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 sizeable 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, favourable 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.
Bio:
Jonathan Ensey is a
Senior Partner at GoThink!, a retail marketing and business consulting company,
and the Managing Director of eSpend.
