Following a period of high interest rates, global elections and fluctuating economic markers in 2024, the luxury housing market is showing impressive adaptability to face the year ahead, says Philip A. White Jr., president and CEO, Sotheby’s International Realty. “Despite economic uncertainties and global geopolitical shifts, the luxury real estate sector has demonstrated remarkable resilience historically,” says White. “Our most discerning investors and high-net-worth individuals [HNWIs] continue to exhibit unwavering confidence in premium properties, evidenced by Bank of America Private Bank’s findings [in June 2024], which showed that these buyers dedicate up to 32% of their investment portfolios to real estate holdings. This substantial allocation underscores the prestige and value of exceptional properties. Additionally, limited inventory in prime locations continues to drive appreciation, reflecting the market’s sustained vigor and competitive spirit.”

The luxury end of the housing market has performed well above the non-luxury market in recent years, according to an April 2024 report by J.P. Morgan Private Bank, based on data from Miller Samuel, the National Association of REALTORS® (NAR) and Haver Analytics. The report found that luxury home prices increased 65% from the fourth quarter of 2019 to the fourth quarter of 2023, compared with a 40% gain in the non-luxury market. And according to the 2025 Emerging Trends in Real Estate report issued by PricewaterhouseCoopers in October 2024, “We are on the cusp of the next upturn in the real estate cycle, and now is the time to be thinking about planning, laying the groundwork for the next two to three years of growth.”

This upward cycle can already be seen in the significant luxury sales and listing achievements made in 2024, White says. Sotheby’s International Realty witnessed unprecedented sales across several key markets last year.

For example, White adds, the Florida Panhandle set a new record for the area with a US$28.5 million beachfront property sale brokered by Scenic Sotheby’s International Realty. Internationally, in Dubai, a new high was set when Dubai Sotheby’s International Realty and Saudi Arabia Sotheby’s International Realty partnered to sell a villa for US$65.5 million, the most expensive ever sold on Jumeirah Bay Island, Dubai. In New Zealand, the NZ$21.8 million (US$2.9 million) sale of a home in March 2024 set a national record for the year. Puerto Rico Sotheby’s International Realty achieved US$13.4 million in September 2024 for a triplex home in San Juan, Puerto Rico, for the first time ever.

“We also saw luxury properties list at record prices, including the historic Hitchcock Estate in New York’s Hudson Valley, listed by Heather Croner Real Estate Sotheby’s International Realty at US$65 million, making it the most expensive home for sale in the area, and a record-breaking US$12 million mansion in the state of South Carolina, represented by Herlong Sotheby’s International Realty, underscoring the strong demand for premium real estate and reflecting just how much buyers value these one-of-a-kind homes,” White says.

Moreover, the trend of record-breaking prices continued across various regions. “Sotheby’s International Realty - San Francisco Brokerage listed a US$32 million home in June 2024, making it the city’s most expensive home for sale,” White adds. “Additionally, we continued to see impressive transactions achieved in smaller markets such as in North Carolina, where Premier Sotheby’s International Realty set a new record for the state with the sale of a US$15.85 million home in October 2024. Prominent Properties Sotheby’s International Realty in New Jersey also achieved a US$16.7 million sale in July 2024, the state’s priciest sale of the year, and TTR Sotheby's International Realty broke the record for priciest home sale ever in Washington, D.C. at US$25M, secured just after the U.S. election, indicating that luxury buyers are still actively seeking exceptional properties across a range of locations.”

Despite economic fluctuations, the luxury segment remains vibrant, with noteworthy activity continuing throughout the year around the world. “Our strategic expansion into new markets such as Anguilla and Poland has broadened our global reach and influence, enhancing our ability to serve our clients better wherever they are in the world,” White says.

In the luxury realm, the performance of financial markets is a key driver of home sales, says White. “HNWIs often make real estate decisions based on the stock market, as fluctuations may influence their desire to invest in luxury properties,” he says. “While overall economic growth and geopolitical stability also play roles, luxury buyers and sellers closely monitor market trends to gauge the right timing and opportunities for their investments.”

While forecasts vary, most analysts anticipate growth in the S&P 500 in 2025, with UBS predicting a 10% gain in that index next year, according to its November 2024 report. Inflation in the U.S. had somewhat stabilized, reaching 2.4% in September 2024, according to the Bureau of Labor Statistics, but economists interviewed by Bloomberg in December 2024 predicted this could rise to 2.5% in 2025 rather than continue downward. The U.S. labor market, meanwhile, is resilient and consumer spending is anticipated to rise.

In its December 2024 United States Economic Forecast, financial consultants Deloitte predicted housing prices would rise by 4.8% by the end of 2024, with growth expected to slow to 2.9% in 2025, before rising again towards 2026.

Interest rates have a less pronounced impact on the luxury housing market, in part because many buyers prefer to pay cash, which mitigates the influence of fluctuating interest rates on their purchasing decisions, White adds. According to the 2025 Sotheby’s International Realty agent survey, nearly half of polled agents said that 75% or more of their buyers were paying in cash in 2024.

Beyond financial considerations, lifestyle factors play an important role in luxury buyer dynamics. “The strong desire for high-quality, unique properties that enhance one’s lifestyle remains,” White says. “Buyers continue to seek homes that align with their personal aspirations and values.” Trends such as hybrid working, heightened demand for wellness amenities, and sustainability are shaping the luxury housing market and influencing buyers’ decisions.

Set amid lush tropical vegetation on nearly two acres of landscaped lands is this bespoke, luxury beachfront retreat at The St. Regis Bahia Beach Resort in Puerto Rico.

Puerto Rico Sotheby’s International Realty

Cash is king.

Source: 2025 Sotheby’s International Realty agent survey.

45%

of Sotheby’s International Realty agents surveyed said that most of their clients buying luxury homes were paying in cash.

“We’re seeing that emerging affluents are increasingly driven by the lifestyle they aspire to, often prioritizing their personal interests and values when choosing a home,” White says. “For example, a buyer who loves hiking might choose a home in a mountain community because it aligns with their outdoor passions—they’ll work out the logistics later. This shift highlights how lifestyle preferences are becoming a central factor in luxury real estate decisions.”

One factor that currently shows limited impact on markets is changes in commission practices. Despite industry changes being in the news, White notes that commissions have always been negotiable and that Sotheby’s International Realty agents are well-versed in this practice, given the unique nature of high-end real estate.

“We continue to see clients recognize the value of experienced agents who provide tailored, high-quality service,” White says. “This is especially true in complex luxury transactions where expertise is crucial. Ultimately, the biggest movers in the luxury market are still tied to broader economic factors and changing lifestyle preferences. These fundamental elements, plus the demand for more space or prime locations, continue to drive the market more than commission structures.”

According to a December 2024 article in Bloomberg, the city’s luxury housing market has started to tilt in the buyers’ favor, with prices easing and new developments offering more options. One major shift in the New York City market is that penthouses are now first, rather than last, to sell in newly built condominiums, a reflection of limited inventory that dampened sales activity in 2024, Stein says. “I think we’re poised for a new upward cycle in New York City, because some sellers have been on the sidelines and are ready to move now,” he says.

Low inventory is also an issue in Palm Beach, Florida—particularly for waterfront property, says Todd Peter, senior global real estate advisor, Sotheby’s International Realty - Palm Beach Brokerage. The luxury market there starts at US$25 million and prices have climbed for the limited number of oceanfront properties.

Peter sold a waterfront lot without a house on it for US$50 million in 2024, along with a record-breaking sale of US$74.5 million for an off-market listing, both on the Intracoastal Waterway.

“The volume of sales has been similar in the past two years, but we’ve seen a boom in this area since the pandemic,” Peter says. “People moved here to try it out and now they’re staying for the weather, lifestyle and tax advantages.” Among those who have recently moved to the area is the hedge fund billionaire and art collector Ken Griffin, who has relocated his company Citadel there and bought a combined 25 acres worth an estimated US$450 million, according to the Palm Beach Post.

In Orange County, California, luxury market activity, which starts at US$10 million, more than doubled in 2021 and 2022 compared with 2019 and 2020, says Sean Stanfield, global real estate advisor, Pacific Sotheby’s International Realty.

“Things slowed quite a bit in 2023 and 2024 and although the higher end of the market had more activity in 2024 than in 2023, those transactions have taken longer and have been a little more challenging than in the previous two years,” Stanfield says. “Appreciation has continued in the luxury market, but each pocket of the county has seen varying degrees of increase. For 2025, we anticipate more activity in the US$3 million to US$10 million price range, but activity above US$10 million will likely continue at the same pace as we saw this year based on the market reports that we follow.”

A big factor anticipated to influence the forecast is possible interest rate cuts, Stanfield says. “Rate cuts could create a significant number of sellers who were previously married to their mortgages to consider making a move. If we see a major increase in inventory, prices will likely remain pretty stable, but if we see rate cuts without a large increase in inventory, we will likely see more strong appreciation. We have had a couple of years of record low transactions, so there is pent-up demand for buyers and sellers. We believe we will see a significant increase in transaction count in 2025.”

Another factor likely to influence upper-bracket markets in the coming years is the estimated US$84 trillion expected to be transferred from the Silent Generation and Baby Boomers to their younger heirs by 2045, according to consulting firm Cerulli Associates.

“The wealth transfer expected over the next decade will have a major impact on the luxury housing market, especially as younger generations inherit this wealth,” White says.

20% to 30% more properties priced at US$1 million and above in 2024 compared to 2023.

Generally, international buyer activity has yet to normalize and actually decreased in 2024 compared with 2023, which was also a slower-than-normal year, according to NAR data released in July 2024. Just 54,300 homes were sold in the U.S. to foreign buyers between April 2023 and March 2024, down 36% from the previous year and the lowest level since the organization began tracking these sales in 2009. Contributing factors include the pullback of Chinese buyers and the strong dollar, which added to purchase costs, Yun says.

However, White says international buyers continue to be a vital segment of the luxury real estate market “These buyers often invest substantial capital, which can drive property values and foster economic growth in various areas. We are seeing a resurgence of interest from international buyers from Hong Kong and buyers from South Korea, the U.K. and the Middle East are particularly active in New York City. Buyers from Greece are expressing interest in Los Angeles, California, and Indian buyers have their eyes on New York City and Miami, Florida. They are drawn to the U.S. for its stable real estate market, attractive investment opportunities and desirable living conditions.”

“Austin’s luxury real estate market faced a transitional period in 2024, marked by a cautious ‘wait-and-see’ approach from buyers,” Wilcoxon says. “This hesitation stems from the substantial appreciation during 2020 to 2022, which created a gap between seller expectations and buyer willingness. Currently, the market favors exceptional properties and perceived deals.”

As of October 2024, luxury homes in Austin ranged from US$1.5 million to US$2 million in many prime areas, rising to US$35 million and up, according to local market data. This wide range reflects the market’s diversity and appeal to various affluent buyers, she says.

“As the global economy normalizes, we anticipate a gradual return of buyer confidence and potential price stabilization. Key market influencers include economic conditions, tech industry performance, stock market fluctuations and evolving work patterns. The influx of technology companies is expected to drive job growth and boost the luxury housing sector.”

Wilcoxon anticipates a slow but steady recovery in 2025, with modest price growth and increased transactions. Buyers will likely remain selective, prioritizing value and unique features. “Despite current challenges, Austin’s long-term outlook remains bright,” she says. “The city continues to attract out-of-state buyers, drawn by its family-friendly environment, absence of state income tax and thriving tech scene. Innovative developments like Sixth & Blanco—combining boutique hotels, retail and luxury residences—showcase Austin’s evolution into a world-class destination. These projects are reshaping the city’s skyline and elevating its status in the national luxury real estate landscape.”

The Texas city is just one location that wealthy American homebuyers are looking at across the country as they embrace flexible working schedules. This trend has been further impacted by the growing availability of private aviation. During the first half of 2024, 1,363 new jets were delivered to private owners, an increase of 5.3% over the first half of 2023, according to a September 2024 report by the General Aviation Manufacturers Association.

"AS THE GLOBAL ECONOMY NORMALIZES, WE ANTICIPATE A GRADUAL RETURN OF BUYER CONFIDENCE AND POTENTIAL PRICE STABILIZATION"

Kumara Wilcoxon, global real estate advisor, Kuper Sotheby’s International Realty

Villa La Favorite, a Belle Époque residence overlooking the sea in Cannes, was built circa 1884 for Maxime Outrey, a former French ambassador to the United States and Japan.

Côte d’Azur Sotheby’s International Realty

“The abundance of private aviation shows that people are willing to spend money and travel to enjoy a second or third home,” Yun says. “We’ve seen Montana’s luxury market ramp up even though not that many people live there. They’re flying in from Seattle and San Francisco.”

Private aviation benefits Palm Beach, Florida, too, Peter says, because even though there are multiple daily commercial flights at three nearby airports, there are also numerous private airports. The effect can even be seen overseas. “The increased use of private jets has made the Côte d’Azur in France even more accessible to international buyers, highlighting the region’s appeal as a global luxury hub,” says Frederic Barth, CEO, Côte d’Azur Sotheby’s International Realty.

Overseas markets are also benefiting from the recovery from pandemic volatility and the luxury real estate market on the Côte d’Azur remained resilient in 2024, with price growth supported by the desirable lifestyle and limited supply. “Demand for unique, secure and private residences is unlikely to wane,” Barth says. “A return to overall economic stability will further support investments, although macroeconomic factors, including inflation and interest rate policies, may influence short-term market dynamics.”

Globally, inflation declined in 2024 and was forecasted to end at under 5% compared to nearly 8% in 2022, according to the S&P Global Market Intelligence report published in September 2024. It forecasts a further decline in global inflation to about 3% in 2025 and 2026.

France’s Côte d’Azur continues to attract European buyers, especially from the U.K. and Germany, but geopolitical factors and fiscal changes have diversified the buyer pool, with growing interest from North America, the Middle East and Asia.

New Home Building Remains Resilient

New development impacts many luxury markets. The extreme shortage of homes in the U.S. at all price points has led to increases in new home construction. Newly built homes now make up approximately 16% of all home sales, compared with 12% before the pandemic, according to an April 2024 report from ING Financial Services. However, the number of homes built annually continues to lag behind demand. Approximately 670,000 new homes were anticipated to be sold in 2024, according to ING’s analysis, which is similar to the average for every year since 1990. However, the U.S. population grew from 250 million to 340 million during the same period.

Many of today’s buyers, particularly at the upper end of the market, prefer a newly built home to avoid renovating, but they’re not always easy to find, Peter says. “In Chicago, there’s been a shift away from luxury condos to new high-end rental buildings because of the cost of financing,” adds Tim Salm, senior vice president of sales, Jameson Sotheby’s International Realty in Illinois. “Builders have less of an appetite for risk and it is easier to rent luxury apartments than to sell high-end units.”

Newly built custom homes on infill lots in the city of Chicago, Illinois, and in nearby vacation home markets, such as the North Shore suburbs and Lake Geneva, are extremely popular because of the ability of homeowners to commute into the city occasionally. “It has been a tepid year for luxury homes in the city in 2024, but the secondary home market is still doing record business,” Salm says. “People feel like they’re making up for the time they lost during COVID, so they’re buying a small luxury condo in the city and a vacation home nearby so they get the yin and yang of both lifestyles. We’re also selling luxury homes to young people who have inherited wealth or whose parents want to set them up to build equity.”

The new-home-building segment of the luxury market is evolving with several key trends, White says. “Developers will likely focus on creating innovative, high-end properties that cater to evolving buyer preferences for space, privacy and luxury amenities, as well as sustainability,” he says. “We’re seeing continued strong demand for branded residences that offer a unique blend of high-end living and exclusive services. Often developed in collaboration with renowned brands, these residences provide buyers with not just a home but a lifestyle experience, combining premium real estate with exceptional service. We recently took over sales for 111 West 57th Street in New York City, which offers incredible luxury amenities, including the only on-site padel court in a Manhattan development.”

The Vineyard Homes at Stanly Ranch Auberge Resorts Collection in Napa Valley, California, were designed to prioritize wellness, comfort and spaces for generational gatherings.

Sotheby’s International Realty - St. Helena Brokerage

Given the regulations in sought-after communities such as Napa Valley, California, it’s a surprising twist that some newly built properties are available. “Buyers of luxury properties were more active in 2024 than in 2023,” says Hillary Ryan, global real estate advisor, Sotheby’s International Realty - St. Helena Brokerage. “There’s increased inventory of luxury properties available and new ultra-luxury inventory will bring more buyers into our market who were previously looking but did not find a home that matched their requirements.”

While Napa Valley has long been a robust second-home market for buyers from the Bay Area, Ryan has recently seen an increase in primary-home buyers, since people can commute as needed. “Buyers here are seeking compound-like properties with a focus on wellness,” she says. “In the ultra-luxury category buyers expect to have a gym, productive gardens for farm-to-table dining, spa-like bathrooms, tennis and pickleball courts and even Zen gardens and infrared saunas. The influence of biohacking culture has made an impact on what buyers are seeking in their wine country residences.”

The market has settled into a more predictable rhythm, but the demand for luxury properties remains robust, White says. “We don’t expect this to change and while we don’t have a crystal ball, we believe the luxury real estate market will continue seeing record transactions and sustained interest in high-end properties.”

Investment landscape

When Sotheby’s International Realty published its 2024 Mid-Year Luxury Outlook in July 2024, two topics were at the forefront of the year’s agenda: whether a long-awaited reduction in U.S. interest rates would occur and what impact the many elections around the world would have on property markets. As the year came to a close, both of those questions had been answered.

On September 18, 2024, the U.S. Federal Reserve, the country’s central bank, cut interest rates by half a percentage point to 4.75% to 5%, the first reduction since March 2020 and down from a 20-year high of 5.25% to 5.50%. The Fed made a further quarter-point reduction in both November and December 2024, with only a further two cuts anticipated in 2025. However, Jerome Powell, the central bank’s chair, suggested during the announcement of these changes—the first of which took place on the heels of the U.S. Presidential election—that policymakers would be watching incoming economic data closely, as a new Presidential administration takes power in January 2025, before making any future adjustments.

The key indicator that will affect any further decisions the Fed makes on interest rates is inflation. When it made its first cut in September 2024, inflation was at 2.4%, nearing the Fed’s 2% benchmark for price stability, down from a 20-year high of 9.1% in June 2022, according to the U.S. Bureau of Labor. Following the U.S. Presidential election, and the anticipation of tariffs promised by the incoming administration in 2025, inflation began to rise to 2.7% in November 2024, according to the Bureau of Labor Statistics, and could continue to change in the coming year.

In turn, the Fed presented a cautious approach to any further interest rate cuts. “We know that reducing policy restraint too fast or too much could hinder progress on inflation,” Powell said during a press conference following the Fed’s rate cut in December 2024. “At the same time, reducing policy restraint too slowly could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the committee will assess incoming data, the evolving outlook, and the balance of risks. We’re not on any preset course.” Powell added that, despite expectation that inflation will be higher in 2025, the Fed is on track to continue to cut interests rates. “I think the actual cuts that we make next year will not be because of anything we wrote down today,” he said. “We’re going to react to data.”

Changes in interest rates have a direct effect on mortgage rates. Anticipating the Fed’s cuts, mortgage rates had started to fall in August 2024 to an average of 6.7%, down from a 20-year high of 7.79% in October 2023. But with lowered expectations about future cuts from the Fed and concerns about inflation, mortgage rates also slowed with the Mortgage Bankers Association (MBA) adjusting its expectations to range between 6.4% and 6.6% in 2025, according to a November 2024 report from Housing Wire. Fannie Mae also revised its projections to 6.4% in 2025 and above 6% in 2026.

Mortgage rates would be further affected if the incoming U.S. president revives efforts to reprivatize the country’s two largest mortgage guarantors, Fannie Mae and Freddie Mac, which were taken under government conservatorship following the 2008 housing crisis, according to an early December 2024 report from CNN. “The law says they are eventually to be privatized,” Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania, told CNN. “But the stakes are very, very high as to how this is carried out.” One way to mitigate the market swings that could occur would be for the government to charge the companies a fee for the guarantee of a bailout in a future crisis.

Meanwhile, the impact of the Fed’s interest rate decision also started to ripple out globally. While rates in the U.K. had dropped from a 16-year average high of 5.25% in June 2024 to 4.75% in November 2024, Bank of England policymakers told the BBC that any future rate cuts would likely be more gradual since inflation concerns persisted and the newly installed Labour government’s budget and tax plans would likely increase consumer prices.

Meanwhile, the People’s Bank of China instructed the country’s commercial banks to lower mortgage rates for existing home loans by at least 30 basis points below the loan prime rate. The one-year rate was set at 3.35%, the five-year rate at 3.85%.

This Colonial Revival-style home in Washington, D.C., has a commanding presence in the heart of Georgetown’s prestigious East Village.

TTR Sotheby’s International Realty

"REDUCING POLICY RESTRAINT TOO FAST OR TOO MUCH COULD HINDER PROGRESS ON INFLATION"

Jerome Powell, chairman, U.S. Federal Reserve System

Political Changes

The impact of many national elections was still playing out as this report was being compiled. According to Reuters and The Economist, about half of the world’s voting-age population—in nearly 80 countries, collectively accounting for more than 60% of global GDP—were eligible to participate in elections in 2024.

The most closely watched of these was in the U.S., the world’s largest economy and third-largest nation by population, which elected its next president in November. The Republican Party achieved a decisive victory in the election, winning the presidency and securing a majority in both houses of Congress. The outcome led to a surge in the U.S. stock market according to a report in The New York Times on November 6, 2024—the day after the election—and strengthened the value of the American dollar against the currency of major trading partners, including Japan, Mexico and China, due to the proposed tariffs the incoming administration has promised to impose against foreign goods. According to analysts cited by the The New York Times, the incoming Republican president’s economic platform is expected to bolster growth but also raise inflation, which could lead to higher interest rates over time.

Header: A magnificent 35-foot stone bell tower crowns this Irvine, California, estate.

Pacific Sotheby’s International Realty

Meanwhile, in the U.K., a landslide victory for the Labour Party in July 2024 stimulated the property market, with home prices in September rising at their fastest pace in nearly two years. The average price was up 4.7% from a year before and had risen for the third straight month, according to U.K. lender Halifax. However, a projected increase in taxes on the country’s wealthy has led real estate agents in the luxury sector to seek out U.S. buyers for their high-end properties, according to Bloomberg.

And in India, the incumbent Bharatiya Janata Party (BJP) held onto power but did not win an outright majority, leading to a coalition government with the Telugu Desam Party and Janata Dal (United). The BJP’s tepid victory has not adversely affected the country’s property markets, however, with a September 2024 Reuters poll of housing experts finding that property prices in India were expected to rise 7.75% in 2024, nearly double 2023’s 4.3% growth, mainly driven by demand for luxury properties.