AgentMarketing

Luxury real estate: Portrait of an international homebuyer

What motivates a foreign investor to buy luxury real estate?
  • International homebuyers show interest in diverse markets.
  • Ultra high net worth individuals look for ultra luxury real estate.
  • Foreign real estate investors make a dramatic impact on local markets.

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The most prolific foreign homebuyer is an ultra high net worth (UHNW) individual — and they are buying luxury real estate. The UHNW designation means that they have assets of at least $30 million. The group’s purchasing activity is fueled by specific trends and motivations such as the desire to diversify safe investments or a plan to gain citizenship.

International UNHW buyers pursue these non-traditional goals as well as the traditional reasons for purchasing property including the real estate value and its potential for capital appreciation.

Luxury real estate figures prominently in this equation. Therefore, it’s beneficial for high-end agents to gain insight into the global lifestyle of international homebuyers.

Who are UHNW individuals?

According to the UHNW Luxury Real Estate Report (Homes as Opportunity Gateways) by Wealth-X (the global authority on wealth intelligence) and Sotheby’s International Realty, 12 percent of second homes bought by ultra high net worth individuals who reside in BRICS nations (Brazil, Russia, India, China, South Africa) are located outside their country of residence.

Currently, Chinese buyers make up the third-largest share of international UHNW homeowners in the United States — topped only by Canada and the United Kingdom. Many Chinese investors are looking to buy upscale Western real estate as part of a long-term rebalancing plan.

What is the UHNW buyer looking for in luxury real estate?

Recent fluctuations in emerging market nations have spurred on UHNW investors to consider purchasing luxury real estate in Western countries. Politically or economically stable locations represent a contrast to uncertainty at home.

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The foreign purchaser tends to buy from key real estate markets in different countries including the U.S., Canada, Australia and the Mediterranean. Such locations hold a tremendous appeal for UHNW individuals who see these markets as being full of opportunity.

The most popular destinations offer programs through which people can achieve residency or citizenship by investing in local business. Attractive tax regimes are another draw for foreign investors who are interested in buying high-end real estate.

Where do UHNW buyers look for luxury property?

Of course, UHNW buyers check out luxury residential property in famous markets such as London and New York. International investors keep home prices climbing in these regions. The cost of luxury real estate in London’s central neighborhoods has increased 42 percent between June 2010 and June 2015.

Ultra-luxury real estate (referring to listings of more than $30 million) in New York has seen an impressive rise in property values over the past five years. During 2014, 73 NYC homes in this category were up for sale. A year later, that number had risen to include 114 ultra-luxury properties.

Investors who buy outside their domestic market do not, however, always choose to purchase real estate in major hubs. Often they pursue property in other targeted — but less expensive — Western markets such as Sydney, Australia, or Vancouver, Canada.

Home values have also risen significantly over the past year in both these areas. For example, Sydney saw an increase of 15.1 percent year-on-year and Vancouver, 12.3 percent year-on-year. As UHNW investors seek out this type of economic and political environment and real estate diversity, expect properties in cities like this to continue rising in value.

Kevin M. Leonard is the founder of Luxury Agent and Valore Group. You can follow him on Twitter or LinkedIn.

Email Kevin Leonard.