to know that people who could live anywhere in the world choose to live here in Hawaii for at least part of the year. Not only are they spending big bucks on their homes, but they are also contributing to the economy in other ways. They renovate and furnish their homes, purchase cars, support the arts, and pay lots of taxes. Let’s look at the trend of growing wealth around the country and here in the Islands and especially the luxury homes where they choose to live.
A Million Multi-Millionaires
In the nation as a whole, there are now more than a million households with a net worth of $5 million dollars or more (not including the value of primary residences), according to an April report released by the Chicago-based Spectrum Group, “Affluent Market Insights 2007.” The number of Ultra High Net Worth individuals (those with a net worth of $5 million or more, excluding primary residences) grew 23% in 2006, representing the fastest growing sector of the luxury market. These numbers echo trends seen elsewhere indicating that while the rich are getting richer, it’s the ultra-affluent who are experiencing the greatest increase in wealth. According to the 2006 Forbes list of the Top 400 Richest Americans, each of the 400 individuals has a net worth of at least $1 billion dollars, a first since the company began compiling the list.
There are also now more than 9 million Millionaire households in the U.S. (those with a net worth of $1 million dollars or more, excluding primary residences), an 8% increase from 2005 to 2006. And during the same timeframe, the number of Affluent households in the United States (defined as those with a net worth of $500,000 dollars or more, excluding primary residences) rose 9% to a record 15 million-plus.
Where do they Live?
Market research indicates that while California has the greatest number of millionaires residents, Hawaii’s millionaires are the wealthiest in the nation, according to Laurie Moore-Moore, founder of the Institute for Luxury Home Marketing. Here in Hawaii, the MLS System resale statistics indicate that there have already been 89 homes that sold for two million dollars or more in the Honolulu/Oahu area of Hawaii, as of late September 2007. The wealthiest zip code in Hawaii is East Honolulu’s 96821, in case you wondered, which includes Waialae Iki, and Hawaii Loa Ridge.
The Luxury Home Market is Strong
Increasing wealth drives luxury home market. Luxury real estate does not follow the pattern of the rest of the market. The highest priced real estate continues to chart its own course, particularly where multi-million dollar homes are concerned, and has a capacity for greater resiliency in the face of economic fluctuations.
Owners of such properties are not generally forced to sell. They have holding power, and they are willing take their time getting the price they want. They can ride out a difficult market. Buyers who can afford these homes are very savvy, but will often pay a premium to get what they want. Indeed, according to Forbes Magazine, two of the three most expensive properties in the world—a chateau in England neighboring Windsor Castle, and Donald Trump’s re-vamped Maison de L’Amitié in Palm Beach, Florida—have been vacant for two years. The owners have the resources to wait for the market conditions they desire. For some, luxurious estates are second homes, investments, or simply discretionary purchases.
World Record Sale
The recent record sale of a 20,000 square foot London penthouse overlooking Hyde Park for about $200 million to Sheikh Hamad of Qatar and the sale of a custom home lot in New York’s Hamptons for $103 million are evidence that the super rich see trophy homes as smart investments that also make a statement and enhance one’s lifestyle.
$155 Million Estate Tops US List
A “spec home” still under construction in Big Sky, Montana tops the list of the 1000 most expensive homes currently on the market in the U.S., according to the just-released Unique Homes magazine's special issue, Ultimate Homes, 2007. Built by Yellowstone Club developer Tim Blixseth, the “Pinnacle” home sits on 160 acres and comes with four 4,000-square-foot guest houses, security and staff quarters, a retractable helipad (with helicopter and pilot lounge), and an underground garage stocked with a fleet of Suburbans. “The jump from last year’s top listing, priced at $125 million, to this year’s $155 million price tag is an indication that the uber-rich are still buying and selling despite the vagaries of the real estate market in general,” said Laurie Moore-Moore, Founder and CEO of The Institute for Luxury Home Marketing.
“At a time when the newswires are filled with stories of sub-prime lending crises and real estate gloom, we’ve simultaneously seen listings for $100 million-dollar homes hit the market, a history-making event in residential real estate,” said Moore-Moore. On the Hawaiian island of Oahu, the higher-priced properties are showing enduring strength in the market. Some of the priciest neighborhoods continue to show appreciation including Diamond Head at 5.4% price appreciation since last year at this time, and Waialae –Kahala at 3.7 percent increase over last year. Don’t hold your breath and expect the market to fall out anytime soon.
Who Are They?
Are the rich really very different than you and I? Judge for yourself. New research by the Institute for Luxury Home Marketing and Unique Homes magazine revealed some interesting facts about households which own at least one home valued at $2.5 million or more. Here are some of the findings:
- Most are married
- Nearly three out of four are age 55 or younger
- Most made their own fortunes
- Most were born in the U.S. but 14% were born abroad
- A few own residences abroad 8%
- 81% are top corporate executives, self-employed, professionals or business owners
- Half report annual earnings of $1,000,000 or more
- Most are golfers 71%
- More than half are paying a child or grandchild's private school tuition
- Most attend theatre, ballet or opera 71%
- Play tennis or racquet sports 40%
- 70% own more than one personal residence
- 27% own three or more homes
- 36% own other residential real estate as investments
- 97% use a real estate agent
You just found out that you have much in common with these individuals! Their homes are possibly another matter ...
Homes of the Wealthy
When you have it all, you need a place to put it all. The Picassos need suitable wall space, there are yachts to dock, and you don’t want to park the Rolls just anywhere. Bigger is better, and only the best will suffice.
The wealthy are buying multiple homes. North American vacation and second home sales are out performing the market overall and the number of trophy properties offered in the double and triple digit millions continues to grow both in the US and abroad.
Some of the features that are most in demand in ultra-luxury homes are not too surprising:
- Home Theaters
- Staff quarters
- More than 4 bedroooms
- Outdoor kitchens
- Separate catering kitchens
- Home gyms
- Pools, with pool houses or cabanas
- Waterfront or water views
- Gated communities
- Garages for 3 or more cars
Wealth Growing Globally
Growing wealth is a global phenomenon. Strong and stable economies, good news on Wall Street, and a global commodities boom helped grow fortunes and sparked a surge of demand for trophy homes in 2006. The wealthy are citizens of the world, and the demand for über homes from Dubai to London and from New York City to Honolulu is not likely to slow down.
Thanks to Laurie Moore-Moore of the institute for Luxury Home Marketing for allowing me to utilize the Institute’s research for this column and paraphrase their press releases. The Institute for Luxury Home Marketing specializes in research on the luxury properties and on training and certifying real estate professionals around the world in the art of handling exceptional properties. More information can be found at www.clhms.org.
As a Certified Luxury Home Marketing Specialist, Stephanie Gieseler has completed the education and experience required to handle the unique needs of luxury home sellers and buyers.
