Southwest Florida apparently escaped the free fall in foreign investment in residential real estate that hit much of the country. And the Sunshine State remains the most appealing to those property buyers, besting California and Texas.
The latest annual survey of real estate professionals by the National Association of Realtors found a steep decline in property sales and dollar volume in American existing homes from April 2018 through March 2019. A drop in global growth and low housing inventory contributed to the decrease in the number of foreign purchases of U.S. residential real estate.
“A confluence of many factors — slower economic growth abroad, tighter capital controls in China, a stronger U.S. dollar and a low inventory of homes for sale — contributed to the pullback of foreign buyers,” Lawrence Yun, NAR chief economist, said in last week’s report of the survey. “However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.”
The decline across Florida stands in marked contrast with national figures. Foreigners accounted for 13% of the state’s overall residential sales, two percentage points lower than the previous time span. The national share totaled 5% of sales.
Among Florida’s metropolitan areas, the North Port-Sarasota-Bradenton market stayed in fourth place in popularity with foreign buyers. This trend has held true for at least the last eight years, said Jennifer Horvat, the chief marketing officer for Michael Saunders & Company.
“Sarasota is very attractive to an international audience for our outstanding lifestyle but has historically been a small percentage of our annual purchases, especially when compared to other areas like Miami and Orlando,” Horvat said. “Any national decreases in foreign buyers have not been realized as much in our market because we are a second-home destination still highly sought-after by a select group of foreign buyers.”
Matching historical trends across the country, Florida continues to be at the epicenter of foreign investment — attracting 20% of all foreign buyers with Canadians representing 42% of those residential transactions.
Craig Cerreta, the managing broker at Premier Sotheby’s International Realty’s downtown Sarasota office, said Canadians are maintaining interest in the Sarasota-Manatee market. “Our primary foreign buyers for this region are Canada and Europe,” he said. “In fact, we have seen a slight uptick in Canadian buyers looking. Not necessarily contracting yet, but at least looking.”
Moreover, “Premier Sotheby’s has not seen a significant reduction in foreign buyers over the past 12 months,” Cerreta said. “This includes our regions across the west coast of Florida through Orlando.”
While foreign buyers purchased property across Florida, those transactions focused on Miami-Fort Lauderdale-West Palm Beach (54%), Orlando-Kissimmee-Sanford (9%), Tampa-St. Petersburg-Clearwater (9%) and North Point-Sarasota-Bradenton (5%).
“Many Canadians and other foreigners found Florida so enticing because of its lenient tax laws,” Yun said. “Additionally, many Florida metro areas have an inventory of cheaper properties, relatively speaking — a combination which makes the state a very popular destination.”
California followed Florida, accounting for 12% of all international purchases in the country. Some 34% of those property purchases came from Chinese buyers, a decline from the previous year. The third most popular state among international buyers was Texas (10%), which was particularly desirable among Indian and Mexican buyers.
NAR’s Profile of International Transactions in U.S. Residential Real Estate 2019 found that foreign buyers bought $77.9 billion worth of U.S. existing homes in the 2019 survey period, a sharp drop of 36% from the previous 12-month total of $121 billion. Nonresident foreign buyers accounted for $33.2 billion of those sales, a 37% drop from the $53 billion from the prior period. Resident foreign buyers — immigrants — bought $44.7 billion of residential real estate, a 34% decline from the earlier total of $67.9 billion.
In other highlights from the NAR report:
— The number of residential transactions fell along with the average price from the previous survey period. Foreigners bought 183,100 properties, down from 266,800, at an average price of $426,100.
— The majority of foreign buyers (68%) primarily reside in another country.
— In dollars, foreign residential purchases accounted for 19% of Florida’s volume of sales in 2018 — and 21% in 2017. Those sales surpassed the national share of 8%. In hard numbers, foreigners purchased 52,000 existing homes, a 15% drop during the prior 12-month period at 61,300.
— For the seventh consecutive year, Chinese nationals topped all other countries in dollar volume of residential purchases, spending an estimated $13.4 billion, a 56% plunge from the previous period.
— Second place went to Canadians at $8 billion. Although Chinese and Canadian investors bought about the same number of homes, Chinese buyers bought more expensive properties. The other top international buyers came from India at $6.9 billion, the United Kingdom at $3.8 billion and Mexico at $2.3 billion. All of the top five countries showed a drop in dollar volume.
— Outside the top three among states, Arizona accounted for 5% of international buyers, popular for Canadian and Mexican purchasers, followed by New Jersey at 4%. New Jersey appealed to a mix of international buyers, especially those from the United Kingdom. Other major destinations were North Carolina, Illinois, New York and Georgia, each accounting for 3% of all foreign buyers.
— Of all those international buyers, 8% paid $1 million or more compared with 3% of all U.S. existing homebuyers.
— Cash was king with international buyers with 41% of the reported transactions occurring that way compared to 21% for all existing-home purchases during the 2019 assessment reference period. Canadians who primarily live abroad were the highest foreign demographic to pay all cash, at 75%.
Tribune Content Agency