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Real Estate - JANUARY 29, 2018

New high reached in foreign investment into U.S. luxury residential real estate

by Andrea Zander

Foreign investment into the U.S. luxury residential real estate market has jumped to a new high at $7.48 billion, with Miami, Manhattan and Los Angeles as the key locations, according to U.S. Ultra Prime Real Estate, a report from Beauchamp Estates, in association with Leslie J. Garfield & Co.

In the 12 months to March 2017 nonresident foreign sales in the United States for property priced at more than $1 million, hit $7.48 billion, up 72 percent from 2016. Of these transactions, 44 percent were all-cash purchases.

The new report reveals that for premium residential real estate priced above $2,700 per square foot, the key locations in the United States for foreign buyers are Miami, New York and Los Angeles.

“Despite the vast geographical size of the United States, data from the U.S. National Association of Realtors (NAR) shows that almost 40 percent of overseas buyer transactions are made in just three U.S. locations — Miami/Florida (26 percent), Los Angeles/California (9 percent) and Manhattan (3 percent) — and for ultra-prime property these three locations are the U.S. destinations of choice for the world’s wealthy,” said Gary Hersham, managing director at Beauchamp Estates.

Jed Garfield, president at Leslie J. Garfield & Co., said, “Data from the NAR shows that just five overseas countries dominate investment into U.S. residential real estate, accounting for 50 percent of all transactions; they are Canada, the United Kingdom, China, Mexico and India.”

International buyers and occupiers dominate the Miami residential property market (80 percent), with only 20 percent of the market being attributed to domestic U.S. buyers. The average per square foot price for luxury Miami residential property is $2,749 with overseas buyers typically buying a 13,107-square-foot luxury residence with the most popular addresses being Miami Beach, Palm Beach and North Bay Road. Island locations such as Fisher Island and Bay Point are popular with overseas buyers because of the privacy and security they provide, the report adds.

The key sources of overseas demand for luxury Miami real estate are from South American and Continental European buyers led by investors from Venezuela, Brazil and Colombia for the former, and purchasers from France, Italy and Belgium for the latter.

“Miami is a leading hub for overseas buyers investing in U.S. luxury real estate,” said Hersham. “Alongside the beach, restaurants/bars, leisure facilities and all-year good weather, the city has become a leading financial and tech business hub. Around 95 percent of ultra-prime real estate in Miami purchased is done via cash transactions. Miami is extremely popular with high-net-worth buyers from South America — Colombians, Brazilians and Argentinians — with other key overseas buyers being the British and investors from the Philippines.”

Manhattan follows as the next key hub for overseas purchasers buying U.S. luxury residential real estate. For luxury Manhattan property, 27 percent of buyers are from overseas, while 63 percent are domestic. The overseas buyers are truly international with key groups being Chinese, British, French and German buyers.

Overseas buyers of luxury property in Manhattan will pay an average of $3,618 per square foot and typically purchase a 9,509-square-foot property — either a family townhouse to use as a New York home or a large lateral duplex or penthouse providing a pied-a-terre and also a base for children studying in Manhattan.

The top locations for overseas buyers in Manhattan are Upper East Side, Greenwich Village and Tribeca.

“Manhattan is a premier world-city and attracts overseas buyers from around the world,” said Garfield. “Over the last five years, there has been significant investment in the Manhattan luxury real estate market from Asia, Europe and Canada. Prices for premium Manhattan homes have risen by close to 30 percent since 2010 with price growth of over 3.5 percent in 2016.”

Los Angeles is the third most popular U.S. destination for overseas buyers, with 20 percent of the housing market now comprising overseas households, with the balance consisting of domestic residents.

Overseas buyers of luxury property in Los Angeles pay an average of $2,901 per square foot, buying an 11,211-square-foot mansion or large house in Beverly Hills, Hollywood Hills West, Pacific Coast Highway or Malibu. The typical ultra-luxury Los Angeles property provides six bedrooms, has a separate staff wing and is set in 2.55 acres of private gardens. Key overseas buyer groups in Los Angeles are from the Middle East (Saudi Arabia, Qatar and Israel), China, the United Kingdom, France and Italy.

The report highlights that up until 2026, an additional 22,000 ultra high-net-worth individuals are forecast to buy premium property in the United States and reside there either full or part time. By 2026 the ultra high-net-worth population of Miami is set to grow by 40 percent (up to 1,050 more wealthy households). Manhattan and Los Angeles are forecast to see wealthy household numbers rise by 30 percent with up to 8,541 and 4,095 new wealthy households, respectively.

The report uses local market intelligence provided by Manhattan headquartered Leslie J. Garfield & Co. and California-based Trulia, with overseas enquiries/deals for the U.S. from London-based Beauchamp Estates. The report findings are supported by data from WealthX and the U.S. National Association of Realtors.

The report used analysis by Dataloft, the market intelligence group.

 

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