Demand From Foreign Buyers Is Waning

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March 08, 2016

Thanks to a strong U.S. dollar and rising home prices, demand from foreign buyers is weakening. Just one year ago, many experts thought foreign investors would come to the U.S. in droves because of the global economic tumult. In June 2015, Chinese buyers passed Canadians as the top foreign buyers of U.S. real estate.

But now, it looks as though foreign buyers are getting a little skittish as cities such as New York and San Francisco are becoming more and more expensive. The stronger U.S. dollar certainly isn’t helping these possible investors as it makes properties even less affordable, The Wall Street Journal reports.

A buyer form Brazil saw the median price of existing U.S. homes increase 67 percent compared to a year earlier. Buyers from Canada and China saw prices increase 27 percent and 14 percent respectively.

Another issue, at least for Chinese buyers, is a crackdown by the Chinese government on buyers trying to skirt the $50,000 annual limit citizens are allowed to transfer out of the country. It is still unclear if the demand for U.S. homes from Chinese buyers will fall as much as demand from other countries. China is still reporting economic growth of more than 6 percent and U.S. real estate may be a perfect way for some Chinese residents to diversify their investments.

Although foreign buyers make up a relatively small portion of the overall U.S. housing market, a slowdown could have a disproportionate effect on demand for high-end condos and luxury homes in places like Southern California and Manhattan.

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