While global real estate trends continue to change with the ebb and flow of foreign economies, opportunities for U.S. real estate professionals are there for the taking—provided they remain informed and well-versed in the nuances of the global market, including which countries are currently having the biggest impact on the American housing market…and why.
Frank Kowalski, chairman of the National Association of REALTORS® Global Business & Alliances Committee, and a REALTOR® with Metro Dade Realty, Inc., in Miami, Fla., notes that while the global landscape continues to shift much like the desert sands, there seems to be a consistent interest in U.S. real estate.
“Factors that have impacted the influx of foreign buyers in the U.S. are as diverse and varied as the countries they come from,” he says. “Whether it be for personal freedoms or milder weather or potential for financial gain, the root drive for those investing in the U.S. is not all that different than it was 100 years ago.”
Lawrence Yun, NAR’s chief economist, says market conditions are solidly improving and he characterizes the global investment market as a good recovery, but doesn’t see it doing anything too impactful in the year ahead.
“Foreign buyers typically make up 2-4 percent of all home transactions in the U.S., and there could be movement in the dial, but I expect the international impact to be fairly minimal,” he says. “The impact from China will continue to grow positively. The impact on Europe may be held back somewhat because of Greece and other Eurozone economic slowdowns they may be experiencing, and Latin America is always a question mark.”
While certain global economies have suffered, others have flourished. As an example, Kowalski cites a recent sale he made for a Venezuelan investor.
“Venezuelans have long been anxious to invest in the U.S. real estate market here in Miami. One family in particular bought five new units in 2005 near the peak of the market bubble,” he says. “While many others chose to short sale out of this market, these investors knew holding on to these investments was prudent since rents were strong.”
Foreign investors seek the same things U.S. buyers do—security and safety of their investments and the hope that the investment will continue to grow. It’s a lesson they have learned from investments in other countries.
“While certain economies such as Greece are experiencing considerable upheaval, its impact on other economies in the European Union appears to be minimal. The reason for that is it came as no surprise,” Kowalski says. “The 2008 U.S. meltdown came comparatively quickly, catching many by surprise. The crisis in Greece has been five years in the making. Those who found themselves invested in Greece since 2010 have had time to adjust their strategies to minimize their losses.”
Yun and Kowalski both agreed that fluctuation in global economies is reflected in the currencies’ buying power. The U.S. dollar has really strengthened, so for foreign investors, real estate is more expensive to buy in the U.S.
As an example, if a Brazilian investor had US $400,000 to spend on a property last fall, he or she would have been looking at properties listed at BRL 908,000. However, a year later, US $400,000 equates to BRL 1,396,000—a difference of over BRL 488,000.
Another high profile example is our neighbor to the north, and the former leader in purchases of U.S. real estate, Canada. The Canadian loon has depreciated 12 percent against the U.S. dollar, cutting sharply into the Canadian ventures across the board. On the flip side, the Chinese yuan and Hong Kong dollar actually appreciated, which is evident by the strong international sales numbers from Asia over the past three years. For the first time ever, China (in this report, China includes People’s Republic of China, Hong Kong, and Taiwan) surpassed Canada as the top buyer of U.S. real estate, according to NAR’s 2015 Profile of Home Buying Activity of International Clients.
“It is important to note where the interest is coming from for U.S. real estate,” Kowalski says. “In a recent report from 24/7 Wall St., five countries—Canada, China, Mexico, India and the United Kingdom—were reported as accounting for 51 percent of all U.S. home purchases by foreign buyers. While the activity may be temporarily fading from our Canadian neighbors, I believe they will remain in the top five, though not as strong as in the past.”
Gaining in Popularity
Yun says that the expansion of international trade is one of the chief factors mobilizing buyers across borders.
“More foreign business people will need to reside here in the U.S., and some of the U.S. companies want to locate abroad, so there will be a greater degree of people movement just because trade of goods and services internationally has been growing,” he says. “This will raise the presence of international buyers in the U.S.”
Joao Teodoro da Silva, president of Brazil’s COFECI-CRECI (Federal Council of Real Estate Brokers—NAR’s partner in Brazil), points out that opportunities for Brazilian investors are on the rise in the U.S., due to affordable prices.
“The price reduction that happened during the financial crisis period is now recovering progressively, and will reach its full value in a short-to-medium timeframe. Whomever buys now will certainly make a positive profit,” he says. “On the flip side, this is also an excellent moment for American investments in Brazil, not only because we have a growing market in a developing country, but because the currency exchange rate is, frankly, in favor of American citizens.”
Francisco Rodolfo Pesserl, advisor to Cofeci-Creci’s president and CILA’s (the Latin American Real Estate Confederation) executive secretary, says CILA members and Latin American investors are also finding favorable investments in America.
“The U.S. is, and will always be, a large, stable and promising place within which to invest, and CILA members, in general, are attracted to the many options they can find to place their money, be it on the short, medium or long range,” he says.
Knowing Where Global Opportunity Lies
While tracking international buyer activity is difficult, it is estimated to represent approximately 4 percent of the entire U.S. market, down nearly 10 percent from the prior year in the number of transactions, but up in dollar volume.
“Transactions are fueled heavily by the Chinese activity in California where their average purchase is near $1 million,” Kowalski says. “Florida, Texas and Arizona also enjoy the top spots for activity of global investments, with honorable mentions going to New York, New Jersey, and Illinois.”
For more information, visit www.realtor.org/global.