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Strengthened dollar curbing growth in U.S property sales to foreigners

1.3% decline over 2015 blamed on high prices here, waning economic growth abroad

Waning economic growth in many countries and higher home prices further enhanced by a strengthening U.S. dollar resulted in a slight decline in international sales dollar volume of U.S. property over the past year and a significant retreat in buying from non-resident foreigners.

An annual survey of residential purchases from international buyers by the National Association of Realtors also showed that the dollar volume of sales from Chinese buyers exceeded the total dollar sales figure of the next top four ranked countries combined.

NAR's "2016 Profile of International Activity in U.S. residential real estate" covers transactions between April 2015 and March 2016.

The survey found that foreign buyers purchased $102.6 billion of residential property, a 1.3% decline from the $103.9 billion of property purchased in last year's survey. In terms of actual properties purchased, however, a total of 214,885 individual properties were bought by foreign buyers (up 2.8%) and those properties were typically valued higher ($277,380) compared to the median price of all U.S. existing home sales ($223,058).

Lawrence Yun, NAR's chief economist, said this year's findings highlight the tremendous appeal U.S. real estate still has on many foreign nationals despite the price of property becoming less affordable.

"Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year," he said.

Yun added:

"While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009.

"Foreigners, especially those from China, continue to see the U.S. as a solid investment opportunity and an attractive place to visit and live.

"Both the increase in U.S. home prices, up 6% in March 2016 compared to one year ago, and the depreciating value of foreign currencies against the U.S. dollar made buying property a lot pricier last year.

"Led by Venezuela (45%) and Brazil (24%), at least eight countries, including China and Canada, saw double-digit percentage increases in the median sales price of a U.S. existing-home when measured in their country's currency."

For the fourth year in a row, buyers from China exceeded all countries by dollar volume of sales at $27.3 billion, which was a slight decrease from last year's survey ($28.6 billion) but over triple the total dollar volume of sales from Canadian buyers (ranked second at $8.9 billion).

Chinese buyers purchased the most housing units for the second consecutive year and also typically bought the most expensive homes at a median price of $542,084.

"Although China's currency modestly weakened versus the U.S. dollar in the past year, it's much stronger than it was 5 to 10 years ago, thereby making U.S. properties still appear reasonably affordable over a longer time span," Yun said.

In addition to the slightly diminished sales activity from Chinese buyers, the total number of sales and the sales dollar volume from buyers from Canada, India ($6.1 billion) and Mexico ($4.8 billion) also retracted from their levels one year ago. Only buyers from the United Kingdom, after a decrease in the 2015 survey, saw an uptick in total sales and dollar volume ($5.5 billion).

"Sales activity from U.K. buyers could very well subside over the next year depending on how severe the economic fallout is from Britain's decision to leave the European Union," Yun added.

"However, with economic instability and political turmoil outside of the U.S. likely to persist, the world view of American real estate as a safe investment should keep demand firm even as pressures from a stronger dollar continue to weigh down on affordability," he said.

Five states account for half of foreign buyer purchases, prices and all-cash sales decline.

Slightly over half of all foreign buyers purchased property in Florida (22%), California (15%), Texas (10%), Arizona or New York (each at 4%). Latin Americans, Europeans and Canadians -- who tend to buy in warm climates for vacation purposes, mostly sought properties in Florida and Arizona.

California and New York drew the most Asian buyers, while Texas mostly saw sales activity from Latin American, Caribbean and Asian buyers.

The median purchase price over the survey period was a tad lower ($277,380) compared to the 2015 survey ($284,900) as a result of the fewer non-resident foreign buyers. Overall, foreign buyers most commonly purchased a home priced between $250,001 and $500,000, while 10% paid over $1 million or more.

Exactly half of all international transactions were all-cash purchases, which was slightly down from a year ago (55%) but still roughly double the overall share of existing sales.

All-cash purchases were more common by non-resident foreign buyers (73%) and those from Canada, China and the United Kingdom.

A majority of foreign buyers over the past year purchased a single-family home, and nearly half bought in a suburban area. Two--thirds or more of buyers from each China, India, Mexico and the United Kingdom purchased detached single-family homes, while Canadian buyers were the most likely to buy a multi-family home.

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