Foreign Investment into U.S. Residential Property Hits New High, As Do Prices

Foreign investment into the U.S. luxury residential real estate market jumped to a new high in 2017, $7.48 billion, with Miami, Manhattan and Los Angeles the key beneficiaries.

A report from Beauchamp Associates and Leslie J. Garfield & Co., U.S. Ultra Prime Real Estate, said in the past 12 months, foreign investment in U.S. properties jumped by 72 percent. Of these transactions, 44 percent were all-cash purchases, with nearly 40 percent of these transactions in Miami, New York and Los Angeles.

More than half of these transactions came from investors in just five countries: Canada, the United Kingdom, China, Mexico and India.

A separate report from Redfin, Seattle, said U.S. luxury home prices rose by 7.4 percent year over year to an average of $1.76 million in the fourth quarter.

Redfin Chief Economist Nela Richardson said persistent demand, shrinking supply and a healthy economy helped drive up prices. The number of home for sale priced at or above $1 million fell by nearly 24 percent compared to a year ago, marking three consecutive quarters of decline in luxury supply. The number of homes priced $5 million or higher fell by more than 23 percent during the same period.

“The stock market hit all-time highs with gains in nearly every sector last quarter, instilling confidence among the wealthiest home buyers,” Richardson said. “As a result, we saw double-digit growth in luxury home sales in the last months of the year.”

Redfin said sales of homes priced at or above $1 million rose by 15.2 percent from a year ago; sales of homes priced at or above $5 million rose by nearly 14 percent. Luxury homes moved off the market quickly, typically finding a buyer in an average of 75 days, a drop of eight days from a year ago.

Redfin said Florida beachfront communities saw significant gains in luxury sale prices; San Francisco saw the largest declines.

The Beauchamp/Garfield report said the Miami property market is dominated by international buyers and occupiers (80 percent), with just 20 percent of the market attributed to domestic U.S. buyers. Key sources of overseas demand for luxury Miami real estate were South America and Europe.

“Miami is a leading hub for overseas buyers investing in U.S. luxury real estate,” said Gary Hersham, managing director with Beauchamp Estates. “Around 95 percent of ultra-prime real estate in Miami purchased is done via cash transactions. Miami is extremely popular with high net-worth buyers from South America.”

For luxury Manhattan property, 27 percent of buyers are from overseas, compared to 63 percent domestic. The buyer mix is “truly international,” the report said, with key groups including Chinese, French British and German buyers.

“Over the last five years there has been a significant investment in the Manhattan luxury real estate market from Asia, Europe and Canada,” said Jed Garfield, president of Leslie J. Garfield & Co. “Prices for premium Manhattan homes have risen by close to 30 percent since 2010, with home price of over 3.5 percent in 2016.”

In Los Angeles, 20 percent of the housing market now comprises overseas buyers, primarily from the Middle East, China, the U.K., France and Italy.

The report forecasts continue growth. Through 2026, the report estimates an additional 22,000 ultra high-net-worth individuals will purchase properties in the U.S.