International Buyers Investing in U.S. Housing Market

International Buyers of Real Estate on the Rise
October 20, 2010
Thanks to the low prices that can be found on real estate throughout the United States, many foreign investors are turning their attention away from the U.S. stock market and putting their attention on the housing market instead. In fact, foreign investment in U.S. real estate has virtually skyrocketed recently, with most planning to rent out the properties and then to sell them once the economy turns around.
Given the prices that real estate investors have before them, it is easy to see why the interest has grown. At the Viceroy condos in downtown Miami, for example, units once sold for as high as $670 per square foot. Today, they can be purchased at an average price of $319 per square foot.
“I have never seen such a high concentration of foreign nationals acquiring real estate,” said Peter Zalewski in a recent Yahoo finance article. “Eight percent of the sales in downtown Miami are foreign-based. This is unprecendented.”
Miami isn’t the only market to see an increase in foreign investors, however, as other hot spots have included New York, Washington, Las Vegas, San Francisco, Los Angeles, Seattle and Phoenix. In fact, Phoenix saw more buyers from Canada than from California for the first time recently.
“It’s a positive in a sea of negatives,” said Jonathan Miller, who is the chief executive of Miller Samuel, which is a New York-based real estate consulting firm.
Even better for those with money to invest, the payoff can start immediately. Some, for example, focus solely on purchasing those condos that already have renters. In this way, he is able to immediately walk away each month with a profit after paying association fees and taxes. In short, the weak currency, high unemployment and expansive inventory have made the United States an attractive buyer’s market.
“Never before have all these things come together like this,” said Patrick O’Neill, who is the chief executive officer of the O’Neill Group in Hong Kong. “Unless you want to go to Baghdad, the United States is the best you can get.”
The National Association of Realtors is also reporting an increase in international sales, as 28% of brokers have reported working with at least one international client. This figure is up by 5% when compared to last year. Similarly, 8% of brokers report completing at least one sale with an international client, which is up from 12% in 2009.
“I was going [to] invest in the stock market, but I decided to invest in real estate instead,” said Diego Garcia, who is a native of Mexico City and is on assignment with Pfizer Inc. in New York City.
Of course, there are still risks involved with making this type of purchase, as the housing market is still far from reaching a full recovery. Furthermore, prices are still continuing to fall in many markets, which means a foreign investor could get stuck in a bad situation if needing to make a quick sale. Similarly, if a renter leaves, the investor will be stuck without any cash coming in. Nonetheless, demand from foreign investors continues to grow. In fact, overseas buyers now represent 7% of the total buyer’s market. In response, many U.S. brokerages are now hiring agents who are able to speak foreign languages.
“The international buyer pool is better than we have ever seen it before,” said Phillip White, who is the president of New York-based Sotheby’s International.