For many deep-pocketed foreign investors, U.S. housing has never looked better. But international interest in American properties may be waning.
Overseas buyers’ purchases of U.S. residential real estate fell 17 percent based on dollar value to $68.2 billion in the 12 months ending in March 2013, down from $82.5 billion in the previous 12 months, according to the latest National Association of Realtors yearly survey of international home buying activity. Foreign purchases comprised 6.3 percent of the $1.08 trillion in total U.S. existing home sales during the 12-month period. The NAR tracked buying from 68 countries, with Canada, China, Mexico, India and the United Kingdom accounting for 53 percent of the transactions.
“Foreign buyers are experiencing hurdles not only abroad, but also here in the U.S. when it comes to purchasing property,” said NAR President Gary Thomas, in a statement. “Difficult economic conditions, particularly in Europe, have impacted foreign buyers, but several factors in the U.S. have also affected their purchasing power here.”
At 23 percent, Canada took the largest share, followed by Chinese buyers who accounted for 18 percent of the $68.2 billion in sales. Flush with cash, buyers from mainland China and Hong Kong are snapping up luxury homes in major U.S. cities such as New York, Los Angeles and San Francisco. Chinese buyers — many of them industrialists or real estate tycoons — are also buying more expensive homes than other foreign buyers, especially in Manhattan.
Real estate companies have noticed the surge in international sales and have started to cater to this burgeoning globe-trotting niche. Although 54 percent of foreign buyers were referred to a Realtor through friends, previous clients and international and domestic referrals, about 23 percent find agents through a website or online listings.
Tilman Otto, a broker with Gibraltar Real Estate Group in Henderson, Nev., said German-speaking European buyers — from Germany, Belgium, Denmark, Austria, Switzerland and the Netherlands — are buying U.S. homes because two reasons: They are worried about the future of the Euro-Zone and taxes in Europe are as high as 65 percent.
“I get 40 to 50 emails a day inquiring about U.S. real estate,” said Otto, who runs a German-language website, Las Vegas Immobilie, and frequently fields hundreds of phone calls a week from European buyers. “For Europeans it’s a no brainer to buy here. Prices are cheap and the taxes are low. I’ve got a couple of clients that have bought five or 10 properties. The prices have nearly doubled since 2010 when they bought. They’re millionaires now — and they’re very happy.”
Otto said all the sales are all-cash. Most of his clients never step foot in Las Vegas; the majority of the deals are done over the telephone and the Internet. In March, he sold a high-end condo to a northern Italian buyer who wants to move his cash out of Italian banks and into American real estate. Otto said the buyer was worried about a Cyprus-style bank run in Italy.
“In 2010, the European buyers were getting 9 to 11 percent net cap rates,” said Otto. “Today, they get 6 to 8 percent cap rates. In Europe, their cash earns zero interest in a bank.”
Economic and political uncertainty around the globe are driving up real estate sales in the United State, especially in Miami and New York, where capital flight from Argentina, Venezuela and other unstable countries are forcing money to cross borders.
International buyers are also attracted to sunny resorts and warm retirement areas like Las Vegas, Miami, Phoenix and Fort Myers, Fla., where buyers from Canada and Europe flock. They are also interested in metropolitan areas like Manhattan and Washington, D.C. Four states accounted for 58 percent of all foreign sales. Florida topped the list, with 23 percent. California was second with 17 percent. Arizona and Texas each accounted for 9 percent. New York and northern Virginia came both in at 3 percent.