Editor’s note: Foreign home buyers are playing a significant role in some U.S. markets, and U.S. buyers are showing a growing interest in international markets. Florida is just one example of growing globalization in the real estate industry. In this three-part series, Inman News examines the habits of international real estate buyers and the close ties between cross-border buyers and luxury markets. (See Part 1 and Part 3.)
Buying a second home is increasingly a matter of adopting a second country.
About 4.1 million Americans reside in other countries, according to the Association of Americans Resident Overseas, with about 1 million living in Mexico and 688,000 living in Canada. If all of these residents living abroad were placed in one U.S. state, it would be the 25th most populous state in the country, the association reported. The statistics don’t include travelers who are visiting briefly and who don’t secure visas, and don’t include members of the U.S. military.
“What we’ve noticed over the past five years – the trend is definitely accelerating. Americans are buying second homes in droves internationally,” said Jeff Hornberger, international market development manager for the National Association of Realtors trade group.
Latin American countries, and particularly those in Mexico, Central America, and the Caribbean, are hot destinations for U.S. buyers, Hornberger said. There is more political and economic stability in the region than in years past, the dollar goes a long way, global travel to these destinations is quick and affordable, and baby boomers are looking for more than just homes on golf courses in typical U.S. retirement markets, he added.
Also, in countries such as Panama and Nicaragua that are seeking to lure foreign buyers, “they are really rolling out the red carpet for Americans in terms of tax incentives,” he said.
While U.S. buyers have shown interest in a range of property types, including condos and single-family homes, they seem to gravitate toward properties that are “comparable to what you’d find in the U.S.,” he said, such as big houses in gated communities with open kitchens and stainless steel appliances. “The American buyer still likes the American product.”
U.S. buyers tend to use these properties much as they would a second home in their home country. “A lot of folks are looking at seasonal homes. They want to close the door and forget about it when they’re gone, knowing that everything is going to be taken care of. There’s a guard at the entrance. You are in ‘U.S. suburbia.'”
The International Consortium of Real Estate Associations, a group that includes participation from the National Association of Realtors, boasts “over 3 million properties around the world” at its Web site, WorldProperties.com. The group, known as ICREA, reports that globalization “has had an immediate and powerful impact on real estate markets, attracting the attention of real estate professionals worldwide,” and “the rapid growth of the Internet has made the international market accessible to millions of consumers.”
Hornberger said that the interest in international real estate is skyrocketing, though it’s difficult to statistically track the actual number of U.S. residents who own property abroad. He has seen a growing interest in international real estate conferences and events. During a trip to Panama last month to discuss real estate opportunities in that nation, there were about 140 U.S. real estate agents who participated. “The first year 30 came, the second year 60 came. A lot of Realtors have themselves bought property,” Hornberger said.
“The amount of construction happening in Panama – there are a lot of new developments going up. The boom is happening right now. There are so many construction cranes right now that it’s amazing. It’s just a country that’s very comfortable for U.S. (residents). The U.S. dollar is their currency,” he said. “There are two oceans within an hour of each other. Financing terms are very similar to what we have in the U.S.” And there are direct flights to and from a number of major U.S. cities, he said – Panama is a 2 1/2-hour flight from Miami.
In addition to the market for general U.S. buyers, Hornberger said property in Latin America is popular among Latino residents in the United States, some of whom may have been born or have family ties in Latin American countries. First-generation immigrants may have a particular interest in staying connected to their homeland by purchasing properties there, Hornberger said.
While Europe has also been a popular destination for U.S. residents to purchase property, the dollar has been weak against the euro for several years and air travel tends to be more costly and lengthy to European destinations.
Real estate practices can vary dramatically from country to country, Hornberger said, and ICREA has worked to provide information to consumers and agents alike about the peculiarities of home sales in many countries. In addition to its participation in the international real estate group, the National Association of Realtors offers a certification program for Realtors who work with international properties, called Certified International Property Specialist. There are about 1,500 Realtors who hold this certification.
Tom Kelly, a real estate author and columnist who co-authored “Cashing in on a Second Home in Mexico,” said Panama is definitely a hot international real estate market. “Costa Rica continues to be hot but it’s kind of been found. Mexico is jumping up and down.” Belize, Panama and the Yucatan Peninsula region are becoming very popular, he said.
“The Yucatan Peninsula is growing from Cancun south. Analysts say that one day it will look like Los Angeles to San Diego,” he said. Affordability is definitely a driver for U.S. residents who are purchasing property in Latin America, Kelly said, and the baby boomer demographic is another key driver. “Boomers will probably never buy their father’s second home on a golf course or by a quiet lake. They are into doing more things, more exotic things, and that’s why they’re looking abroad. They are all about experiences.”
Tony Macaluso, a real estate educator and owner of Portside Properties Inc. in Palm Beach Gardens, Fla., who was born in Falmouth, England, said that as properties become less affordable and Social Security dries up in the United States, “it might just necessitate that (U.S. residents) look outside the country for quality of life.”
Affordability, proximity and good weather are all factors in drawing U.S. buyers to international real estate, said Jack McCabe of McCabe Research & Consulting in Deerfield Beach, Fla. “You can do a lot better now (in many other countries) than you can in California. Not everyone wants to be in an urban situation in retirement. Friends that I have … go down to Costa Rica and Belize. You can get there quicker (from Florida) than you can be in Washington, D.C., and New Orleans. It’s much closer for Californians to fly down to Mexico than it is to fly to Hawaii.
“Our parents’ generation – it’s hard to picture them living outside of the country. Now I think, because there is globalization, in every city now you meet people from all over the world. Americans are much more traveled. The Jet Age had a lot more to do with feeling comfortable in your surroundings. You feel much more relaxed (in other countries).”
Some U.S. residential real estate companies are partnering with developers in other countries to build communities for international buyers, McCabe said. “U.S. developers see a big market for people buying second homes outside of the states.’ And U.S. commercial real estate firms are taking a stronger interest in other markets throughout the world, too. “I think there’s more a feeling of certainty. There is not so much volatility in investing in foreign real estate.”
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