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NAR: U.S. International Real Estate Investment Drops 36%

Annual survey found a “confluence of many factors,” such as a decline in global growth (down 3.6% in 2018) and a tight housing inventory, led to the drop.

WASHINGTON – According to a survey of residential purchases by international buyers released by the National Association of Realtors® (NAR), foreign buyers purchased fewer U.S. existing homes over the latest one-year study period, from April 2018 through March 2019.

Global economic growth, which increased in 2016 to 2017, slowed to 3.6% in 2018 and is on pace to taper to 3.3% in 2019.

NAR’s Profile of International Transactions in U.S. Residential Real Estate 2019 – an annual survey from the National Association of Realtors® (NAR) – found that foreign buyers purchased $77.9 billion worth of U.S. existing homes from the 2019 survey reference period – a 36% decline from the level reached in the previous 12 months ($121 billion).

Non-resident foreign buyers accounted for $33.2 billion of U.S. existing-home sales, a 37% decline from the prior level of $53 billion.

Resident foreign buyers – recent immigrants – purchased $44.7 billion of residential property, a 34% drop from the prior level ($67.9 billion).

The dollar volume of purchases also saw a decline, as well as average prices compared to levels during the previous 12 months. In the latest year, foreign buyers purchased 183,100 properties (266,800 in the previous period) at an average price of $426,100.

“A confluence of many factors – slower economic growth abroad, tighter capital controls in China, a stronger U.S. dollar and a low inventory of homes for sale – contributed to the pullback of foreign buyers,” says Lawrence Yun, NAR chief economist.

“However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.,” Yun adds.

Top foreign buyers

  1. China: For the seventh consecutive year, China exceeded all other countries in dollar volume of purchases, buying an estimated $13.4 billion worth of residential property – though that’s a 56% decline from the previous 12 months. The Chinese economy is growing at a slower pace compared to past years, at 6.3% in 2019 compared to 6.9% in 2017. It’s also harder for Chinese citizens to move money out of the country since the Chinese government tightened monitoring of dollar outflows since 2016 to manage its foreign exchange reserves.
  2. Canada: Following China, the next top foreign buyer for 2019 was Canada at $8.0 billion. While Chinese investors and Canadian investors tied concerning the number of purchases, on average, Chinese buyers bought properties at a higher price point. Therefore, China ranked ahead of Canada in terms of dollar volume.
  3. India: The third top international buyer was India at $6.9 billion
  4. United Kingdom: The U.K. was fourth at $3.8 billion
  5. Mexico: In fifth place, Mexico invested $2.3 billion.
  6. Each of the top five buyers experienced a decline in the dollar volume of purchases.

Where did international buyers go?

Following historical trends, Florida was at the epicenter of foreign investment, and the state attracted 20% of foreign buyers. Forty-two percent of Canadians purchased property in Florida.

“Many Canadians and other foreigners found Florida so enticing because of its lenient tax laws,” says Yun. “Additionally, many Florida metro areas have an inventory of cheaper properties, relatively speaking – a combination which makes the state a very popular destination.”

California followed Florida, accounting for 12% of international purchases; 34% of Chinese buyers purchased property in California, which represents a year-to-year decline.

The third most popular destination among international buyers was Texas (10%), particularly desirable among Indian and Mexican buyers.

Arizona accounted for 5% of international buyers, popular for Canadian and Mexican purchasers, followed by New Jersey (4%). New Jersey appealed to a mix of international buyers, especially those from the United Kingdom.

A few other significant destinations were North Carolina, Illinois, New York and Georgia. Each of these states accounted for 3% of all foreign buyers.

Price points

Forty-four percent of foreign buyers purchased in a suburban area, while 76% purchased single detached family homes and townhomes. The median purchase price for foreign buyers was $280,600, which is slightly higher than the $259,600 average for all U.S. existing homes sold. According to Yun, the price difference is a reflection of the choice of location and the kinds of properties desired by foreign buyers.

Eight percent of international buyers paid $1 million or more for their property, compared to just 3% of all U.S. existing homebuyers.

Resident foreign buyers – those living in the United States either as recent immigrants or holding visas for professional, educational or other purposes – typically purchased properties at a slightly higher price point ($282,500) compared to non-resident foreign purchasers ($277,700).

“Even though numbers were lower this year than during the previous 12 months, international investors and buyers still spent and invested a great deal of money in U.S. real estate,” says NAR President John Smaby. “Homebuyers from across the globe know that the U.S. market is still a safe, secure and promising place to invest.”

International buyers are more likely to purchase homes in cash: 41% of the international transactions were all-cash sales compared to 21% of all existing-home purchases.

Non-resident foreign buyers are more likely to pay in cash than resident foreign buyers, who are more likely to acquire mortgage financing from U.S. sources: 63% of non-resident foreign buyers had an all-cash purchase transaction compared to 25% among resident foreign buyers.

Canadian buyers, who primarily live abroad, were the most likely to pay all cash (75%). The majority of Asian Indian buyers, most of whom resided in the U.S. as recent immigrants or visa holders, obtained a U.S. mortgage. Almost half of Chinese buyers made an all-cash purchase.

© 2019 Florida Realtors®