The US remains attractive to worldwide investors who spent more than ever on property there last year. Florida property continues to appeal to most foreign buyers who show an overwhelming preference for single family homes in suburban areas.
The latest survey of foreign property buyers in the US by the National Association of Realtors finds that although fewer foreigners purchased a property in the US between April 2014 and March 2015, they spent considerably more. While total sales to foreigners went down by 10 per cent, actual spending rose by 13 per cent.
The Profile of Home Buying Activity of International Clients reports that 209,000 US properties were sold to foreigners last year, 4 per cent of the country’s total. The amount spent by foreigners reached US$104 billion, which represents 8 per cent of all property purchases. International buyers tend to purchase more expensive properties than Americans – foreigners spend an average of nearly US$500,000 against the US$256,000 average price paid by Americans themselves.
Among the property types, foreigner buyers of US property choose single family homes. This sector accounted for a massive 61 per cent of the total, well ahead of its nearest competitor – condo properties bought by 19 per cent of international clients. The suburbs of US cities were the preferred location.
Motives behind buying a property in the US vary depending on the resident status of the foreigner. For those who are live in the US, their main reason for purchasing was for business or educational purposes. Among non-resident foreign buyers, holiday home and property investment topped the list of motives behind their purchase.
When it comes to location, just four states in the US make up 51 per cent of foreign purchases – Arizona, California, Florida and Texas. And within this quartet, Florida takes the lion’s share, accounting for 21 per cent of all purchases, considerably ahead of the next largest, California, attracting 16 per cent of foreign buyers.
Property in Florida appeals to the majority of international clients looking for holiday homes and/or investment properties. It’s the top destination for both Canadians and Mexicans – the Canadians are drawn to the year-round warm climate in the Sunshine State and Mexicans like its proximity.
Florida’s resorts also top the most searched for destinations on the Realtor.com portal. Miami, Orlando and Miami Beach make up three of the five most popular places to buy property in the US. In the case of Canadian buyers, Florida dominates the top 9 rankings with a total of 5 destinations.
The foreign buyer
International investors buying US property are predominantly made up of five nationalities. At the top (and for the first time ever) are the Chinese who make up 16 per cent of the share. Next come Canadians whose 14 per cent is slightly lower than previous years because of the strong US dollar. Mexico and India sit in third and fourth positions with 9 and 8 per cent respectively, followed by the UK accounting for 4 per cent of buyers.
In the most popular state for buying property, 35 per cent of international clients are from Latin America, including Mexico and Brazil – investors from Brazil has shown a keen interest in property in Florida over the last year. They are followed by buyers from Canada and Europe who both make up over a quarter of the share in Florida.
Although foreign buyers spend an average of almost double the amount that American buyers pay for property, the actual price paid by foreign buyers varies considerably depending on their nationality. So while the Chinese spend around US$831,000, Canadians pay an average of US$380,300 and the British US$455,600.
Resident foreign buyers account for 49 per cent of international purchases of US property and within this group, the main motive for buying is for a primary residence. Other reasons foreigners give for buying include buy-to-let investment in the US – residential rentals comprise 20 per cent of purchases and holiday rentals 11 per cent.
The National Association of Realtors cites several reasons behind the international interest in US property. The first is the attractiveness of the US as an investment location since the country is widely perceived to be a secure haven for wealth.
Another reason is value for money. The report lists average prices for a 120 square metre condo property in worldwide locations and finds the US compares very favourably, particularly properties in Florida. For example, this type of property costs US$960,840 in London and US$1.9 million in Viena, but a same sized condo in Miami would be priced at US$149,900 or US$174,000 in Sarasota.
US property is also currently undervalued. A survey by The Economist in April revealed that property here is around 11 per cent below value contrasting dramatically with the 27 per cent overvalue estimated in the UK and Sweden, for example. The same survey found that US rental property offers better value than that in Canada, Mexico and the UK.
Source: National Association of Realtors