Florida Realtor April 2010 : Page 12
INTERNATIONAL MARKET TRENDS At A GlAnce Florida leads the nation in international buyers. The state’s properties are bargains in the global market. World of All signs are pointing to the international buyer. If you’re working this niche, here are some trends to watch. by RIchARd Westlund A Immigration, taxes and ﬁnance are the primary obstacles. Demand is expected to rise as prices stabilize. pportunities Cowie is among the thousands of Flor-ida real estate professionals who serve international customers, including buy-ers and current owners seeking to sell their vacation homes. “Although interna-tional clients purchase homes through-out the United States, much of the ac-tivity has focused on a few areas of the country—Florida, Texas, California and Arizona,” says Lawrence Yun, PhD, senior vice president and chief economist for the National Association of Realtors ® (NAR) and co-author of the NAR/Florida Real-tors 2009 “Proﬁle of International Home Buyers in Florida” That study showed Florida leading the nation with 23 percent of all interna-tional buyer purchases in the 12-month period ending in June 2009. The study also showed Florida as the top choice for European buyers (32.6 percent), B ill Cowie knows that interna-tional buyers constitute a vital component of Florida’s real estate market. As director of the Brit-ish Homes Group Florida in Kissimmee, Cowie focuses on serving buyers from the United Kingdom and other Euro-pean countries seeking vacation and investment properties. “About 60 percent of our business comes from foreign buyers purchasing vacation homes,” says Cowie. “However, in the past year we’ve expanded to commercial properties as well. Many Europeans, especially those from Brit-ain, can get a substantial break on their income and inheritance taxes when they put money into overseas real estate. We’ve even seen some U.K. pen-sion planners investing in the Florida market.” 12 FLORIDA REALTOR April 2010
A World Of Opportunities
At A GlAnce
Florida leads the nation in international buyers.
The state’s properties are bargains in the global market.
Immigration, taxes and finance are the primary obstacles.
Demand is expected to rise as prices stabilize.
All signs are pointing to the international buyer. If you’re working this niche, here are some trends to watch.
Bill Cowie knows that international buyers constitute a vital component of Florida’s real estate market. As director of the British Homes Group Florida in Kissimmee, Cowie focuses on serving buyers from the United Kingdom and other European countries seeking vacation and investment properties.
“About 60 percent of our business comes from foreign buyers purchasing vacation homes,” says Cowie. “However, in the past year we’ve expanded to commercial properties as well. Many Europeans, especially those from Britain, can get a substantial break on their income and inheritance taxes when they put money into overseas real estate. We’ve even seen some U.K. pension planners investing in the Florida market.”
Cowie is among the thousands of Florida real estate professionals who serve international customers, including buyers and current owners seeking to sell their vacation homes. “Although international clients purchase homes throughout the United States, much of the activity has focused on a few areas of the country—Florida, Texas, California and Arizona,” says Lawrence Yun, PhD, senior vice president and chief economist for the National Association of Realtors® (NAR) and co-author of the NAR/Florida Realtors 2009 “Profile of International Home Buyers in Florida”
That study showed Florida leading the nation with 23 percent of all international buyer purchases in the 12-month period ending in June 2009. The study also showed Florida as the top choice for European buyers (32.6 percent),U.K. buyers (46.8 percent) Latin American buyers (45.0 percent) and Canadian buyers (35.4 percent).
“With its beaches, theme parks and overall lifestyle, Florida is a coveted destination for foreign buyers,” says Carla Rayman, director of international business development, Prudential Palms Realty, Sarasota. “Our properties are nice investments [for them] as well.”
A Favored Destination
Through the ups and downs of the global economy, Florida remains a favored destination for foreign buyers, according to John Tuccillo, president, Tuccillo and Associates (JTA), Arlington, Va., and former NAR chief economist. “Florida’s natural beauty, climate and the water make this an ideal spot for a vacation,” he says.
Cowie notes that unlike many warm-weather destinations, Florida is easily accessible, with direct flights from major cities in Canada, Mexico, Europe and Latin America. “The U.S. Homeland Security program, despite its flaws, is working,” he adds. “Because global terrorism is undoubtedly a factor for many people planning to buy an overseas home, that is a positive factor for Florida.”
Another attraction is the state’s diversity in cultures, languages and lifestyles, says Terri Bersach, managing broker, Coldwell Banker Residential Real Estate in Weston. “South Florida continues to be desired by many [buyers from] international markets,” she says. “Many foreign buyers like to settle in enclaves— areas where their countrymen have already established themselves.”
For example, Doral, a city just west of Miami International Airport, attracts many Venezuelans, while Sunny Isles Beach to the east includes a sizable Russian community. Elsewhere in the state, Naples appeals to buyers from Germany and Scandinavia, Daytona Beach is the winter home of many French Canadians, and the Kissimmee area attracts Puerto Ricans as well as Brits and other Europeans.
Tuccillo notes that another reason for Florida’s popularity is that home prices have come down considerably in the past few years. The state’s prices—already a bargain by European standards—are enhanced by the weakness of the dollar against other major currencies, including the euro and the British pound. “That has the effect of further reducing the cost of U.S. real estate,” he says.
The NAR study took a close look at pricing and found that foreign buyers purchased more expensive properties, on average, than did U.S. buyers. However, U.S. homes were less expensive than properties in other countries. In May 2009, the average home price in the United States was $218,300 compared with $278,100 in Canada and $237,900 in the United Kingdom.
“We’ve seen a small but growing percentage of our buyers purchasing multiple properties,” says Rayman. “Some of our clients see that the prices in Florida are so low [that] they buy more than one home, investing in the future.”
What buyers Want
In today’s market, both domestic and foreign buyers are looking for well-priced homes in convenient locations. But international buyers continue to prefer locations with access to the water—even if they have to pay a bit more for the privilege. “Foreigners are coming here for sun, and the sun is more enjoyable on the water,” Tuccillo says.
For many buyers, that means purchasing a condominium in a high-rise tower overlooking the Atlantic Ocean, Gulf of Mexico or Intracoastal Waterway. A condo residence also off ers security, an important consideration for affluent purchasers, as well as a low-maintenance lifestyle.
But that pattern is changing to a certain extent, particularly for foreign buyers with young children. “I have seen a strong trend toward gated communities with amenities and good schools, like Weston and Doral in South Florida,” says Bersach. “These considerations are particularly attractive for buyers who are looking to relocate their families from countries where security and potential kidnapping are major concerns.”
On the other hand, gated communities don’t have a big draw for buyers on the Gulf Coast and in Central Florida, according to Rayman. “We are seeing the Brits purchasing three- or four-bedroom single-family homes with pools,” she says. “The Canadians, however, seem to prefer condos. They want to know that when they return home, they don’t have to worry about the property.”
In serving international buyers, the major challenges for real estate professionals relate to U.S. immigration laws, taxes and finance. Under current law, foreigners cannot remain in the country for more than six months continuously unless they have a special visa, such as those for students or workers. “Real estate associates need to be knowledgeable about U.S. visa laws and be ready and able to work the system to allow their potential customers to meet their desires,” Tuccillo says.
Many real estate organizations, including Florida Realtors, have advocated the adoption of a silver visa program that would allow financially self-sufficient retirees to live in the United States yearround. “With the other challenges facing our country, it appears that Washington will not make progress on comprehensive immigration reform this year,” says John Mike, sales associate with Prudential Florida WCI Realty in Wellington and the NAR president’s liaison with the United Kingdom.
However, Mike notes that the EB-5 visa program for international investors does open the door to a relatively small segment of affluent foreign buyers (see “Great Idea” above.) “Although it doesn’t impact the wider market, the popularity of the EB-5 program demonstrates the continuing appeal of investing in the United States and Florida,” he adds.
Another issue for international buyers, according to Rayman, is taxes. “Many people think our property taxes are high,” she says. “When you add in the cost of [homeowners’] insurance, it can be a real eye-opener for people who aren’t used to those payments. It’s a good idea to bring up these issues early in the conversation with [prospects], so they have a better sense of the overall costs, not just the mortgage loan.”
In addition, the tight global credit market continues to have an impact on international buyers seeking to finance their purchases. Even though almost half of buyers in the NAR study paid cash, the availability of financing certainly influences purchasing decisions. While many U.S. lenders understand the needs of foreign borrowers and cater to that market, Cowie says that overseas financing may also be available. “We have found that arranging multinational financing is a big help to many buyers,” he says. “In some cases, they are able to purchase Florida real estate in their own currency.”
signs of an upturn
Real estate professionals familiar with the international market expect to see a strong upturn in activity in the second half of 2010 and the upcoming winter season. “Right now, many prospects are still on the fence waiting for signs of stability in the U.S. market,” says Cowie. “As soon as foreign buyers believe the market has bottomed, we will see a significant increase in activity. Then, when prices start moving up again, there will be a flood of buyers. After all, almost everyone would like to live in Florida.”
Richard Westlund is a Miami-based freelance writer.
For affluent international buyers, the EB-5 visa program off ers an accelerated path to attaining permanent U.S. residency. To be eligible, foreign residents must invest either $500,000 or $1 million in a job-creating commercial enterprise that meets the program’s criteria. “For someone who has available capital and can invest in an enterprise with a track record for generating new jobs, this is a fairly conservative way to obtain U.S. residency without excessive risk,” says attorney Roger A. Bernstein, partner, Bernstein Osberg–Braun DeMoraes LLC, a Miami law firm.
Realtors® make contact with their international customers in much the same way they do with their domestic homebuyers—through previous relationships with customers or through referrals from friends or other customers. The No. 1 source for international customers is via previous customers or contacts. The Internet is also an important source for foreign buyers.
Destination of Foreign Homebuyers
The Miami-Fort Lauderdale area was the most frequently reported location for a home purchased by a foreign buyer in Florida. More than one in four (27 percent) foreign buyers purchased a home in the area, followed by 11 percent who purchased a home in either the Orlando or Sarasota area.
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