International Buyers Return to U.S.

The incredible disappearing international buyer returned to the U.S. this year, according to the National Association of REALTORS® (NAR).6 This signals a notable shift after three years of lagging foreign investment in U.S. residential real estate.

Eager to put their money in U.S. real estate, which has traditionally been regarded as a safe haven, international buyers purchased 98,600 residential properties last year, totaling $59 billion. This was an 8.5% increase from the previous 12-month period.

Even with real estate prices as high as they are in the U.S., many international buyers from high-cost cities view a U.S. property as a relative deal. According to NAR, a typical property costs $28,570 per square meter in Hong Kong, $26,262 in London, and $10,947 in Toronto. Meanwhile, it is $8,250 per square meter in San Francisco and just $3,170 in Miami. Even New

Source: Wealth-X

York is cheaper than Hong Kong and London at $17,191.

Top Countries

Traditionally, Chinese buyers have spent the most on U.S. real estate – and that did not change in 2022. China and Canada remained first and second in U.S. residential sales dollar volume at $6.1 billion and $5.5 billion, respectively, continuing a trend going back to 2013.

However, buyers from Canada and Mexico made up the highest percentage of overall international buyers in the U.S. marketplace. Chinese participation in U.S. real estate reached its peak in 2014 and 2015, but dropped starting in 2019 as the Chinese government cracked down on capital flight and overseas real estate transactions. In 2021 and 2022, presumably due to COVID-19 travel restrictions, the percentage of Chinese buyers investing in U.S. real estate sunk to half of what it was in 2020.

Chinese Investment Has Room to Grow

Still, this suggests that Chinese demand for U.S. real estate has considerable room to grow this year and in the years ahead. Chinese investors could be searching for an escape hatch from the country’s COVID-19 lockdowns and real estate crisis.7 The property sector, which accounts for about a quarter of China's economy, has struggled since the summer of 2020.

Top Destinations

Top Destinations for International Buyers

For the 14th straight year, sunny Florida remained the top destination for international buyers. For Chinese buyers, however, California and New York are their top preferred spots, followed by Indiana and Florida, tied for third. At just over $1 million, Chinese buyers had the highest average purchase price, and nearly a third, 31%, purchased property in California, per NAR. Compare that to Canadians who had an average purchase price of $485,000.

Types of Properties

Investment properties and vacation residences are among the most popular reasons for purchasing a home for international buyers, according to NAR data. Like our survey respondents, many international buyers plan to use their U.S. property for vacation or rental purposes. This, once again, highlights the wealthy’s propensity for multiple homeownership, investment, and lifestyle enjoyment.

This contrasts with Chinese buyers who appear to be mainly focused on purchasing primary residences.

44% of international buyers purchased a property to use as a VACATION HOME, RENTAL PROPERTY, OR BOTH.

All-Cash Offers Set to Increase

All-cash offers are expected to rise with the number of international buyers returning to the market.

Given the hurdles involved with getting a loan from a U.S. banking institution, international buyers are generally more likely to pay cash than U.S. nationals. In 2022, the share of all-cash offers increased amid tight competition for limited homes on the market. All-cash sales accounted for 44% of international buyer transactions, nearly twice the rate (24%) of all existing-home buyers, according to NAR. Nearly 7 out of 10 Canadian buyers (69%) made all-cash purchases.

All-Cash Purchases Among Top International Buyers

Puttin G It In Pe R Spective

Luxury real estate has always been a global pursuit. The pandemic momentarily halted this by limiting global movement and slowing international property buying. Now the tides are changing yet again.

The geopolitical events of recent years may cause the normally risk-adverse affluent to look beyond their home country’s borders for sunnier shores and a safeguard. Shifting mindsets toward stability, physical safety, family, wellness, personal enjoyment, and a pent-up desire for experiences could also put the wealthy on the move globally again. With the rapid embrace of technology increasing connectivity worldwide and more wealth at their disposal today, the affluent consumers' freedom to move about the world may be exercised to an even greater extent over the next few years than at any other time before.

Rising interest rates are inspiring a new generation of high-net-worth buyers to get creative with their real estate financing this year and take a page out of the ultra-highnet-worth investor playbook.

A surging stock market, home equity gains, rising incomes, historically low borrowing costs, and a desire for larger living spaces sparked a home buying and boom over the last two years.

With borrowing costs at historic lows, large U.S. banks ended up doubling down on wealthier customers who sought loans to buy primary or secondary homes during this period. The combined value of loans made by the wealth management arms of JPMorgan Chase, Bank of America, Citigroup, and Morgan Stanley surpassed $600 billion in the second quarter of 2021, up 17.5% from 2020, per the Financial Times.¹ This represented 22.5% of the banks’ total loan books, up from 16.3% in mid-2017.

This type of borrowing was on the rise for more than a decade. However, the pace picked up after the Federal Reserve cut interest rates in response to the pandemic.