Waning economic growth in many countries and higher home prices further enhanced by a strengthening U.S. dollar resulted in a slight decline in international sales dollar volume of U.S. property over the past year and a significant retreat in buying from non-resident foreigners.
This is according to an annual survey of residential purchases from international buyers released recently by the National Association of Realtors. The survey also amazingly revealed that the dollar volume of sales from Chinese buyers exceeded the total dollar sales figure of the next top four ranked countries combined.
NAR’s 2016 Profile of International Activity in U.S. Residential Real Estate, covering U.S. residential real estate sales to international clients between April 2015 and March 2016, found that foreign buyers purchased $102.6 billion of residential property, a 1.3 percent decline from the $103.9 billion of property purchased in last year’s survey. Overall, a total of 214,885 U.S. residential properties were bought by foreign buyers (up 2.8 percent), and properties were typically valued higher ($277,380) compared to the median price of all U.S. existing home sales ($223,058).
Lawrence Yun, NAR chief economist, says this year’s findings highlight the tremendous appeal U.S. real estate still has on many foreign nationals despite the price of property becoming less affordable. “Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,” he said. “While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009.”2
Adds Yun, “Foreigners – especially those from China – continue to see the U.S. as a solid investment opportunity and an attractive place to visit and live.”
According to the survey, sales to non-resident foreign buyers pulled back by approximately $10 billion to the lowest dollar volume since 2013 ($35 billion). The decline was largely caused by the decrease in the share of non-resident foreign buyers to foreign residential buyers to 41 percent – down from the almost even split between the two in previous years (48 percent in 2015).
“Both the increase in U.S. home prices – up 6 percent in March 2016 compared to one year ago – and the depreciating value of foreign currencies against the U.S. dollar made buying property a lot pricier last year,” says Yun. “Led by Venezuela (45 percent) and Brazil (24 percent), at least eight countries, including China and Canada, saw double-digit percent increases in the median sales price of a U.S. existing-home when measured in their country’s currency.”
For the fourth year in a row, buyers from China exceeded all countries by dollar volume of salesat $27.3 billion, which was a slight decrease from last year’s survey ($28.6 billion) but over triple the total dollar volume of sales from Canadian buyers (ranked second at $8.9 billion). Chinese buyers purchased the most housing units for the second consecutive year (29,195; down from 34,327 in 2015), and also typically bought the most expensive homes at a median price of $542,084.
“Although China’s currency modestly weakened versus the U.S. dollar in the past year, it’s much stronger than it was 5 to 10 years ago, thereby making U.S. properties still appear reasonably affordable over a longer time span,” notes Yun.
In addition to the slightly diminished sales activity from Chinese buyers, the total number of sales and the sales dollar volume from buyers from Canada, India ($6.1 billion) and Mexico ($4.8 billion) also retracted from their levels one year ago. Only buyers from the United Kingdom – after a decrease in the 2015 survey – saw an uptick in total sales and dollar volume ($5.5 billion).
“Sales activity from U.K. buyers could very well subside over the next year depending on how severe the economic fallout is from Britain’s decision to leave the European Union,” adds Yun. “However, with economic instability and political turmoil outside of the U.S. likely to persist, the world view of American real estate as a safe investment should keep demand firm even as pressures from a stronger dollar continue to weigh down on affordability.”