As global uncertainty intensifies due to geopolitical tensions, economic fluctuations, and social polarization, affluent individuals and families increasingly turn to international markets to diversify their real estate investments and enhance their lifestyles. With its stunning natural beauty, robust real estate offerings, and exceptional connectivity, Los Cabos has emerged as a prime destination for luxury property buyers.
This article, informed by a conversation with Ian Gengos, Owner and Managing Broker of Berkshire Hathaway HomeServices Baja Real Estate, explores several luxury real estate trends driving this wealth migration and how Los Cabos is uniquely positioned to attract and accommodate discerning investors.
Despite Global Uncertainty, the International Market Is Strong
Amid uncertainty in the economic and political arenas, affluent individuals and families increasingly buy residential properties abroad to diversify their portfolios and lifestyles.
Indeed, we are experiencing a significant moment in the global wealth migration. According to a report by Henley & Partners, 128,000 millionaires will likely relocate in 2024, surpassing the previous record of 120,000 in 2023. This relocation represents a 16% increase from the 110,000 who moved in 2019, before the pandemic.
The tendency shows no slowing, with 135,000 millionaires projected to relocate in 2025. This movement is among the most important luxury real estate trends. As the report points out, the tendency underscores the notion that mobility is the ultimate asset in an age of uncertainty. This idea dovetails with the one presenting lifestyle as the new currency, where the quality of life, personal fulfillment, and experiences are valued as highly as financial wealth.
U.S. Wealth Migration Is a Booster for Luxury Real Estate in Los Cabos
Los Cabos and South Baja are in a privileged position to attract wealthy individuals who are hunting for residential real estate abroad. The region boasts remarkable connectivity (including multiple daily direct flights to hubs in the U.S.), stable legal provisions, and a strong and expanding inventory of luxury properties. The U.S. is the primary feeder market for luxury real estate in Los Cabos. Therefore, it is vital to understand how the global migration of wealth plays out in that country.
The trend of affluent U.S. citizens relocating abroad experienced a boost during the COVID-19 pandemic. It still shows considerable momentum. According to an article published in Robb Report, nearly 40 percent of wealthy Americans plan to buy a home in a foreign country within the next year. And two-thirds aim to purchase property abroad within the next five years.
Mexico Remains the Top Destination for U.S. Consumers
The article also revealed that location is the top consideration for 45 percent of U.S. discerning consumers. Approximately 29 percent of high-net-worth individuals are looking to move to Europe. Twenty-eight percent are considering destinations in North America outside the U.S. Twenty-three percent are looking at the Caribbean.
Mexico, and particularly South Baja, is advantageously placed to attract these buyers. However, the country must develop a more proactive and holistic approach to investment migration on a policy level. (Read this interview for an overview of investing in Mexican real estate.) Gengos referred to recent remarks by Jamie Dimon, CEO of JP Morgan, praising Mexico as one of the best countries in the world for investment:
“This endorsement has significant implications for the Los Cabos real estate market. It further validates the decisions individuals are already making. Whether you are an experienced real estate investor involved in property acquisitions for many years, there is always an emotional component to consider. Mexico has become the U.S.’s top trading partner, attracting massive foreign direct investments. The country also possesses robust manufacturing capabilities. These factors provide a compelling rationale behind people’s emotional decisions when considering investing in real estate in Mexico,” Gengos pointed out.
According to figures released in 2022 by the U.S. State Department, 1.6 million U.S. citizens live in Mexico. The country is also the top destination for American travelers. Additionally, Credit Suisse reported that 39% of all millionaires are Americans. These figures represent some of the key luxury real estate trends today. They bode well for the real estate market in Los Cabos and South Baja, especially in the luxury segment.
Hybrid Work Will Shape Luxury Real Estate Trends for Years to Come
Another trend dovetailing with the ones mentioned above is the normalization of hybrid work. The modern workplace is changing, with fewer employees working from the office full-time. Many companies are embracing a hybrid work model. Staff split their time between the office and remote work, usually from home. This shift raises essential questions about the future of work and its impact on real estate.
Hybrid work statistics provide valuable insights. More than a quarter of full-time employees currently work in hybrid environments. Moreover, 90% of CEOs have reported reduced business costs from adopting a hybrid work model. These statistics underline the increasing prevalence of hybrid work. They suggest that it will continue to shape the future of the workplace.
Hybrid Work Has Become Normalized
Aditya Sanghvi, partner at McKinsey and Company, believes that hybrid work is here to stay for three reasons:
- Office attendance rates have stabilized.
- Actual attendance closely aligns with workers’ desires and expectations.
- Many knowledge workers would rather resign or take a pay cut than come into the office more frequently. Several of them hold executive positions that influence these decisions.
Real estate clients in South Baja have increasingly reported using their new homes as a place to work for part of the year. Many spend a few weeks of the month here and return to their U.S. cities for monthly meetings. Excellent internet connectivity and space to set up a home office are consistently sought-after features in properties in Los Cabos. Luxury homes in prime developments often offer these amenities and even coworking areas. The rise of hybrid work has changed the types of properties that luxury buyers seek and how they use them. Among the most lasting luxury real trends, the normalization of hybrid work may be one of the most fundamental.
In this context, the prime connectivity of Los Cabos is a crucial differentiator. “Connectivity is essential, especially when discussing redistributing real estate assets and repositioning family wealth. Many individuals want to monitor their investments closely and may have teams of advisors and consultants. The ability to enjoy their assets while staying connected is a top priority, especially when there is a combination of utility and investment upside. Additionally, we are linked to numerous major U.S. markets and overseas, and we have observed an increase in our clientele from mainland Mexico and Latin America,” Gengos said.
Luxury Real Estate: A Trusted Investment and Lifestyle Option
Affluent consumers moving abroad in record numbers and the increased liberty to work from home warrant an optimistic outlook for the real estate market in Los Cabos. Nevertheless, real estate is just one investment option that is competing against many others.
Gengos considers real estate in Baja California Sur a competitive investment alternative. “A critical factor our clients consider is the appreciation of the asset over time, which has shown a consistent upward trend despite occasional fluctuations. The market has proven resilient through challenges such as COVID and hurricanes. Additionally, these properties offer a strong potential for rental income with few restrictions compared to traditional rental properties in the U.S. market, providing annual residual income. Besides financial benefits, the lifestyle and utility of these properties also contribute to their appeal. In the future, these properties will likely have a substantial resale value due to their scarcity and high demand, further adding to their financial justification and income potential,” he noted.
Indeed, according to a recent Gallup poll, more Americans consider real estate a better long-term investment than stocks, gold, savings accounts, certificates of deposit, or bonds. The following factors contribute to luxury properties’ long-term appreciation and resilience. They are a sound choice for investors seeking stability and growth:
Scarcity and Exclusivity
Luxury properties are rare and exclusive. Limited availability makes them desirable, as buyers recognize the uniqueness and status of owning such homes. Exclusivity adds appeal, as luxury homes often feature unique attributes or prime locations inaccessible to the average property. These characteristics attract buyers willing to pay a premium.
Prime Locations
The location of luxury real estate is crucial for long-term appreciation. Properties in prestigious neighborhoods or vibrant communities, like beachfront and gated locations in Los Cabos, are more likely to increase in value over time. Proximity to desirable amenities, reputable schools, exclusive shopping centers, and efficient transportation hubs enhances the desirability and value of luxury properties.
Quality of Construction and Materials
Luxury properties are constructed with premium materials and meticulous attention to detail, adhering to the highest industry standards. Rigorous construction methods and thorough quality management enhance the properties’ structural integrity and energy efficiency, making them a significant investment.
Resilience to Market Volatility
Luxury properties have historically shown resilience to market volatility, making them attractive to investors seeking stability. Despite economic downturns, luxury real estate often maintains value due to its appeal to high-net-worth individuals. Economic fluctuations do not impact these buyers as much, providing a hedge against inflation and market instability. This resilience appeals to investors looking for both returns on investment and long-term stability.
Embracing Subtle Elegance: Quiet Luxury in South Baja
In an uncertain global environment, where affluent individuals seek to purchase luxury real estate overseas as a stable investment and a lifestyle choice, real estate professionals in South Baja must consider what specific qualities they prioritize in their homes.
Among these qualities, the quiet luxury trend, which gained significant popularity in fashion and interior design in 2023, continues to thrive in 2024. Understated elegance, timeless appeal, and high-quality materials characterize quiet luxury. This design philosophy emphasizes simplicity and refinement, creating serene, calming spaces that exude sophistication without ostentation. It represents a more relaxed form of minimalism, moving away from the cold, clinical aesthetics of the past to offer comfort, warmth, and environmental consciousness in our living spaces.
In today’s fast-paced world, quiet luxury is about creating spaces that allow us to relax and find solace away from the pressures of an ‘always-on’ lifestyle. It signifies a departure from flashy displays of wealth, focusing instead on subtle, refined living. This approach to real estate highlights privacy, exclusivity, and a more understated form of luxury, prioritizing high-quality materials and craftsmanship that enhance our homes and lives. It is about finding joy in simplicity and elegance, where every element contributes to a sense of tranquility and comfort.
Los Cabos and South Baja epitomize the spirit of quiet luxury. The region offers luxury properties emphasizing natural beauty and serene landscapes, from splendid beaches to breathtaking mountains and deserts. Here, the ability to enjoy extraordinary experiences, such as yachting adventures in the morning and working remotely from a home office in the afternoon, define luxury. Los Cabos’ luxury residences often feature designs that let the surroundings and vistas speak for themselves, avoiding overly ornate designs and embracing the quiet, refined elegance that defines this enduring luxury real estate trend.
The Future Bodes Well: An Eye on Millenials
Are the luxury real estate trends related to affluent individuals and families looking for property investments abroad likely to hold for decades, or are they just momentary? The answer leans towards the former option.
According to Pew Research Center surveys, younger people in the U.S. often have more positive views of foreign countries and institutions than their elders. These attitudes persist as generations age. Even as they age, younger generations tend to be more internationally oriented, favorably disposed to groups, leaders, and countries beyond their borders, and less likely to see the U.S. as exceptional.
In addition to this favorable disposition towards the rest of the world among the younger generations of the U.S., the distribution of wealth is undergoing significant changes between generations. The resulting perspective is bright.
The Great Wealth Transfer
As a report by Knight Frank explains, over the next two decades, a substantial wealth transfer will occur as the silent generation and baby boomers pass on their assets to millennials. This transfer, amounting to approximately $90 trillion in the U.S. alone, will make affluent millennials the wealthiest generation in history.
As pointed out, real estate remains a crucial investment for wealthy individuals. Twenty-two percent of ultra-high-net-worth individuals plan to purchase a home this year. Nineteen percent of high-net-worth individuals are expected to do so. Millennials are the most active in this market. They are the generation with the most interest in purchasing property.
Gengos has noticed this trend playing out in Los Cabos. “The younger generations, specifically millennials, emphasize experiences and lifestyles more. Lifestyle is a form of currency, and with the transfer of wealth from older generations, millennials are starting to invest and spend in different ways. Instead of traditional luxury, they seek scarcity, exclusivity, and experiential vacations. For example, someone may own a home worth $25-30 million in Malibu, but their kids may watch TV all day if the surfing conditions are poor. A property in Los Cabos can offer golfing, mountain biking, hiking, pickleball, paddle tennis, and other experiential activities,” he said.
In summary, the generational shift in wealth is bringing about significant changes in investment behaviors and priorities, with younger generations driving trends towards diversity, environmental responsibility, and continued interest in real estate.
A Note on Alternative Real Estate Investments in Baja California Sur
The state of Baja California Sur, where Los Cabos is located, is among the top five states in Mexico in terms of GDP growth. A generation ago, this region was considered distant and isolated, but it is now leading in economic and population growth in Mexico. Gengos explained that he sees a significant opportunity in commercial and logistics real estate in the state. He also urges his clients to consider non-obvious real estate investments.
“When deciding where to invest their money, I advise my clients that they may not necessarily want to invest in another single-family home or condo. For wealthy individuals, investing in a 50-unit condo building for the workers involved in the development of Los Cabos could be a good option. Additionally, industrial investment, while not as glamorous as a multi-million dollar luxury mansion, represents an investment in a market that will yield returns over time,” he said.
“As Baja California Sur continues to develop, there is a significant opportunity to establish logistics centers. Most goods that come to Baja are transported from mainland Mexico through a specific ferry terminal in La Paz. However, one of our challenges is the need for more storage space for these containers. We need logistics centers with multiple shipping bays and secure storage areas for the goods being transported here. Although this may seem like it could be more exciting, it represents a great investment opportunity with high rental potential,” he added.
Conclusion: Los Cabos Emerges as a Premier Destination for Affluent Global Investors
In an age of uncertainty, Los Cabos’s appeal to affluent global real estate investors continues to grow. The region’s commitment to building a strong inventory of prime residences, unparalleled connectivity to all U.S. hubs, stunning natural beauty, and strong real estate appreciation make it a beacon for those seeking stability, elegance, sound investment, and a high-quality lifestyle. As global wealth trends evolve, Los Cabos stands out as a premier destination that not only meets but exceeds the expectations of luxury real estate buyers. Luxury real estate trends are constantly evolving, and this coastal region in Mexico consistently leads the way.
