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The National Association of Realtors (NAR) has released its annual report on international buyers. When you combine this data with offshore buyer data from Juwai IQI, you have valuable insights that can help real estate agents sell more property over the next 12 months.
A typical foreign buyer is one we recently worked with. He purchased a $2 million condo in Manhattan’s Lower East Side, near Chinatown. He has moved to New York from Hong Kong and wanted a place with some of the iconic views only available in New York City. (His new apartment has open views of the Manhattan Bridge.)
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Considering the apartment’s size and amenities, our buyer considered it a bargain, significantly less expensive than his former home in Hong Kong’s Repulse Bay.
You might be surprised that foreign buyers can be a source of significant referral business. I mention that because this Hong Kong buyer was a referral client. He was recommended to us by another family with whom we had worked.
Foster long-term relationships with foreign investors by providing exceptional service, transparency and local market expertise. Treat them with respect and give them the same quality of representation as you would any other buyer, and you may find yourself with a rapidly growing flow of referrals.
Now, for the data. Here are the five key lessons we can learn from the latest foreign buyer data and a discussion of what it all means for you.
Chinese buyers dominate despite the decline
China remains the largest source of foreign buyers in dollar volume, purchasing $7.5 billion worth of existing homes. This figure underscores the substantial financial capacity of Chinese buyers. Even today, China’s economy is a wealth-minting machine, with 6.01 million millionaires, according to Al Jazeera.
When it comes to number of transactions, Chinese buyers have dropped to second after Canadians, according to the new National Association of Realtors report. The average purchase price for Chinese buyers is much higher, at $1.3 million; Canadians have the second-highest average purchase price of $834,000.
One in 50 transactions involves a foreign buyer
In total, last year, the NAR report found that foreign buyers acquired approximately 54,000 homes in the U.S.
With the current expensive U.S. dollar, buyers who hold foreign currency find it costs more of their own money to purchase American homes. Exchange rates have made American homes 9.4 percent more expensive for Chinese buyers, 3.7 percent more for Europeans, and 3.6 percent more for Canadians, according to NAR data.
A drop in the U.S. dollar will help reverse this equation and make American real estate look more affordable by contrast. So, a fall in the dollar will lead to more foreign buying.
Southern states top the list
NAR also broke out foreign buyer purchases by location. You are most likely to work with a buyer from overseas in Florida, which accounted for 20 percent of all foreign buyer transactions. Other states with large numbers of foreign buyers include Texas (13 percent), California (11 percent), Arizona (5 percent), and Georgia (4 percent).
Of course, within these states, foreign transactions also tend to be concentrated in specific locations.
In total, foreign buyers spent $42 billion on 54,300 home purchases, accounting for 2 percent of the $2.1 trillion existing-home sales market.
Higher purchase prices and cash transactions
Agents working with foreign buyers tend to be prosperous, typically buying higher-priced homes. The median price for all foreign buyers is $475,000, according to the NAR. That’s 20 percent higher than the marketwide price of $392,600.
And don’t forget that 50 percent of foreign buyers pay in cash, while only 28 percent of domestic buyers do. That makes foreign buyers more attractive to sellers and helps them when negotiating.
The US now faces tougher competition
The U.S., throughout most of this century, was the top destination for foreign homebuyers from many countries, including China. However, its position has slipped due to the strong dollar and the after-effects of the global pandemic.
For buyers from China, the U.S. today is now the fifth-most-popular destination. We think this ranking could again improve in the years ahead because there remains a strong flow of Chinese to the U.S.
The Migration Policy Institute reports that some 2.4 million Chinese citizens live in the United States. The Institute on International Education says more than 280,000 Chinese students were studying in the U.S. And the NAR report reveals that billions of dollars of Chinese investment money sought a home in the stable U.S. housing market.
What it all means for agents
Understanding these trends is crucial for agents who aim to work with foreign buyers and capitalize on the transaction flow they represent.
One actionable strategy is to target buyers who seek premium properties, such as high-net-worth individuals from China, Canada, Latin America and Europe. Emphasize the unique benefits of U.S. real estate, such as stability and the potential for high returns. Also, learn about the property types that most interest these buyers in your area.
Focusing on key destinations will help you with this strategy. Because foreign buyers are most active in Florida, Texas, California, Arizona and Georgia, tailor your marketing strategies to showcase the lifestyle and investment benefits of these locations. Be ready to provide useful information that will help these buyers hit the ground running when they fly in to visit properties and explore the place that might become their new home.
Build strong relationships with this strategy
Given that foreign buyers pay in cash about half the time, you can also streamline your processes to facilitate quick and efficient cash transactions. Highlight to sellers the benefits of cash transactions, and explain to foreign clients that their ability to pay cash can give them a negotiating advantage.
Also, keep an eye on the U.S. dollar exchange rate with the currencies of the overseas buyer groups you work with. Keep your buyers and network informed about exchange rate fluctuations and their impact on property affordability.
Now that you are familiar with the latest NAR data on foreign buyers and my insights on how best to work with them, I hope you can more effectively attract and serve this important market segment.
Embrace the digital tools, social media and other platforms that international buyers are most comfortable with. Advertise your properties directly to them in their language. And help them get a good sense of properties and the market before they visit, including virtual tours, webinars, live video walk-throughs, and online consultations.
Kashif Ansari is the co-founder of Juwai IQI. He has served as Group CEO since its inception, building it into one of the world’s largest and most successful Asia-HQ’d proptech groups. Connect with Kashif on Linkedin.
