The U.S. housing market has hit another stumbling block, as purchases of homes by foreign buyers dropped a dramatic 36%, according to a report by the National Association of Realtors.
The data comes from an annual survey of residential purchases from international buyers, which found that foreign buyers, led by the Chinese, purchased existing properties with a total value of $77.9 billion from April 2018 through March 2019, compared to properties totaling $121 billion in the preceding 12 months.
Investors from China exited the market most dramatically, with purchases falling 56% to an estimated $13.4 billion worth of residential property.
There are many reasons for the plunge, including less economic growth abroad — growth slowed to 3.6% in 2018 and is on track to slow to 3.3% in 2019 — tighter controls on outside investment by the Chinese government, a stronger U.S. dollar and a low inventory of homes for sale, according to Lawrence Yun, NAR’s chief economist, who called the magnitude of the decline “quite striking, implying less confidence in owning a property in the U.S.”
Most foreign purchases were in Florida, followed by California, Texas, Arizona, North Carolina and Illinois.
While this is bad news for the overall U.S. market, it won’t make a crucial dent in the New York market, as foreign investment hasn’t been part of the market for some time, those in the industry say.
Leonard Steinberg, a broker in New York City with Compass, referred to the recent high-profile Manhattan purchases billionaire hedge-fund manager Ken Griffin, who closed on a $233 million penthouse earlier this year, and Amazon founder Jeff Bezos, who recently bought three condos for a combined $80 million.
“The reality of it is the Chinese billionaire or Russian oligarch were a small fraction of the market,” Steinberg says. “Your best foreign buyers are American buyers – just from other parts of the country.”
Svetlana Choi, a broker with Warburg Realty, said there is still foreign investment in New York, just not for ultra-luxury properties.
“While there are still Chinese investing, they would prefer to invest in an apartment building in Flushing that can bring a far larger return, than an empty super expensive apartment in New York City,” Choi says.
Noemi Bitterman, also of Warburg Realty, notes that as the market continues to decline, more investors may come through.
“My feeling is that now is definitely a time to buy because current prices reflect fair market value and not inflated prices as we saw six to 12 months ago,” Bitterman says. “The market has adjusted and prices are where they should be.”