Real Estate Blog
June 15, 2022

Luxury Real Estate: A Worthwhile Investment?

Do you have dreams of owning a prestigious home? Investing in luxury real estate can be a great way to add new assets to your investment portfolio. In this article, you’ll learn about the benefits of this kind of investment and how to evaluate its profitability.

1. What Is Luxury Real Estate?

Just because a property has a high price tag doesn’t mean it’s a luxury home. In fact, luxury real estate is characterized mainly by its rare and exclusive nature, i.e., the fact that a limited number of high-end properties are available on the market and that these are particularly difficult to reproduce[1].

Moreover, these homes generally have high-quality materials and state-of-the-art features, while being in highly sought-after areas. Furthermore, some properties benefit from architectural or heritage protection, which contributes to making them highly desirable[2].

In addition to these criteria, prestige properties have many advantages[3], such as

  • A unique location
  • A large living area
  • A large private lot
  • High-end facilities (infinity pool, sauna, pantry, etc.)

2. How Do You Invest in Luxury Real Estate?

According to François Des Rosiers, economist and professor in the finance, insurance and real estate department at the Université Laval, real estate seems to be a haven, no matter what the market does: “Compared to the stock market, this sector offers a reliable return. Real estate is becoming an increasingly important part of a wealthy portfolio[4]. 

While this dream may seem unattainable to many buyers, there are several ways to grow your wealth[5], such as

  • Renovation of an existing property
  • Building a new home
  • Renting your property

Before investing in a high-end property, it is important to assess your objectives, including the short and long-term return on investment, as well as the state of the real estate market. Indeed, the high-end real estate market tends to experience more pronounced price increases and decreases than the more affordable real estate market[6].

3. Evaluating the Profitability of Your Investment

According to Sacha Brosseau, former Vice-President of Brokerage at Sotheby’s International Realty Canada, luxury real estate is not for people in a rush: “In Quebec, the real estate market is safe. A home purchased in a desirable area like Westmount, improved over the years with some renovation, will provide a profit. The mistake would be to buy a house with the sole purpose of reselling it quickly at a profit. As a rule, you need to hold a home for three to five years before expecting a profit.[7]“

Thus, a prestigious property could be an interesting investment because of the value that your property will gain over the years, allowing you to acquire a certain financial security, without, however, neglecting the minimal investment that it will require.[8]

In addition, by investing in an existing property, you will have the opportunity to carry out some renovations, while benefiting from a tax reduction.[9] And if the renovations are of high quality, you will likely reap considerable value when you resell the property.

Ready to invest in high-end real estate? Browse the centris.ca website to find the perfect property or contact a real estate broker specialized in this type of market to make your dream a reality.

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