The depressed housing market has been getting a boost from wealthy foreigners who have been purchasing property in increasing numbers. Taking advantage of the housing bust by snapping up properties at cut-rate prices, foreign purchasers account for about 9% of all real estate purchases made in the last year. This is a significant number when it is considered that this group is made up of recent immigrants that have lived in the US for less than two years.
A study by the National Association of Realtors (“NAR”) reveals that these buyers often buy in cash, do not take out mortgages, and are spending more on average per property than the rest of the market helping to stabilize the markets where the purchases are made. Additionally, they are helping to maintain properties that might otherwise sit vacant and are as a result boosting neighborhood property values.
Some of these purchases are made in conjunction with EB-5 investments. The EB-5 visa category is one that enables wealthy foreigners to invest $1 million (or $500,000 into a targeted employment area) into a new commercial enterprise that creates at least 10 full time jobs for US employees, in return for green cards for the investor and his or her dependants. Originally created by Congress to stimulate the economy through foreign investment and job creation in the commercial sector, the EB-5 visa category is appearing to benefit the depressed housing markets as well.
These new immigrants come from a number of countries around the globe; however the NAR study reveals that 8% of all purchases made by foreigners last year were made by wealthy Mexicans. Alston Boyd, a Texas realtor, believes that many of these Mexican immigrants are taking advantage of the EB-5 category to move their families out of crime-ridden cities in Mexico. Afraid of kidnapping and violence in some of the northern border towns, the EB-5 visa allows these foreign nationals a chance at a safer life, according to Boyd. In Texas, 7% of home purchases were made by new immigrants, mainly from Mexico. The Houston and San Antonio markets in particular have seen a significant upswing in sales to foreigners.
Other markets are being positively affected as well, for instance Arizona is seeing the benefits of Canadian investment in vacation and retirement homes. Attracted by the warm weather, Canadians make up a significant amount of the 7% of foreign immigrant purchases made in that state. In California, 11% of all sales are going to foreigners, with purchasers hailing primarily from Australia, Japan, South Korea, China and India. These groups are buying luxury homes in markets such as Bel Air, Beverly Hills and Pebble Beach. Finally Florida has seen the greatest influx of foreign cash into the real estate market with 26% of all purchases made by foreigners. Latin American and European immigrants view Florida’s weather and the proximity to their relative homelands attractive for investment purposes.
Whether made in conjunction with a business purchase in efforts to secure an EB-5 visa, or simply as an investment vehicle, foreign purchasers view the values in the US real estate markets as greater than those in their home countries. US realtors, in turn, view the foreign immigrant purchasers as a group that’s helping the markets to normalize.