Tuesday, November 17, 2009

Luxury Real Estate Luxury Marketing: Redefining the World of Luxury

Denali mountain aka Mt.McKinley national park service photo

As a luxury real estate marketing professional it is very important to tune into the new psycho graphic trends and changes that luxury consumers are exhibiting during current market conditions. Understanding the mindset of all-cash buyers, in particular is now an imperative. They are the ones who determine the purchase prices in today’s market. Aligning the thinking of your sellers with these viable prospects can significantly increase your volume of business.

Have you noticed that the price of name brand shoes from Italy have increased in price faster than changes in the exchange rate between the dollar and the Euro and also faster than increases in the cost of living itself? Assuming for the sake of this discussion that the cost of labor, materials, marketing and other cost are held constant over the past several years, where is the extra value coming from?

These and many similar questions are now being asked by affluent consumers who are re-examining their own personal values when it comes to purchasing luxury goods and services.

We recently attended the NAR conference in San Diego, California and came away with an interesting insight inspired by an agent from Fairbanks, Alaska. She mentioned that the highest priced luxury homes in her town are selling in the low $400Ks. Her personal residence, a six wooded acre estate with a spectacular view of the Denali mountain range is valued at $200K. And, the market is active, contrary to other markets in the US.

In Alaska you cannot get away with sub par construction given the rigors of the climate. Construction costs are certainly not less than in California, for example, and labor costs are higher because the labor pool is limited.

Clearly, luxury is value added to basic costs of manufacturing (and land n the case of real estate) which makes it completely subjective. Like all-cash buyers consumers therefore, are beginning to realize that they dictate the terms of the value added rather than sellers now that there is an abundance of choices. In our previous market we had a false condition of scarcity that was fueled by the competition of easy money and the ensuing escalation of unrealistically inflated prices. The inflated false value was non-sustentative. And, this is what consumers are now re-evaluating.

A top agent in downtown San Diego sold a high-rise condo unit, with sensational views that are permanently unobstructed, listed at $1.2M two years ago, for half price. This all cash buyer determined the value despite the developer’s insistence that there should be a premium of $50K per story, arguing that the higher the floor, the more value it can command. Was there actually value added between that floor and the one above? Consumers now make that value call as they redefine luxury on their own terms.

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