Going Global: The Impact of International Home Sales on Real Estate Markets
Jan 27, 2016
Analysts have been paying attention recently to the influx of foreign buyers in real estate markets in areas such as California, Texas, Florida, and New York, and the impact of cross-border home sales on real estate markets and communities.
While accounting for only 4 percent of home sales according to the National Association of Realtors®, these trends can change very quickly.
For example, while a recent article described a mainland Chinese investor’s effort to build a community of 99 mega-mansions near Dallas, other sources have noted that for Chinese buyers in particular, cross-border home sales have actually started to wane with the decline in the Chinese stock market and lower prospects for economic growth in China.
According to a recently released report from NAR, similar trends have occurred for international home sales to foreign nationals from different countries, including real estate markets such as New York (for example, Russian and Eastern European buyers) and South Florida (primarily Latin American buyers).
Each of these local trends has in common an influx of money — often supporting cash purchases, rather than financing — supporting a flow of foreign investment into the area.
International home sales can inflate home prices in specific real estate markets.
According to NAR, the average single-family home sale price to an international client is $449,600, nearly double the average U.S. home sale price of $255,600. However, as with other kinds of investment like international stock ownership, once economic conditions change, real estate investment can flow out of it just as quickly.
This is because, as with all other kinds of economic investment, foreign real estate investment is subject to the whims of national and global economics and markets. In the case of Chinese investors, changes to the Chinese and American economies (like the recent economic slowdown in China) can have an impact on how Chinese nationals view American real estate markets.
For example, a young Beijing businessman recently told The Wall Street Journal that while he sees “many problems with Chinese universities, and the environment and air quality [in China],” the stock market decline and other economic challenges there have “increased [his] desire to buy a house in the U.S., but also requires [him] to wait and watch more carefully.”
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