Many shifts in the Real Estate Market have been observed over the last few years. Inventory has gradually been coming back, and according to the Urban Land Institute, this should be the last year that low inventory aids property prices. There has been a migration back to the urban areas, or suburban developments focused around more urban-minded projects. And there has been a swing from a buyer’s market to a seller’s market, as sellers know they can leverage buyers hungry to buy before interest rates and home prices go even higher.
Each of these has had a substantial impact on the market, but one of the more interesting trends I’ve observed is with regard to the international buyers; according to Cory Older, Director of a leading property analysis company, one in every fourteen homes sold in the US is purchased by a foreign buyer. While there has always been an international market here in the States, that market has been growing exponentially in the past few years. For the period of April 2013 through March 2014, international sales were estimated at $92.2 billion, an increase from the previous period’s level of $68.2 billion. Although still considered a niche market, it’s a sizable one. 20% of realtors report the amount of foreign buyers increasing over the last five years; however, only 28% of realtors reported having international clients, and only 4% reported having 11 or more.
Canada, China, Mexico, India, and the U.K. accounted for approximately 54% of all reported international transactions, and while buyers and recent immigrants purchased throughout the country, Florida, California, Arizona, and Texas accounted for 55% of the total reported purchases. Many factors have led to the increase in international home purchases and real estate investments – affordable home prices, favorable exchange rates, and growing affluence abroad.
Through the first quarter of this year, almost 60% of reported international transactions were all cash, compared to only one-third of domestic purchases. This in part speaks to the affluence of the international buyer, but could also be due to the lack of a U.S. based credit history and difficulties in mortgage documentation and financial profile requirements. Roughly 65% of these acquisitions are single-family homes, and 42% of all purchases are used as a primary residence.
It’s undeniable that foreign buyers are becoming an increasingly important group in real estate markets globally. While there are always exceptions, most fall into two categories of buyers with different motivations for buying overseas properties: buyers from emerging markets who are generally wealthier and often purchase for real asset capital appreciation value, and developed market buyers who might be interested in a lower median price and are often more focused on investment yield.
International buyer’s habits are often quite different than domestic purchasers. According to Nicole Morris, a Palm Beach real estate agent whose primary focus is on international buyers, “Foreign buyers don’t necessarily look for the best residential real estate deal first. They look for the best location. After they’ve found the best location, then they want the best deal. And they usually aren’t in a hurry. Honestly, American culture wants everything to move so fast. This scares international buyers and sellers who don’t want to be pushed or pressured. They want to feel comfortable with the process.”
Realtors who are focused on increasing their production would be well served to develop a plan to cater to this growing segment in the market. Understanding the buyers, their unique needs, and the purpose of their purchase could expand an agent’s pool of prospects, and in turn, grow their business.
Jonathan Ensey is a Senior Partner at GoThink!, a retail marketing and business consulting company, and the Managing Director of eSpend, a proprietary eCommerce platform with Variable Digital Print and Print On Demand capabilities, as well as a fully integrated SMS, MMS, and email campaign management tool. Our flagship site is dedicated to providing real estate marketing collateral and services to Keller Williams real estate agents.