Any hopes that foreign buyers would continue to rush into the US tripping over themselves for an opportunity to park money in a "safe" real estate asset have been dashed according to a survey by the National Association of Realtors released Wednesday.
Purchases of US residential real estate by foreigners fell 1.3% y/y from $103.9bn in 2015 to $102.6bn in 2016 (year ended March 2016). As shown below, the main buyer by dollar volume was China, contributing nearly 27% of the total.
Breaking down the data further, purchases by foreigners who aren't residents of the US fell by $10bn y/y to $44bn, the lowest level since 2013.
Even as foreign buyers continued to pay huge premiums, the average purchase price paid by foreign buyers declined substantially y/y as well.
As the WSJ notes, even as foreign buyers make up a small part of the market overall, luxury residential builders in Miami, Manhattan, and parts of California could take a hit if (and when) this trend continues.
Here are the main destinations of foreign real estate purchases:
We have focused quite a bit on China's capital outflows, and it comes as no surprise that the markets we discussed are where the NAR shows China buying, specifically California.
Another interesting point along those lines, is the fact that Chinese buyers pay predominantly in cash - interestingly, so does Canada.
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All of this reiterates what we have been documenting for quite some time now, namely that China capital outflow continues to be directed to the US real estate market, and that the overall trend of foreign buyers purchasing in the US is slowing, thus pulling the rug out from underneath those soaring real estate prices in major markets. The pain will continue as the funds slow, and the supply glut becomes even more of a factor as a result.