The Hottest U.S. Markets for Foreign Luxury Buyers

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It’s rare to have one factor influence home sales nationally over a long period of time, but few trends have held as much sway over U.S. real estate — especially in the luxury home market— than foreign buyers.

Initially, the draw was post-recession values in New York and California, especially compared to cities such as London. Since then, as the tide of foreign nationals coming to the United States has swelled, so too have the incentives that now include political and economic stability, the desire for hard assets, lifestyle and even prestige. And owning U.S. property has been known to be good cocktail conversation.

New construction, in particular, is proving to be a good match for these buyers. Priscilla Schumacher, director of sales and marketing for Glenview, Ill.-based Edward R. James Homes, explains: “International buyers are savvy and they do their homework. They’re looking for a home that suits their needs today, but maintains its resale value down the road.”

Schumacher also notes that some of the infill locations for new construction are more desirable. “Location and schools are main drivers, as well as the community amenities for their children and family,” Schumacher says.

Education has emerged as another strong motivation. Initially, it was housing for college students, but in the last five years that trend has moved down to high school and middle school. In their annual Wealth Report, global real estate advisors Knight Frank estimate that half of the affluent in China and Russia are likely to send their child overseas for secondary education.

Among upscale Realtors, stories of couples buying properties with future education in mind — even though their child is an infant — are not uncommon. “There is a lot of hype about international buyers, but we know it’s real,” says Stephanie Pfeffer, executive vice president of Luxury Portfolio International, pointing to the 35-percent increase in the dollar volume of sales to foreign buyers from 2013 to 2014.

Although the number of sales decreased from 2014 to 2015, dollar volume increased by another 8 percent rising to $104 billion, according to the National Association of Realtors (NAR) 2015 Profile of International Activity of International Clients. Four states account for half of international transactions: Florida, California, Texas and Arizona and buyers from five countries dominated the purchases, with Chinese buyers (People’s Republic, Taiwan and Hong Kong) accounting for 16 percent of the transactions, followed by Canada at 14 percent; Mexico at 9 percent; India at 8 percent; and the U.K. at 4 percent.

Still, data doesn’t tell the whole story. Consider Plano, Texas, where Tommie Hopes, a sales counselor for a high-end community developed by Rendition Homes, says she deals almost exclusively with foreign clientele. Since the community opened about 18 months ago, she’s had buyers primarily from India and China. She also has sold to buyers from Pakistan, Vietnam and the Ukraine.

Hopes notes, “These buyers want that second bedroom and full bathroom downstairs. They also want open kitchen and dining room plans to seat bigger families. They’re looking for a floor plan that allows flexibility to accommodate family and other guests visiting for an extended period of time from their countries of origin. They’re also very interested in plans that showcase high-volume ceilings.”

Not only did Chinese buyers account for the largest share, spending $28.6 billion on properties, nationwide their average purchase price of $831,800 was well above the $499,600 average buyers from other countries spent. NAR notes that foreign buyers overall are “likely to be wealthier than the typical U.S. median domestic buyer and may be looking for an upscale or trophy property.”

Approximately one in three international buyers in California last year hailed from China. Among these buyers, the California Association of Realtors says those purchasing $1 million-plus homes bought primarily for investment and tax advantages or they had a child attending school here. 

Post-recession, Miami has become even more attractive for luxury buyers. Knight Frank counts it as the sixth most important city in the world. While few other Florida cities can match Miami’s sizzle, international buyers — particularly from Central and South America — are slowly easing into other cities including Fort Lauderdale. Still, Florida was the top state for international buyers, claiming 21 percent of all U.S. sales to foreign buyers. Orlando continues to attract interest from a range of countries. Florida was a top choice for Canadian buyers, as are high-end locations such as Scottsdale and Paradise Valley in Arizona.

In Florida, locations include Palm Beach, Singer Island and Naples. European buyers also gravitate to Palm Beach, according to Marisela Cotilla with Douglas Elliman Real Estate in Boca Raton.

New York, Los Angeles, Boston, Miami, Washington, D.C., and San Francisco have all been, and continue to be, prime markets for foreign buyers, but other locations are garnering international interest because of potential return on investment and lower prices when compared to top markets such as New York, where per-square-foot prices can be as high as $2,400. These buyers are looking for long-term growth opportunities, a luxury lifestyle and security.

On the West Coast, Seattle continues to attract a number of Asian buyers. Proximity to Vancouver is one influence, but education and lower costs are another. On the Urban Land Institute’s 2016 list of markets to watch, Seattle rose to fourth place, up from seventh last year.

While Chicago was one of the top cities searched online by potential buyers from outside the country, it still hasn’t captured as much attention as cities such as New York and Los Angeles. Still lower prices, potential for appreciation and excellent universities are expected to foster future demand. Also expected to boost interest are plans from Beijing-based Wanda Group for a $1 billion hotel and condo tower downtown. 

Aspen has long had a global reputation as a luxury enclave, but nearby, the cachet of Vail is growing internationally, particularly with Mexicans and South Americans. One of the main resort properties, The Sebastian, is owned by a Mexican family. In the last year, buyers from Mexico have purchased new residences at a number of resorts, including Four Seasons, the Ritz-Carlton and Solaris. One of the draws at the Ritz-Carlton Residences in Lions Head is privacy and security. Local agents say it is one of the few places where these owners don’t have to worry about their children. San Antonio is another location, with a large number of Mexican buyers. It’s no surprise Mexico is one of the top five counties with buyers purchasing in the United States.

In the last year, a number of mountain resort markets such as Lake Tahoe and Telluride have reported growing interest from foreign buyers. And expectations are that more foreign buyers will gravitate to resort locations along the East Coast. 

Global and domestic investors moving into smaller U.S. markets were an overriding theme at the Urban Land Institute’s fall conference. They anticipate cities such as Nashville, Austin, Atlanta, Charlotte, Denver and Dallas, which they have dubbed “18-hour cities,” to generate interest this year. Also called “second-tier” cities, these 18-hour cities are those that have redeveloped downtowns and that are not quite the up-all-night cities like New York, but businesses don’t close after 5 p.m. like in smaller cities.

Few groups bounced back from the recession as those with a net worth of a $1 million or more. In the last decade, the ranks of the ultra-wealthy (those having a net worth of $30 million or more) grew by 61 percent and this population is expected to increase by another 34 percent by 2024. Estimates have put the millionaire population at 17 million worldwide.

Looking ahead, few experts see the global appetite for U.S. properties slacking any time soon. Interest in prime locations along U.S. coasts will remain strong, but expectations are that international buyers will cast wider nets and begin to take a serious look at new locations.

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