Grant Cardone Roasts Luxury Items and Recommends Real Estate Instead: 'Birkin Bags Are Not Investments'

In the world of luxury goods, the allure of owning a Birkin bag or a Rolex watch has long been seen as a symbol of status and wealth. However, Grant Cardone, a prominent entrepreneur and author, has a different perspective. He argues that luxury items are not investments but rather liabilities that depreciate over time. Instead, he advocates for investing in real estate, a tangible asset that can generate passive income and appreciate in value.

Cardone's critique of luxury items as investments is not without merit. The luxury goods market is currently facing a significant slowdown, with growth expected to be between 1% to 3% annually from 2024 to 2027. This is a stark contrast to the 5% compound annual growth rate experienced between 2019 and 2023. The industry is grappling with macroeconomic headwinds, shifting client preferences, and a deteriorating value proposition. These factors are expected to create a low-growth environment, making it difficult for luxury brands to maintain their exclusivity and desirability.



The rapid expansion of the luxury industry over the past five years has led to overexposure and weakened the industry's promise of exclusivity, creativity, and craftsmanship. Brands increased prices, but some failed to adapt their creative strategies and supply chains to meet new scale requirements, thereby weakening their core value proposition. This has led to a situation where luxury items are no longer seen as investments but rather as status symbols that depreciate over time.

Moreover, the report from McKinsey, 'State of Luxury: Fashion,' highlights that ultra-high net worth clients, who account for 30% to 40% of the sector’s spend, are looking to spend less on personal goods in the future and more on home decor and the combined category of travel and hospitality. This shift in consumer behavior further challenges the idea of luxury items as investments, as the demand for these goods is expected to decrease.

In contrast, real estate offers several advantages as an investment. It is a tangible asset that provides a sense of security and stability. Unlike luxury items, which can depreciate in value or go out of fashion, real estate tends to appreciate over time. This is evident in the current market where the average California home value is $784,989, up 6.0% over the past year, indicating a steady appreciation in property values.

Real estate can also generate passive income through rentals, a significant advantage over luxury items, which do not provide any income. The current housing market in California shows a high demand for homes, with 49.1% of homes selling above list price, indicating a strong rental market potential. Additionally, real estate allows for the use of leverage, meaning investors can control a large asset with a relatively small amount of capital. This is not possible with luxury items. The current market trends show that homes are selling quickly, with a median of 15 days to pending, indicating a high demand and the potential for quick returns on investment.

Furthermore, real estate investments come with several tax benefits, such as depreciation and mortgage interest deductions. These benefits are not available for luxury items. The current market trends show that home prices are high, and these tax benefits can help offset the costs of investment. Real estate is often considered a good hedge against inflation. As the cost of living increases, so does the value of real estate. This is evident in the current market where home prices are high and continue to rise, indicating that real estate is a good investment in an inflationary environment.

In conclusion, while luxury items may offer a sense of status and exclusivity, they are not investments. The luxury goods market is facing a significant slowdown, and the demand for these goods is expected to decrease. In contrast, real estate offers several advantages as an investment, including stability, income generation, leverage, tax benefits, and inflation hedging. Therefore, it may be more prudent to consider real estate as an investment option, as it offers better returns and lower risks.