Solid values during the corona crisis — luxury real estate is booming, luxury brands are collapsing

Strong increase in demand for luxury real estate

60% increase in demand for luxury properties in July 2020 compared to the previous year - This figure is confirmed Sven Odia, CEO of Engel & Völkers. This means increased demand in this segment of between two and five million euros. The reasons for the increase in demand are understandable. When living and working in open spaces is increasingly being shifted into private life, luxury properties with extensive outdoor areas and work and hobby rooms represent a safe haven for wealthy people.

Times of crisis always create social and economic uncertainty. Buying behavior and awareness of values are shifting. In order to reduce the risk of infection, properties in peripheral locations are currently preferred. Larger living spaces and more rooms to furnish one or more home offices are also very popular due to the corona crisis. Last but not least, the desire for a luxurious second home with restricted freedom of travel plays a significant role in the increase in demand in the luxury real estate segment.

Slumps in consumer behavior and shifting interest in buying

With the exception of the real estate segment, the corona crisis has caused a slump in consumer behavior in the luxury segment as well as in other sectors. Global flight bans and lockdowns have swept the inner cities of major cities empty. Good stores and addresses for luxury brands all over the world were suddenly hit for online retailers to be able to intercept everything. According to Bain & Company, sales fell by 35% in the luxury consumer goods market. This applies to fine watch manufacturers as well as fashion labels and jewelry manufacturers.

Luxury is no longer just pure luxury

In addition to the slumps in sales due to lockdowns, there is also apparently a shift in the definition of luxury. There is evidence of a trend: away from superficial brand prestige, which is fixated on names and labels, towards quality, stability and durability as a value. An example of this is an interview in the world from May 9, 2020 with creative director Olivier Saillard from French shoe manufacturer J.M. Weston: “J.M. Weston doesn't make fashion, but shoes that (...) you can wear for 20 years.” A clear statement with which the company addresses consumers who have a new self-image of lifestyle and luxury.

For the next generation of wealthy millennials, mass consumption of luxury is no longer a sign of prosperity, but investment in sustainable and value-stable consumer goods. Lifestyle and personal freedom are more important than the consumption of status symbols. This shift in perspective is the reason that luxury real estate is experiencing an upswing, while luxury brands are being consumed less during the crisis.

Lasting values are gaining perspective, even with digital investments

The corona crisis has changed our society. What is certain is that the pandemic has already permanently changed awareness and behavior today and will be remembered for a long time to come. The trend towards long-term value and solidity is also playing an increasingly important role in decisions for digital investments. By tokenizing luxury real estate and other luxury goods such as art objects or cars can private investors build up digital wealth and benefit from the increasing demand for real estate in the luxury sector.

Thanks to technological automation, tokenized investments in luxury real estate are flexible and fast. Small investors can participate in value developments and additional rental income at selected shares without notarial administrative expenses or tenant management to have to operate. The digital investments are forgery-proof and tamper-proof using blockchain technology and can be traded at any time.