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Stronger relationships between US and UK encourages investment

States Of Mind

27.08.19

The foreign love affair with the USA is blossoming with a more divergent investor pool. So where are the smart buyers heading? Laura Henderson reports

In a nation in which homeownership is synonymous with the American dream – counting the potential ways in which Trump can keep the US housing market vibrant, makes for an engaging bout of crystal ball gazing.

It’s rare to have one factor influence home sales nationally over a long period of time, but few trends have held as much sway over U.S. real estate — especially in the luxury home market— than foreign buyers.

Initially, the draw was post-recession values in New York and California, especially compared to cities such as London. Since then, as the tide of foreign nationals coming to the States has swelled, so too have the incentives that now include political and economic stability, the desire for hard assets, lifestyle and even prestige.

“New York, Los Angeles, Boston, Washington, D.C., and San Francisco have all been, and continue to be, prime markets for foreign buyers,” explains Florida realtor Vanessa Grout, “but other locations are garnering international interest because of potential return on investment and lower prices when compared to top markets such as Manhattan where per-square-foot prices can be as high as $10,000. These buyers are looking for long-term growth opportunities, a luxury lifestyle and security.

New construction, in particular, is proving to be a good match for these buyers. Priscilla Schumacher, director of sales and marketing for Chicago-based Edward R. James Homes, explains: “International buyers are savvy and they do their homework. They’re looking for a home that suits their needs today but maintains its resale value in the medium to long-term.”

According to the National Association of Realtors (NAR) Profile of International Activity of International Clients, four states account for half of international transactions: Florida, California, Texas and Arizona and buyers from five countries dominated the purchases, with Chinese buyers (People’s Republic, Taiwan and Hong Kong) accounting for 16% of the transactions, followed by Canada at 14%; Mexico at 9%; India at 8%; and the U.K. at 4%.

Still, industry statistics don’t tell the whole story. Donna Harper a sales agent for high-end residential communities in Tampa, says she deals almost exclusively with foreign clientele.

She explains: “These buyers want that second bedroom and full bathroom downstairs. They also want open kitchen and dining room plans to seat bigger families.

“They’re looking for a floor plan that allows flexibility to accommodate family and other guests visiting for an extended period of time.”

Not only did Chinese buyers account for the largest share, spending $28.6 billion on properties, nationwide their average purchase price of $831,800 was well above the $499,600 average buyers from other countries spent. NAR notes that foreign buyers overall are “likely to be wealthier than the typical U.S. median domestic buyer and may be looking for an upscale or trophy property.”

Miami has become even more attractive for luxury buyers, largely down to the incredible velocity of improvements to its cultural, entertainment, shopping, real estate and infrastructural offerings over the past few years. Knight Frank now counts it as the sixth most important city in the world.

Adds local agent, Diana Rodriguez: “Few other Florida cities can match Miami’s sizzle. We’re seeing expanded interest away from the beach and into the downtown core, where four or five years ago, no foreign buyer would have looked. This change has been transformational. While New York is a mature market, Miami in this sense is just coming into its own.”

Orlando meanwhile continues to attract interest from a range of countries, with locations such as Palm Beach, Singer Island and Naples proving popular with European buyers, according to Marisela Cotilla with Douglas Elliman Real Estate in Boca Raton.

Looking ahead, few experts see the global appetite for U.S. properties slacking any time soon. Interest in prime locations along U.S. coasts will remain strong, but expectations are that international buyers will cast wider nets and begin to take a serious look at new locations.

Confirms Kathy Beck, broker-associate of Gulf Realty: “With the onset of foreign buyer property taxes that have been put in place in Canada and the limitations on international investment in Australia, investor eyes are on the United States and Florida in particular. Inventory choice is unrivalled with many buyers opting for a gated community set-up, although waterfront homes and modern condos are proving popular too. The one notable difference in the past few months, is renewed interest for resort property. Families have access to a raft of tailored on-site facilities plus it provides a home-from-home community environment.”

The region’s rich macro-environment, adds agent, Mike Pappas, is also extremely attractive for long-term investors. “Rental yields are running at about 8%, but the real return is from capital growth, with hard-core investors getting steady appreciation.”

TOP INVESTMENT SPOTS

Florida Keys

One the USA’s most captivating stretches of coastline - stretching from Key Largo at its northern point to Key West near its southern tip; more than 100 miles of oceanfront sit between Florida Keys’ saltwater wilderness of Everglades National Park and the Florida Straits. Although the area has long been popular with wealthy northern buyers, prime properties in Key West are still more than 8% off their 2006 peak. Yet prices are on the up; the average sale price of a home in Monroe County, which covers much of the Florida Keys, rising 12% year on year in the final quarter of 2018, according to Multiple Listing Service figures.

Island communities such as Big Pine Key and Marathon attract wealthy holiday-home buyers with an appetite for water sports including snorkelling and scuba diving. The archipelago’s other draw is its relaxed atmosphere with a small-town feel to many of the communities. While Key Largo and Key West have the highest profile in the Keys, some of the biggest home sales have taken place in Islamorada, an island community about a third of the way down the Keys. Here, stylish three-bed detached homes with first-come dockage can be picked up for $950,000.

 

Fort Lauderdale

Located 23 miles north of Miami on Florida’s Gold Coast – criss-crossed by canals, creeks and rivers and boasting over 300 miles of navigable waterways, Fort Lauderdale’s renaissance unofficially began thirty or so years ago with the revitalisation of Las Olas Boulevard, the city’s hub of hip.

This former quaint district of small shops has exploded into a lively downtown village, with upscale restaurants, designer boutiques and urban chic property taking hold.

The city has traditionally attracted sunbirds seeking relief from dipping temperatures elsewhere in the US and Canada; its moniker “Venice of America” also attracting foreign investors seeking a chic waterfront bolthole.

According to Sheryl Hodor of luxury agents Hodor and Hotchkiss, the market has changed greatly from this time last year - mixed-use projects-combining high-rises, luxury townhouses and commercial space are the most prominent real estate trend, driven by a conscientious city government keen to ensure efficient use and sympathetic restoration of existing downtown residences.

Those looking for over-the-top estates will find them at Fort Lauderdale’s Rio Vista and Harbor Beach, where multimillion-dollar properties, many with mega yachts, attract the high-end buyer. In contrast, historic neighbourhoods like Victoria Park, with tree-canopied streets, have mostly 1950s renovated homes priced from $700,000.

BUY WISE

  • The real estate industry is well regulated in the States and very transparent (all properties are listed on a nationwide database, Multiple Listings System or MLS, of which all agents have access).
  • Once the property is chosen, the agent working for the buyer prepares an offer to purchase a property. Once signed by the seller, this becomes a binding contract, and the buyer usually pays a deposit of 20-30% (for non-residents) into an ‘escrow’ account.
  • The buyer will usually instruct a licensed home inspector to perform a detailed inspection of the property. An appraiser will visit the property to give a detailed report of the home’s market value with a title search undertaken to ensure the property is ‘debt’ free and all building permits have been approved.
  • When buying a condominium, buyers need to thoroughly investigate the financial health of the condo association. Buyers should always have a lawyer to review contracts and title search documents on their behalf, particularly if they are buying a foreclosed property.

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