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Patricia Tan – Perspectives – International REAL Estate

Patricia Tan

The Changing Face Of International Real Estate

By Patricia Tan

As we wave good bye to our winter visitors, we hope they enjoyed our balmy, sunny shores, and that they will be back again. While many of those visitors come here from the cold northern States, we still welcome a large number from other countries – Canada, United Kingdom, Germany and even as far away as Australia and South Africa, to name a few. In the past, many of these international visitors, just like their American counterparts, have fallen in love with our area and start to think about purchasing a second home or investment property here.

They still do this, but things are changing . . .

The strength of the U S Dollar has led many prospective foreign buyers to think twice about if and how they might purchase a property here. Not to be deterred by currency movement however, many foreigners still choose to buy, but they may buy in a different way.

In recent years the majority of purchases made by overseas buyers have been made with cash. Their home currency’s weakness against the U.S. Dollar has caused them to rethink this strategy and look for ways to minimize the risk of currency movement. Many of these buyers are now looking to finance their home purchase here, and I am pleased to say we have a lot of local lenders who offer foreign national mortgages. These mortgages typically require a down payment of 30-35%. The buyers must prove their financial standing in their home country and show they are able to make the necessary repayments.

Consider the British buyer who wishes to purchase a home at $500,000. He has cash resources in British Pounds. At today’s exchange rate of approx $1.40, the cost of this home in Sterling would be £357,000. Just two years ago the exchange rate was $1.68 and this same house would have cost only £298,000. If this same buyer makes a 30% deposit and finances the remainder of the home purchase, he stands to benefit from repaying the mortgage early, when currency rates move in his favor. Using the same two exchange rates mentioned above, the home would now cost the buyer £107,000 ($150,000 at exchange rate of $1.40) deposit plus £208,000 ($350,000 at exchange rate of $1.68), or a total of £315,000. Even allowing for monthly payments on the mortgage, this is still a significant saving from the £357,000 the home would cost today. Mortgage rates are still low, and are much less volatile than currency rates, and the buyer stands to benefit from investing the balance of his cash while waiting for the right time to repay the mortgage.

Buyers who bought homes here when prices were lower AND their home currency was strong AND that currency has now weakened, stand to gain a lot if they sell their Florida property now, and repatriate funds to their home country. In fact, we have seen a number of Canadians selling homes during this past winter season, fully anticipating they will buy another home here, when the currency rate is more favorable to them.

The Canadian who bought a $500,000 home here in 2011, when property prices were considerably lower and when the Canadian Dollar was worth $1.04, actually paid CAD481,000. Let’s assume the home price has not appreciated and it sells for $500,000 today. The Canadian Dollar now stands at $0.77 so the gain on currency alone would be CAD149,000. Add that to a conservative increase in the home price to say $650,000 over the last four years, and our Canadian friend could be sending back CAD844,000 – a total profit of CAD363,000. If he returns in the future to buy the same home back at say US$750,000 when the Canadian Dollar has returned to parity with US$ the same home is going to cost him CAD750,000 leaving CAD94,000 in his Canadian bank account! More than enough to cover seasonal rental costs between selling and buying.

It is easy to say the strength of the U.S. Dollar today will slow down international buyer activity, but as we can see by the examples above, people will still find a way to enjoy warm winters with us on the west coast of Florida.

patricia-tanPatricia Tan was born in England, and her career in international sales and marketing led her to live and work in many countries around the world before moving to Sarasota in 1997. Patricia is a Certified International Property Specialist (CIPS), Graduate Realtor Institute (GRI), and Transnational Referral Certified (TRC). She is involved in global activities of the Sarasota, Florida and National Association of Realtors, and currently serves as NAR President’s Liaison to U.K. Her real estate business operates from Coldwell Banker on St Armands Key, where her focus is to bring international buyers to the local market. She regularly makes marketing trips to Canada, Asia and Europe, to promote Florida’s Gulf Coast and the Sarasota area in particular. Patricia may be reached at 941-504-9232 or Pat@PatriciaTan.com.

Copyright © 2016 REAL Exclusive Magazine www.getrealexclusive.com
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