Rising Prices for Luxury Homes: What Caused The 24% Increase?
Rising Prices for Luxury Homes- High-end real estate has increased in price as a result of both domestic and international events, making it the most appreciating housing segment during the past five years, according to industry analysts.
Did you know that among the top seven cities, luxury residences experienced the largest average price growth over the past five years? That’s true, according to the most recent research, the price of a luxury residence increased by a staggering 24%. These high-end residences used to cost about Rs 12,400 per square foot on average, but as of right now, they cost about Rs 15,350 per square foot. So, what’s behind this massive increase in the cost of luxury homes? Let’s dive in and learn more about this.
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Costs of construction
Property prices have increased across all price ranges, including the luxury segment, as a result of the spike in construction expenses after the pandemic. There has been a 7% increase in the price of raw materials. “This has an impact on more than just the price of building homes. The cost of home interiors is also increasing. The final selling price of these homes has increased significantly as a result when they finally hit the market.
A price increase was long overdue
Prior to the epidemic, demand and attention had largely migrated to the inexpensive housing segment, making luxury home sales sluggish. The NRIs, who are important buyers in the luxury market, have fallen behind as a result of a number of circumstances, including the slump in the real estate market as well as certain developers’ dishonest practices.
For a considerable amount of time, prices were range-bound. But after the epidemic, numerous NRIs returned to the market, and domestic demand for larger homes increased as well. They purchased a property here due to the decreasing value of the rupee and the overwhelming need for security that came with owning a home in their place of origin. Eventually, this rising demand led to higher sales across all cities, and as there was less accessible inventory in this market sector, developers had to raise prices as well, which was long overdue. Aside from this, the market’s availability of more expensive luxury residences was also influenced by the large and listed developers’ increasing new supply over the past two years, whose prices are comparatively higher than those of smaller developers.
Lifestyle and aesthetics are important
While the cost of raw materials has risen by around 5% to 8%, labour costs have risen by about 10% as well, which has significantly contributed to the rise in the price of luxury residences. However, there is much more to it than that. The high quality of these homes’ specifications and the excellent property management services made available to customers have also helped drive up the cost of real estate. Additionally, homes today are a reflection of one’s lifestyle. The use of local materials, proper ventilation, luxurious interiors, native plant species, water recycling systems, solar-powered lights. And the addition of extensive home automation capabilities are all examples of how buyers today priorities sustainability. While all of these factors are excellent, their combined effect on expenses is significant.
In addition, modern homebuyers are well-educated, well-traveled, and have a good sense of aesthetics. As a result, they are also more than eager to go beyond their set spending limit to buy a house. That matches their high standards and complements their way of life. This greater willingness to spend is a significant element driving up housing costs.
Price rises where there is demand
Any product or service is known to appreciate during the time when there is a strong buying sentiment for it. People are currently looking for ways to save up money in order to invest in a luxurious property. “We had intended to purchase a one-BHK when we started our search for a property. However, we began second-guessing our choice when our employers embraced a hybrid work style.
Additionally, we noticed that the two-BHKs were larger and more comfortable than the one-BHKs in our neighbourhood. Which were all excessively crowded and appears to have been converted from a one-room kitchen flat. We so planned our funds and bought a two-BHK.
Additionally, millennials’ rising disposable incomes have encouraged them to purchase larger homes, which has raised demand for the luxury category. Prior to 2020, NRIs made investments in high-end and luxuries goods that ranged from 8% to 10%. These investments are anticipate to be between 15% and 20% after the pandemic.
Therefore, it would be advisable to buy a beautiful home now rather than waiting for prices to rise further if you want to do so.
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