REAL Exclusive Magazine

Trends In International Real Estate

By Patricia Tan

I write this soon after returning from a springtime marketing trip to Western Europe. I make a similar trip at least twice each year and combine having a presence at overseas property shows, with delivering educational seminars to European buyers looking to invest in Florida and meetings with our valued partners in various European countries. These trips afford me the opportunity to experience first-hand, how our European cousins are spending their Euros, Sterling, Krona or other currency, when they look to buy real estate outside their home countries.

The top two destinations for European buyers buying second homes for vacation or retirement are Spain and France. Promises of a mild Mediterranean climate, sunshine, warmer temperatures and easy accessibility are hard to beat.
 
The Spanish property market has been hard hit in recent years. First, over building in many of their top resort areas left these locations less desirable. This was followed by allegations of corruption, and homes constructed without proper permitting or clean title to the land upon which they were built. Some Europeans are still nervous about buying a second home in Spain.

France has also been a popular destination. In addition to the traditional retiree and vacationer, many Europeans have purchased homes in France as rental investments. French developers have been quick to take advantage of the fact that almost 50% of the population there rent homes. They have structured developments to offer guaranteed rental income and capital growth to savvy investors.

So how does Florida stack up?
 
The U.S.A generally has one of the most transparent real estate markets in the world. How a property is zoned, what has been permitted there and who owns it, is usually a matter of public record. Foreign purchasers of real estate here can feel somewhat protected by this, and have the comfort of title insurance which accompanies most U.S real estate transactions – this is not the case in many other countries.
 
Florida is generally acknowledged as a retirement destination, and the many empty homes we see during our summer months certainly bear witness to the fact we can boast many owners of second homes. However, recent years have seen a shift in the profile of the European buyer who makes an investment here – “investment” being the operative word. 

Many European buyers will buy a home to meet their personal needs, but they will also want to rent it for part of the time – if not to make a cash return, to at least cover their annual cost of ownership. For this reason, many of them will purchase homes that allow short term rentals – weekly or monthly. Here on the Gulf Coast, once you leave the beach areas it is hard to find homes in subdivisions that allow such rentals. The majority of British and German buyers for instance, prefer to buy single family homes rather than condos, and suitable houses can be difficult to find in the beach areas. The limited choice of homes that allow short term rentals on the mainland drives many European buyers to purchase homes in Orlando and Central Florida where short term rentals are allowed and encouraged.

Recently we have seen a growing number of Europeans come to our area to purchase true investment properties – homes they will never use themselves, and where they plan to install a tenant on an annual lease who will pay many of the running costs of the home in addition to a monthly rental.
 
What makes Florida attractive for such an investment at this time?
 
First, real estate prices have rolled back many years to the low prices we see today. In addition, for some international investors, the weakness of the U.S. Dollar against their home currency makes our prices look even lower. We also have a healthy demand for rental properties both from those losing their homes to foreclosure, and from a growing population – retirees unable to sell their homes “up north”, those building new custom homes in our area (yes, this class of buyer has returned!) who need a place to live while construction takes place, and owners and employees of businesses relocating to Florida.
 
Many Europeans see real estate as a key component of their investment portfolio, and may already own rental properties in more than one European country. The time is right for further diversification, to add Florida to the list of places they collect rent.

We recently worked with some European investors who were purchasing tenanted condos in Fort Myers for between $50,000 and $75,000 and seeing net returns of up to 9%. We just sold a Sarasota condo with tenants in place to a British buyer who will achieve a more modest net return of around 5% – but still much more than he would see from a savings account or CD today!

For the higher priced homes, many investors will sacrifice cash income in the short term for a better future upside on capital appreciation, as might be the case when purchasing a waterfront property for instance. Like the Scottish couple we recently showed beachfront condos on Lido and Longboat Key. They wanted a luxury property they could call home for a few months each year, and rent to other visitors when they were not using it themselves.

Patricia Tan was born in England, and moved to Sarasota in 1997. Her career afforded her the opportunity to live and work in many countries around the world, including Australia, Hong Kong, Singapore, Malaysia, Germany, France, Belgium, Netherlands and the United Kingdom. She spent five years as a Director of an American real estate franchise in England. Patricia has served as Chairperson of Sarasota Association of REALTORS®’ International Council, and currently serves as the national Association of REALTORS®’ President’s Liaison to the United Kingdom. She is a Certified International Property Specialist (CIPS) and works as International Sales Director for Prudential Palms Realty. Patricia may be reached at 941-504-9232 or Pat@PatriciaTan.com.

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