The foreigners are returning! The foreigners are returning!
Lured by the weak dollar, buyers from Europe, Asia, and South America are reentering the U.S. real estate market, buoying the hopes of developers and financial institutions across the country. Miami, Las Vegas, and Phoenix are among the cities experiencing an upswing in foreign buyers as the euro—which was equal to about US$1.2 in 2010—has risen approximately 12 percent to US$1.35 as of November 17.
“First and foremost, overseas buyers know American assets are ‘on sale’ and this is a great time to buy quality U.S. assets at a discount,” explains Mike Mixer, managing partner in the Las Vegas office of Colliers International, an international brokerage firm. “Next you have the currency plays, and many foreign investors see an opportunity to diversify some of their capital to a more stable investment environment. We are also seeing more interest in the EB-5 program that grants green cards to foreign investors who can show job creation in selective markets around the U.S.”
Of the approximately $1.07 trillion in existing-home sales between March 2010 and March 2011, approximately $41 billion worth were purchased by foreign buyers, according to a survey conducted earlier this year by the National Association of Realtors. Recent immigrants—those who have moved to the United States within the past two years—and individuals with visas for more than six months purchased an additional $41 billion. Therefore, total purchases by foreign or foreign-born buyers were $82 billion, up from $66 billion reported in 2010.
Mixer and others say the asset classes seem to be spread out and particular to investors’ own experience levels with various product types. Apartment buyers, for instance, tend to stick to this class (expanding into single-family bulk purchases or high-rise residential units and sometimes in bulk). There are others who focus only on income-producing assets such as office, industrial, and retail, while others zero in on land—primarily highly distressed acreage.
Greater Miami and south Florida are seeing renewed investor interest from foreign buyers, says Michael Y. Cannon, executive director of Integra Realty Resources–Miami and an advisory board member of ULI’s Southeast Council.
Cannon, a veteran market analyst/appraiser and consultant, says foreign investors from around the world are again investing in business enterprises and are a major contributor to the area’s economy.
“Several South American, Spanish, Canadian, and other international banks have purchased our domestic banks in addition to their presence in international banking agencies located here,” Cannon continues. “Miami is the second-largest international banking center on the East Coast. These international banks have relationships with global businesses, which, in turn, attract foreign real estate investment.”
He notes that greater Miami’s overbuilt and unsold condos have been snapped up by overseas buyers, paying cash, as unit prices were reduced 30 to 40 percent from the artificial high of the recent past. “This has surprised certain soothsayers who stated that the excess inventory would take ten years to sell off,” says Cannon. “Cash is king.”
Multibillion-dollar projects are planned in downtown Miami, he adds, noting that overseas investors are coming from Central and South America, Europe, Russia, and Asia.
“Foreign investors are seeking prudent investment opportunities and have patient long-term capital for joint ventures with the right company and developer,” says Cannon. “They are interested in mixed-use developments, industrial, retail, hospitality, and multifamily. Foreign investors are no longer interested in speculation, which is out. The market goes, as the money flows.”
ULI members seeking to appeal to non-American buyers should show a little more patience and explain with greater detail how things work in the United States. “Conduct research in advance on the country of origin and be prepared to explain the process of investing in the U.S. from their perspective,” Mixer emphasizes. “Colliers International has offices in all major cities around the globe. In Las Vegas, our values have declined as much as 70 to 80 percent in some cases. We share this information with all our offices all around the world. When you have a well-known city like Las Vegas, being ‘pitched’ all over the world by those who live and work in those countries, it stimulates a lot of interest.”
Mixer also advises ULI members seeking to attract the interest of out-of-country purchasers to:
- Keep it simple;
- Prepare market and property information that is easily translatable; and
- Don’t shotgun information widely to overseas buyers. It’s best to sharp-shoot prospects country by country.