Who Are Those Foreigners Who Buy Real Estate In The US?
The world is getting smaller and the US is getting more global, each and every year. That’s a fact that all of us can observe routinely in our daily lives. At work, more and more of our friends come from another land, another culture. On vacation in a US resort, whether by the ocean, in the mountains or in the desert, you hear all kinds of languages being spoken. Same scene in an upscale shopping center. Look around you. The US, more than ever, is a microcosm of the entire world.
No-one more than Realtors understand this dynamic change. They better, if they want to make a good living. Not only is the foreigners’ share of the total dollar sales volume climbing steadily, but the lion’s share of their purchases tends to be at the high-end. That’s where it is most visible and where it has the most impact. As we said time and again in this column, these facts have a heck of a lot to do with many markets stabilizing, or even thriving, over the last three years.
As it does every year since 2009, the National Association of Realtors (NAR) conducted an online survey of roughly 200,000 Realtors, through the end of April 2015, to analyze with a magnifying glass the profile of international clients, whether non-resident foreigners or recent immigrants who have been in the country less than 2 years. I propose to give you here & now the main findings of this captivating NAR study. Be ready for a few surprises.
• Over the 12 months referred to above, 209,000 houses have been bought by foreigners.
• These transactions represent an aggregate dollar volume of $104Billion (13% more than the year before), about 8% of the total existing home sales in the US.
• The average purchase price of international buyers, which stands at $500k, is nearly double that of a domestic buyer ($256k).
• Out of the 172,850 Ultra-High Net-Worth Individuals (according to Knight Frank 2015 Wealth Report), 35% are from Europe (UK, Germany, France, Italy, etc.), 26% from North America (90% of them in the US) and 24.5% from Asia (China, Japan, Hong Kong, Singapore, etc.).
• US real estate became significantly more expensive over the 12 months period due, in part, to the rising value of the dollar relative to other currencies. The dollar gained 30% on the euro, 19% on the Canadian dollar and 16.5% on the British pound.
• Four countries (out of roughly 200 in this world) accounted for 47% of all purchases made by foreigners: China, Canada, India and Mexico.
• For the 1st time, Chinese buyers exceeded all other international buyers, both in terms of unit sales and dollar volume, with $28.6Billion worth of property.
• Following are Canada ($11.2B), India ($7.9B) and Mexico ($4.9B).
• 50% of the sales to foreigners were concentrated in 4 states: Florida (21%), California (16%), Texas (8%) and Arizona (5%). Proximity to the home country, relatives, job and educational opportunities & climate are the main reasons for the choice of location.
• 35% of the foreigners buying in Florida come from Latin America. 57% of those buying in California come from Asia. 41% of the international clients purchasing in Texas come from Latin America. 46% of those buying in Arizona come from Canada.
• When you look at the average price of a 120 square meter condo (not houses) across the globe, it is obvious that US prices are very attractive compared to many other world cities. According to Global Property Resource, Paris did lead the pack of “most expensive cities” at $4,143,720 (based on a May 29 download of the global data).
• In comparison, New York stands at $1,623,480, San Francisco-Oakland-Fremont at $622,400, Los Angeles-Long Beach-Santa Ana at $375,800, Boston-Cambridge-Quincy at $331,000, New York-Wayne-White Plains at 270,100, Austin-Round Rock at $214,400, Chicago-Naperville-Joliet at $163,800 and Miami-Fort Lauderdale-Miami Beach at $149,900.
• The bulk of sales to international clients are cash purchases (55%), compared to about a fourth of all sales of existing homes in the country.
• Chinese buyers are clearly buying more than any other foreigners or domestic buyers at the high-end. The average home price for Chinese buyers is $831,800. This is to be compared to $455,600 from UK clients, $460,200 from Indian buyers, $380,300 from Canadians, and $274,800 from Mexican clients.
• The volume of purchases from China (including Hong Kong & Taiwan), at $28.6Billions, is 4 times what it was only 4 years ago, in 2011.
• The percentage of Realtors surveyed who reported working with international clients over the 12 months period increased by 7% over the previous year.
The market, yes, it is changing!