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5 Reasons International Buyers are Boosting the Luxury-Home Market


This week, we’re continuing our talk with Laurie Moore-Moore of the Institute for Luxury Home Marketing. In our last post, Moore-Moore touched on some important characteristics of today’s high net-worth home buyers. One of those characteristics struck a particular chord with us:

In the U.S. luxury segment, international buyers are changing the game — and fast.

In fact, the dollar amount international buyers are contributing to the U.S. housing market has almost tripled in the last six years, according to the National Association of Realtors (NAR).

Another fact: International buyers pay almost double the amount the typical U.S. buyer pays for a home. “Foreign clients … pay on average nearly $500,000 for a house, compared to the overall U.S. house price of about $256,000,” according to NAR.

Last week, Moore-Moore explained the surge this way: “The international buyer has some unique motivations to buy in the U.S. the domestic buyer doesn’t necessarily have.”

Do tell, we said. And at that, she offered up five key reasons affluent international buyers are scooping up domestic U.S. real estate almost as fast as you can say “Yuan.” [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][image_with_animation image_url=”3089″ animation=”Fade In” img_link_target=”_self”][vc_column_text]

1 The U.S. Market is still a financial safe haven.

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Although the number of homes sold to foreign investors declined by 10 percent between 2014 and 2015, (likely due to the strengthening of the U.S. dollar against foreign currencies) the overall market segment occupied by the international buyer in the U.S. remains robust.

Why? According to Knight Frank, about 32 percent of the assets in the portfolio of an Ultra-High Net Worth Individual (someone defined as having a total net worth of $30 Million or more in U.S. dollars) are invested in real estate. “The U.S. is considered to be financially and politically more stable, so that safe-haven motivation [for investing in U.S. real estate] is still strong,” says Moore-Moore.

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2 Owning property in the U.S. may raise your “Talk Value”.

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Talk may be cheap for Keith Richards, but it isn’t for international buyers. “There are countries where having a home in the United States gives you great status or prestige — what we like to call ‘Talk Value.’ Some purchasers are motivated by that,” says Moore-Moore.

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3 U.S. educational opportunities draw international buyers.

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About 27 percent of international Ultra-High Net Worth Individuals are likely to send their children overseas for schooling, according to Knight Frank’s 2015Wealth Report. Among Russians and Chinese, that number is closer to 50 percent.

“In China today, the wealthy often send their children to prep school in Europe, England being a very popular destination. But when it’s time to send those students to University, the U.S. and Canada often rise to the fore and become the primary destination of choice,” says Moore-Moore. “Chinese families coming to North America will often buy a fabulous condo or apartment for their student to live in while they’re in university and buy a second residence for themselves to use when they come to visit. Oftentimes, those purchases will be substantial.”

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4 America: Land of the Spree

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Shopping is a key motivator for many international property buyers, especially those who face economic sanctions and luxury-goods shortages overseas.

For example, “It’s not uncommon for a very wealthy Middle Eastern family to come once or twice a year, sometimes with their entourage, and rent multiple floors for all their groups at a very high-end hotel. They may live there for three months while they shop,” says Moore-Moore. “Eventually, it’s the kind of motivation that will inspire the purchase of a significant home.”

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5 U.S. “Trophy Properties” make profitable nest eggs.

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“Cross-market and multi-country investment is an important investment for Ultra-High Net Worth Individuals,” says Moore-Moore. “These [homes] are not liquid assets, because you can’t convert them as quickly to cash as some others, but they’re extremely marketable assets because they’re scarce.”

An example is waterfront property. “These properties are countable. They’re extremely limited.” The scarcity of what Moore-Moore and Knight Frank call “Trophy Properties” makes them desirable portfolio plays for asset-class diversification.

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Do you think international buyers will continue to make a strong showing in the U.S. housing market, even in the face of a strengthening dollar and declining Yuan? We want to hear your opinion! Drop us a comment or email sabra@wordpress-1173240-4329943.cloudwaysapps.com. [/vc_column_text][/vc_column][/vc_row]

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