Texas Real Estate Center 2014 International Home-Buying
It’s time for the annual National Association of Realtors’ (NAR) survey measuring the level of sales of U.S. residential real estate to foreigners. There were 3,547 respondents to the 2014 survey, almost 200 more than last year. The survey was conducted from April 14 to May 14, 2014.
Information was gathered from Realtors on U.S. residential real estate purchased by international clients during the 12 months ending March 2014. The term “international client” refers to two types of purchasers.
- Type A are foreign clients with permanent residences outside the United States. These clients typically purchase property for investment, vacations or visits to this country for less than six months.
- Type B are clients who are recent immigrants (in the United States less than two years) or temporary visa holders who reside here for more than six months for professional, educational or other reasons.
How did the market do?
This year’s international clients bought an estimated $92.2 billion in residential real estate. That’s approximately 7 percent of total U.S. existing home sales of $1.2 trillion (see table below). Of that, $46.7 billion is attributed to Type A clients and $45.5 billion to Type B.
International sales were up $24 billion from the previous survey.
A number of favorable factors influenced foreign demand for U.S. residential properties:
- stronger global activity in the second half of 2013,
- appreciation of the Chinese yuan and the British pound,
- the relative affordability of U.S. residential property, and
- international investors’ desire for higher returns and greater security.
- Chinese residents are also influenced by a flight to quality.
Why U.S. homes?
- Approximately 56 percent of the respondents reported profitability and security are the main factors influencing the decision to purchase in the United States.
- Well defined property rights, strong institutions governed by rule of law, a world-leading economy, and a recovering housing market were also factors.
- Foreign purchasers seek U.S. property related to employment; to house children going to college; for investment and portfolio diversification; and for vacations. Recent immigrants view home ownership as an important accomplishment in their efforts to become established in this country.
What are the countries of origin?
Realtors reported purchasers from 61 countries. Five countries have historically accounted for the majority of the reported purchases: Canada, China (Peoples Republic of China, Hong Kong, Taiwan), Mexico, India and the United Kingdom. In the latest survey, these countries accounted for some 54 percent of the international transactions. At 19 percent, Canada still has the largest share of international purchases, but China has the fastest growing source of international clients, increasing from 5 percent of international sales in 2007 to 16 percent in 2014. Mexico increased from 8 percent in 2013 to 9 percent in 2014 but still was less than the 13 percent registered in 2007 (see figure below).
What are they buying?
Approximately 65 percent of international transactions reported are single-family home sales. In addition, about 39 percent of the homes are intended to be used as primary residences for longer than six months. About 42 percent of transactions were intended for primary residences for: international students enrolled in U.S. colleges and universities, recent immigrants, and professional and managerial employees of businesses and institutions who are in the United States on a temporary but extended visit.
Nonresident foreigners who are limited to six-month stays generally expect to use the property for vacation or rental purposes and as an investment.
- China buys $22bn worth of US homes in 12 months (seeker401.wordpress.com)
- China Fuels Surge in Foreign Purchases of U.S. Housing (blogs.wsj.com)
- Canadians buy most U.S. properties in the world, but China spends most (business.financialpost.com)