Wealthy real estate buyers from abroad are expected to go down in the country’s luxury housing markets on Monday, giving a second boost to demand for high-priced apartments and mansions.
The United States will lift the ban on traveling to about 33 countries for vaccinated visitors, lowering restrictions that prevented most foreign real estate buyers from entering the country to see and buy properties.
Buyers from Europe, China, Brazil and India will now be able to enter the US for the first time in 20 months. Brokers in popular cities among the wealthy overseas (New York, Miami, Los Angeles) say they have a long list of screenings scheduled for the coming weeks of buyers who have been eager to invest in U.S. properties.
A pedestrian is in front of a Manhattan condominium building in New York.
“This represents another advantage of demand that has simply not existed for the past two years,” said Jonathan Miller, CEO of Miller Samuel. “It will be especially beneficial for the high-end and luxury market.”
Sales data suggest that the wave of foreign buyers could generate tens of billions of dollars in additional sales. Foreign buyers spent $267 billion on U.S. real estate in 2018 and $183 billion in 2019, before the pandemic, according to the National Association of Realtors. In 2021, its spending fell to $107 billion, suggesting high accumulated demand, as buyers were unable to visit or visit properties.
Along with the lifting of restrictions, foreign buyers have benefited from the massive creation of wealth during the pandemic with rising asset and stock market prices. With cash, the rich of the world are now looking for trophy assets. Cities like New York, Los Angeles and Miami, which have always been centers for the world’s rich, are still considered safe investments despite the ups and downs of the pandemic.
“Home purchases in New York are very attractive to these buyers because they can use or rent it,” said Douglas Elliman CEO Scott Durkin. “But they can also stick to it. It becomes something they are proud of.”
With its partnership with Knight Frank, the UK-based real estate giant that has listings and brokers around the world, Elliman has been gearing up for next week’s sales rush by combining potential foreign buyers with listings in Nova York, Florida and the west coast. A Knight Frank representative has even moved to New York for a while to work as a “traffic cop” for the possible flow of deals from abroad.
“We are expecting a flood of buyers in all of our markets in the US,” he said.
Brown Harris Stevens is launching a new partnership with a European online real estate and lifestyle market, called 221 List, that will help the company’s buyers and sellers. Corcoran announced in June a cooperation agreement between Corcoran and Savills, the London-based real estate consultancy with offices in Europe, Asia, Africa and the Middle East. Savills has also opened a new US counter at its London headquarters to help the flow of customers.
The big question, especially in South Florida, is whether there are enough homes at the right price for foreign buyers to buy. In Miami and Palm Beach, prices have skyrocketed during the pandemic and inventory is at historic lows, especially for single-family homes. While inventory in Manhattan is still relatively high, with about 7,600 listings, sales and demand in the high end have been strong. For more prized penthouses and larger new apartments, pandemic discounts are giving way to wars of supply and rapid sales.
Prefers new construction
Brokers say foreign buyers prefer a new construction, either a newly built mansion in Beverly Hills or a condo that has never lived in a new Manhattan skyscraper. “New development and high-end properties will be the biggest beneficiaries of the return of foreign buyers,” Miller said.
Traditionally, China has been the main source of foreign buyers for the U.S., but the Chinese government’s crackdown on capital flight and wealth was slowing the flow of money to U.S. real estate even before the pandemic.
Chinese purchases of U.S. real estate amounted to $32 billion in 2017, but fell to $11.5 billion in 2020. While China remained the largest source of foreign buyers in the U.S., as measured by the volume of dollars, before the pandemic, Canada ranks second, with $9.5 billion in 2020. Mexico ranks third, followed by India and the United Kingdom
Brokers say shoppers expected in New York this month are mostly from Europe, specifically the UK and Germany. In Florida, brokers say Brazilians account for the largest share of returning foreign buyers. In Los Angeles, they say the rich in the Middle East make up the majority of buyers expected for the luxurious mansions of Beverly Hills and Bel Air.
Before the pandemic, Florida was the largest market for foreign buyers, accounting for 20% of the country’s total. California ranked second with 16%, followed by Texas, Arizona, New Jersey and New York.
Brokers say that wherever they shop around the world, the rich like to be close to the water.
“Coastal cities will be the main beneficiaries,” Miller said.