Foreign buyers continue to buy more American real estate than in any previous era. Business Insider, in a recent issue of The Real Deal, claims that one market’s loss, is another Market’s gain (Foreign Buyers are Snapping Up More American Real Estate Than Ever). Some countries, such as Canada, the United Kingdom, Australia, and New Zealand, are beginning to see a tapering off in foreign buyers. The United States, on the other hand, is experiencing growth from foreign buyers.
According to the National Association of Realtors, in the twelve-month period ending in March 2017, there were 284,455 homes bought by foreign buyers. Stunningly, this represents a 32.37% percent growth from the previous twelve- month period. This also represents about 5% of the total homes bought across the United States. The total dollar volume is just over $153 billion in U.S. dollars.
There is a decided difference between the two major types of foreign buyers, and how they plan to use their homes. The first group are resident buyers, those who have immigrated to the U.S. or have acquired long-term visas. The second group are re non-resident buyers, who will use the home occasionally. Most often they are just speculators holding the property as an investment against currency hedge.
NAR maintains that the majority of buyers are from five major countries. China, India and Mexico were resident buyers, while those from Canada and the United Kingdom were primarily non-resident buyers.
While the United States does have buyers from all over the world, just five countries are believed to comprise the majority of sales by dollar volume. Among them, Chinese buyers bought $31.7 billion worth of real estate. This represents an increase of 16% from the previous year. On the other hand, India showed an increase of 27% year over year with a sales volume estimated to be $7.8 billion. This surge is huge and is expected to contribute to a greater increase in the price of homes.
Regarding the number of homes purchased, these same five countries are believed to be at the top of that list. Chinese buyers bought 40,572 homes, an increase of 38% year over year. Canadians showed a 25% increase year over year with 33,819 homes bought. Mexicans purchased 28,516 homes which represents an increase of 59% year over year! Indians bought 12,869 homes showing an increase of 2.86%. Residents of the United Kingdom represented an increase of 40% year over year with the purchase of 12,869 homes. The total from just these five countries is 46% of the 284,455 homes purchased by foreigners.
Two things stand out regarding these numbers. They are “concentration and capital controls”. Most of the homes bought by foreigners are concentrated in major markets, such as Los Angeles and San Francisco. Concentration in areas, such as Pittsburgh, is probably lower. Secondly, China’s new currency controls along with a new “anti-money laundering framework” are expected to greatly reduce the amount of capital that can leave the country. China’s purchase of homes in the United States is expected to decrease about 20% through this year.