Why are luxury homes priced so much higher than they should be?

Real estate analysts at Credit Suisse believe luxury homes will continue to soar over the next decade. 

“I think luxury homes are going to go up, and I think they will continue growing, at least in China,” said Michael Schumacher, a senior fellow at CreditSachs who specializes in luxury home sales.

“It’s not going to be driven by the market for the home itself.” 

While luxury homes have been rising at a rapid clip, many of those rising prices are driven by demand from investors. 

According to Schumachers research, Chinese investors have pumped more than $1 trillion into Chinese real estate since the beginning of the year, with the average purchase price rising about 10 percent annually. 

While the surge in luxury sales has been fueled by investors, the surge is also driven by Chinese citizens buying properties at inflated prices.

“The demand is very, very strong, and the demand is there,” Schumbers said. 

Chinese buyers have been buying luxury properties at a rate of almost $1 billion per day. 

Schumacher estimates that Chinese buyers will spend more than a quarter of that money on real estate, meaning Chinese investors will be buying a quarter as many luxury homes as they are selling. 

China’s average real estate prices, which include properties sold at inflated rates, rose by 10.5 percent from the end of January through the end in September, according to real estate data provider Zillow. 

In the US, luxury home prices rose by 6.9 percent last year, according the National Association of Realtors, but luxury home buying has been a hot topic of discussion this year, thanks to speculation that President Donald Trump could sell his stake in the Trump Organization. 

The US housing market has been struggling for years, with home prices falling by 7.3 percent between October 2016 and October 2017, according data from Zillows data provider CoreLogic.

Trump has been criticized for selling off a stake in his real estate company to avoid paying more taxes, but the president has defended the move as a necessary step to “make America great again.”

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