What’s New In International Real Estate?
By Patricia Tan
There is always something new in the world of real estate. It is a constant challenge, as a real estate practitioner, to keep up with the latest market trends, regulations and legislation. Nowhere is this more true perhaps, than in the world of international real estate. It is no longer enough to understand what is happening “in our own back yard”, but we need to be aware of state, national and global situations that have an impact on our real estate market here in Florida.
When most Floridians think of international real estate, they think about people coming here from other countries to buy a second home or investment property. After all, we are THE most popular state for international buyers who purchase property in U.S.A.
With that in mind, I thought it would be useful to highlight some of the changes I have observed recently when working with foreign buyers.
Changing Statistics
A quick examination of the latest statistics published by the National Association of Realtors reveals some interesting facts.
• While Florida is still the number one destination for overseas buyers, our share of that market has dropped from 23% to 22%. At the same time, Arizona’s share has increased from 7% to 11%. Why has Florida’s share dropped? Many of my buyers cite high property taxes, homeowners insurance and condominium fees as reasons not to buy here. Why Arizona? I suspect they may be benefiting from increased Canadian investment, and their proximity to the oil-rich economy of Western Canada.
• In 2009 Canadians represented 17.6% of all foreign buyers in U.S.A. Latest figures attribute 24% to Canadian purchasers. Market share for the second largest group of overseas buyers – those from U.K. – dropped from 10.5% to 9%. No doubt a reflection on their weak economy. Interesting to observe that Chinese market share increased from 5.4% to 9%. The majority of Chinese buyers purchase in California, and they focus more on investment properties rather than second homes.
• The number of foreign buyers who purchase single family homes has dropped from 68.2% to 66% and condo purchases have jumped from 18% to 23%. Once again, this could be due to the rise in number of Canadian buyers who tend to favor condominiums rather than single family homes.
Foreign Currency Markets
The changing fortunes of the U.S. Dollar on international money markets will always have a key role to play. A weak dollar makes our property look even better value to those investors from countries with strong currencies. The last year has seen a very strong Canadian Dollar, when it periodically traded above parity with the U.S. Dollar. We have also seen the Swiss Franc reach new peaks, all the more noticeable against the back drop of a weakened Euro.
Banking Regulation
Foreign buyers have been frustrated by the lack of mortgage funds available to them in U.S.A., although several of our major banks now do have programs for this market. New rules from the U.S. Treasury and the banks themselves are also affecting real estate transactions on a day-to-day basis. We have had several overseas buyers experience problems in getting their funds to closing. Some banks will only wire funds from an account if the customer gives instructions when they are physically present at a branch. Not easy to meet this requirement if your money is in a Florida institution and you live in London, Paris or Rome! Some closings have been frustrated by this, when the buyers were in their home countries at the time of closing. Fortunately for the savvy realtor, there are ways to work around the problem – if you expect it, you can plan for it.
Cultural Challenges
Working with buyers and sellers from other countries can present some unique challenges as we encounter cultural differences along the way. But even age old traditions evolve to keep up with the times.
Consider that China now has more than one million millionaires, and millionaires in the Asia-Pacific region overtook Europe in terms of population and wealth for the first time in 2010. Many of these millionaires are achieving that status at an early age through creative entrepreneurial activities rather than long term wealth building strategies employed by the older generation.
The concept of “saving face” in social and business settings has long been a pillar of Asian cultures, but we now see it taking a more prominent role in other parts of the world too.
Staying ahead of the curve in the global economy in which we now live is not easy, but it is essential to building a strong, vibrant real estate business.
[1]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 [2].
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