Why Has There Been a Drop in Foreign Buyers of US Properties?

Although the appetite for U.S. real estate continues to flourish, foreign purchasing has gone down. According to the National Association of Realtors, purchases of residential property by foreigners in the US fell by $10 billion in the year ending in March, 2016 to $44 billion, which is the lowest level since 2013.

The number of non-residents investing in the real estate market is also reducing. The average price of properties purchased by these buyers also fell from $500,000 to $480,000 in 2015.

Several reasons have been cited for this drop. Higher home prices have been sighted as one of the causes of the decline. This has led to foreigners shifting their interests to lower priced properties. The weakening economies of South America, China, and Europe and the strong US dollar have equally contributed to the weakening of the purchasing power of foreign buyers.

The government of China has introduced substantial restrictions of money leaving the country and this has also made it more difficult for Chinese investors to buy US properties. Although foreigners make up a small portion of the housing market in the US, they are vital to the high-end segment of the industry.

Some developers rely on foreign buyers to purchase their condos and other housing units. The high-end real estate market also relies on foreign buyers to increase their sales. The chief economist of the National Association of Realtors cited devalued foreign currencies, financial market turbulence, and weaker economic growth throughout the world have combined to offer significant challenges to international buyers.

Clearly, the world economy has a direct impact on the real estate industry in the United States. The realtors need to work on ways of cushion themselves from this challenge to meet their profit margins.