← Real Estate Without Borders
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- [00:00]
A
Okay. Welcome back to the Real Estate Without Borders. Today I am joined by Lawrence Yoon from nar, who recently put out a report, was one of the lead researchers on a report that shows the impact of foreign capital and foreign buyers in the US Real estate market. Lawrence, could you give me a quick overview of who you are, what you do and a bit of a summary of the research that you put out?
- [00:23]
B
Yes. So I am chief economist with national association of Realtors. So in my role trying to collect and and analyze all data related to real estate or the potential impact and recently we completed our annual foreign home buyers in U.S. real estate and it did show some recovery. But let's put it in the context that in the most recent year it is still well below what it was pre Covid condition and well below sort of the peak activity that we saw in 2016, 2017. So we are just essentially recovering from very low points.
- [01:05]
A
Yeah, absolutely. What seemed to be some of the key trends that stood out to you when you were doing this report? Is there anything that kind of as you're researching this for the year that that surprised you?
- [01:18]
B
So the foreign buyers, they tend to be more cash compared to domestic buyers, which is implying that foreign buyers, whether they are much wealthier, do not need mortgages or that somehow it is simpler to purchase proper property as an international buyer to just go all cash. So being more predominantly cash among the pure international buyer. Pure means somebody say who is a Canadian resident buying a property in the U.S. or say Chinese resident buying property in the U.S. we have second category which is recent immigrants, people who have been in the country for only two years and they are able to buy a home within two years. One can assume they are either fairly or wealthy or they have very high paying job and consequently purchase. So both combination, we have seen some recovery from very low activity the prior year.
- [02:15]
A
Interesting. And then in regards to the composition of like, who are the foreign buyers who are most active in US real estate? Can you give me a little bit of a summary of like which countries seem to play the biggest role and any changes in that composition that you.
- [02:29]
B
Observed in recent years? It spanned two countries, China and Canada. When I say China, this is not only the mainland China. We are considering Taiwan, Hong Kong as well. So it's not only what we call, you know, communist China, you know, people living in Hong Kong, most free market Taiwan. I think that's part of the explanation for heavy Chinese presence in recent years is just that maybe some wealthy Chinese, if they are able to get the money out of the country, they don't trust their government and therefore they are finding the way to sort of park their money. Maybe there is a real estate need, but even without the real estate need, just park the money where they consider to be safe. And of course, US Observes the private property rights of the owners. No confiscation fears, anything like that. And therefore, I think people feel comfortable buying property. Canadians, naturally, they are a luxury store. And with the cold winter weathers, Canadians tend to buy properties in warmer weather in Arizona, Nevada and in Florida.
- [03:32]
A
And I guess it would be too early to tell with the 2025 data set. But like, has there been any observation of changes in foreign buyer sentiment from Canadians into the U.S. given discussions around a trade war and like tariffs with Canada or even just like anything about Canadian? Because I noticed in the report that Canadians were also contemplating selling a lot of properties and especially they're especially active in, in the Florida market. Have you seen any, any impacts in that regard?
- [03:59]
B
So, you know, one has to first consider broader market condition, which is that in Florida, many people, whether domestic, foreigner, they want to sell or maybe they are forced to sell because of the special circumstance surrounding Florida condominium law, which says that they need to have larger maintenance fund and so forth. So we have anecdotally heard where condo owners of older properties may have to cut a check for $10,000 or $20,000 and they don't have that extra cash sitting around. They sell the property. So it's not only the Canadians who may be selling Japan for international relations reasons, but many condo owners are just selling the property. Canadians happen to be in Florida, but we also know that the flight, say the air travel between Canada and the US has greatly diminished, which is clearly indicating that Canadians are not happy about the direction of the US And I.
- [04:58]
A
Guess in the report you also illustrate which markets each country is most active in. Right. So maybe we'll start with Canada. I know you mentioned like Arizona, but it does seem to be, I think primarily is Florida where Canadians are buying most property. Right?
- [05:14]
B
Yeah. Canadians like the warm weather. I, not surprisingly, I think, you know, after the brutal winter or maybe during the winter time, they want to have that big contrast. So it's the warmer states that the Canadians are sort of definitely looking for, while in China, you know, they're looking for, I guess, more proximity where there could be many Asians living. So California tends to be dominant. So, you know, there is a little variation. Latin America, they really like the Miami specifically, while the Germans, for some reason they like the other side of the Florida like the Naples Fort Myers Sarasota condition. One can see based on also some of the direct flight availability. You know, direct flight from Germany to western Florida and certainly there's many domestic direct flight from.
- [06:02]
A
Yeah, yeah, definitely. Really interesting. I did notice a couple of like changes in composition. I think there was an increase in, in buyers from Latin America and especially Mexico if, if I'm correct on that one. And also a couple of changes in which European countries, it seems like some European countries kind of like will really ramp up and then fall out. If you try and chart it over. Is there any other activity that really like stood out to you or any, any trends that you're like key metrics that you're really paying a lot of attention to in regards to like monitoring this going forward?
- [06:40]
B
I think, you know, China will continue to be a major player just because of the population size and their economy. Even in a bad year, their GDP seems to grow 4%, 5% which means that they're cranking out millionaires here and there. And to the degree that the wealthy individual, whether because they are wealthy, want to buy real estate in the US or they want to take money out or sort of risk assessment out of the China market. So China I think always will be an important player. I think one country to look out for is India because we have seen more Indians whether they are going to Canada, US or Australia, other English speaking countries. Part of it is India had a very solid economic performance, performance one of the better one among major countries in the past year. 7, 8% GDP growth and the tech sector exposure, we know that the IT sector, there's many people from India going, finding job in those Silicon Valley high paying jobs. So I think there will be quite a growth potential from people from India.
- [07:47]
A
Yeah, I've noticed like in, in, in Canada, I mean both Dave and I trade like Dave trades in Canada and Mexico and we both trade in Canada as well. And we've noticed like a huge influx of like Canada had a big wave of capital coming from China and then sort of a second wave of capital coming from, from India sort of as more and more people get pulled up into the middle class in, in the Indian subcontinent and similar to the phenomena that happened in China over the last 20 to 30 years, obviously plays a big role as there's wealth created in that economy. And I think, you know, one of the things that we observed just in the Canadian market was a lot of Chinese capital sort of slowed down as a result of capital controls. I and also just sort of a erosion of the domestic economy. I think like their housing market, a bit of a negative wealth effect probably happening. Do you think that like in a, in a global context, India is almost like on deck to repeat sort of that wave of capital that we saw from China into the Western world, North America, Europe, et cetera. Does that, does that sort of seem like the key demographic or capital trend that we might observe over the next 10 to 20 years?
- [08:53]
B
So India has consistently shown faster economic growth than most other major economies. And furthermore, what we are, I've noted is Indian politician recognize the importance of more free of market economy. So rather than completely government control, which they have done in the, you know, 20 years past, 10 years past, I think that naturally will lead to faster economic growth. The other countries to watch out for is I think the Middle Eastern oil producing countries. You know, naturally if they produce oil, they're getting wealthy, but they also understand they are diversifying some of their economies, you know, getting more people incentivized to work. And therefore I think you may begin to see more presence among the Arab countries able to buy here in the U.S. interesting.
- [09:39]
C
So like more, more people from the UAE coming in to purchase property in North America.
- [09:44]
B
Yes, because for certainly they want to attract many global citizens to purchase in Dubai.
- [09:50]
A
Right.
- [09:51]
B
But I think the reverse is also likely just because they become wealthy and they want to travel.
- [09:56]
A
Yeah.
- [09:57]
C
Oh, that's interesting.
- [09:58]
A
Do you think the current climate globally between like all of the different things going on from different governments, sort of jockeying back and forth on policy, et cetera, does that create like a net decrease in, in like demand for people to move money around? Or do you, or is it the opposite where people almost are placing their bets on a country that they think is going to emerge sort of as a place where they'd want their capital to be? Or is it sort of, is it, is it really just dependent on the person?
- [10:24]
B
You ask people from Venezuela, the Venezuelans living in the US and they will say that because of the political turmoil that happened in Venezuela, that really brought a lot of capital from Venezuela into the US So anytime there's political turmoil in other countries, sometimes they want to park in what they perceive to be more risk free areas. And United States certainly provide that. Canada provides that. I guess Canadians place tax on foreign buyers. So maybe there's one little difference between Canada and the U.S. but you know, anytime there's turmoil, people are seeking out where there is a respect for private property rights. America certainly provides that even with some hectic Trump policies. You know, one day this Another day this. But I think the respect for private property will always be there despite some daily movement on some, you know, tariff or other policy arena. And then you have also just overall where there is a greater economic linkage, where people feel, you know, there's greater linkage. British used to be a heavy buyers of US real estate, but that has sort of tapered off. And I think I would attribute that more towards slower British economic growth. They are not creating that wealthy British people to buy able to buy here in the US but there is some shifts every year.
- [11:44]
C
That's interesting. I actually had three, three of my clients in Canada in Toronto in the past month were Canadians relocating, selling properties and exiting to move to the, to the US Just based off of those factors that you just mentioned, which is super interesting.
- [11:59]
B
It's cool.
- [12:00]
A
One of the things I did also want to discuss is I know you're at the national association of Realtors, so I wanted to chat a little bit about the methodology behind this. Like how do you get. This is obviously a really, really hard data set to come up with. How do you, how do you gather this? You do it through the realtors, through the brokerages. Like can you explain sort of where all of this information comes from?
- [12:21]
B
Yeah, very good. So all the data, I think one goes into more granular basis, take it with a grain of salt. But on the more accurate level one can feel more confident on the direction that's with any kind of data. Whether jobs report gdp. And the way we collect data is based on surveys. So anytime there's survey, who responding to the survey, who is not responding to the survey, is there a difference between the two groups? You know, even like in political election, you know, people say who are you going to vote for? And we know there's some sampling error. So the way we collect data is essentially we ask realtors to say that have you had a boring client in the past 12 months? And if they say no, we completely stop the surveys and say thank you for the for answering that question. But if they had indicated yes, then we further dive into the data. Who are they? Where are you selling the property? Are you in Florida, Arizona? What type of homes did they purchase? What price point do they purchase? And also we also asked question about non successful foreign buyers, Realtors who work with foreign buyers. But they were unsuccessful asking question why not? Was it due to lack of inventory, Lack of the proper home they were looking for? Was it due to affordability issues? So all that is in the report. But the question that you are posing is we are gathering data from our realtor members by surveying them. And the impetus for this report was actually, I think 15 years ago. Some of people in my team said, okay, let's try to go into the US Government data and see how many foreigners are buying property in the US we cannot find anything. So we said, okay, why don't we just ask Realtors to see what we can gather from our realtor audience.
- [14:06]
A
Yeah, it's good, really good methodology. Also noticed that you capture there was a part of the question in there was whether or not you had foreign buyers who were, or foreign owners who were contemplating selling properties. Has there been like any sort of liquidation? I know that the, the US Real estate market, obviously, maybe we can chat a little bit about what's happening there just in, in the broad market. But you know, it seems to be more supply, like a bit of an imbalance between a lot of, a lot of listings and not a lot of buyers do foreign owners seem to be joining this, you know, this, this whole thing where they're trying to sell as well.
- [14:43]
B
So regarding selling, I mean, we've been only collecting that data information only recently. So I would say it's not a solid trend analysis. But you know, for, you know, changes in life circumstance, sometimes people just sell their property. There could be a death in the family, marriages, divorces. So there's always some selling property. We know that real estate prices zoom up in the past five years. So maybe some people are viewing it as sort of top of the market or maybe they say, oh, this is pretty good profit, 50% gain or 70% gain in the state of Florida, so maybe it's time to cash out. So it could be for that reason the buying and selling always happen. We focus more on the buying, selling. Only recently we've been collecting the information, but just anecdotally we have been hearing that especially Canadians unhappy with U.S. government policies want to exit out of the U.S. and furthermore, we see it in some of the indirect measure like the air flight, how many Canadians are flying into the US down quite measurably from now compared to one year, one or two years ago.
- [15:52]
A
Interesting. Any indication of where that, like where those purchase decisions are going? I mean, I can't just assume that Canadians are going to magically decide that they love winter and aren't going to spend winter in Canada or aren't going to spend winter in a warmer climate. Is there any indication of where that, that capital and those, those vacation decisions are going? If the US Is missing out on.
- [16:12]
B
It right now, you Know, maybe some of the Central American countries, you know, Costa Rica also is considered very safe and, but we don't have good information about where the alternative destination would be. But I'm thinking that also, you know, good number of Canadians who are selling property in Florida is really related to that unique issue that's facing the condominium market in the Florida marketplace.
- [16:39]
C
Yeah, I definitely seen an uptick for like the different type of need of like I, I sell real estate in Toronto and in Mexico and I, I, when I first started selling in Mexico, it seemed as though the average consumer, the average investor in Mexico was looking for investment type properties. You know, Airbnb, that was their main focus. But that's since this whole thing has happened there, that shift of their, the reason they're investing is much more for vacation property. So it's like it's, it's been from looking in Florida, no longer looking in Florida or selling in Florida and relocating that capital to, to Mexico for the purpose of their vacation property as it used to be in Florida. So that's kind of interesting that their like, sentiment has changed quite a bit.
- [17:21]
B
Yeah, yeah, yeah. I mean, you know, sometimes, you know, anecdotal is not a statistics, but anecdotal and consistent anecdotal is implying certain trends. So maybe that's what's happening. The Canadians are selling the US and then purchasing in Mexico.
- [17:34]
A
Yeah, yeah, it is. Like, I think it's especially interesting because the way I would observe it in Canada, at least from what I've seen in our own political climate, is the people who are dissatisfied with what's happening in the US would probably be the net owners of property in those markets right now. And so they would be the ones that are selling and you know, probably the one, the ones that are more well capitalized. Typically your baby boomers who, you know, feel a sense of defensiveness against, you know, the political decisions in the US Whereas I think at least what I'm observing for young people, the youth vote is very much skewing in the opposite direction politically. So while you probably have a today problem of more net sellers of Canadian owned US Real estate, I think that there's a decent pipeline of Canadians who are equally dissatisfied with Canada's political environment that are, have intentions of buying real estate. Like we're hearing of a lot of Canadian people wanting to buy real estate in Florida, in, you know, a lot of markets in the US and Canadians. It's interesting because the Canadian real estate market, I would say has been suffering for the last, you know, Three to five years, basically, since our interest rate hiking cycle started. The US Only just seems to be arriving there. And so I think Canadians also became a little bit disinterested in US Real estate as a result of just it not or, sorry, became interested in US Real estate simply because our market was not, not a good, good investable market either. The last piece I want to discuss is sort of the reason why people buy real estate in, in the US And I know you mentioned sort of the primary one, which is obviously like the snowbird, the winter cottage, whatever it is, but is there much investor activity of foreign capital in, in the US Market? Like, you always hear about people talking about, you know, foreign investors and, you know, and Blackstone and whatever it is, like, ruining the market. But does it, does it seem like that's really a, a real trend or like, based on the research that I saw, it was, it was a pretty small portion of the intention of, of these buyers was to actually do it as an investment property.
- [19:25]
B
I think, you know, when people are looking for just pure investment, they're looking at all alternative assets, whether to buy bonds and get a steady interest return going to the stock market. So there's a wide arrangement of how to get the return on the money invested. And it could be in the real estate. So there's a wide abundance. But the fact that people are buying real estate, I think is partly due to, or primarily due to the usage. They want to use the property maybe, you know, three months out of the year, but other time are they going to leave it vacant or are they going to try to recover some bonus money out of it by renting it out? So I think there is a dual usage. So maybe the initial intent was to have that, yeah, have, let's have a property in Arizona, but then they realized they don't utilize all the time. So why don't they rent it out?
- [20:16]
A
Yeah, yeah, we see a lot of that. People just buy cottages and then they'll, when they're not using it, they Airbnb it to try and recover some of that, that cost. Right.
- [20:24]
C
You had a good point, Dan. It's like, I think a lot of the, a lot of purchasers have this misconception that, that any sort of downfall or any sort of pricing increases is due to big investors buying up all the inventory. And it's the investors coming in and scooping everything up, but it's actually a smaller percentage. And like, like you said, Lawrence, I actually, I agree 100%. I do think that it's probably dual Usage, you know, they're, they're buying it with the intent of having a second property. But also it's kind of nice to make some Airbnb funds while you're not using that property, which is interesting.
- [20:59]
A
Yeah, totally. Lawrence, is there anything else that you wanted to add that we didn't get a chance to discuss with you? Like any, any key findings that we forgot to mention in the report that you want to share with the audience?
- [21:11]
B
You know, it's not only about the sunny weather for the Canadians, but it's also about the financial capacity. So the fact that the stock market is just running up all time high, near all time high. Assuming that this level holds, I think we will see greater international transactions. I think people become wealthy, they want to say, yeah, I want to have my second property, I want to have my third property. So right now, at least, the wealth among the property owners across the world is doing comfortably, and therefore I anticipate some further increase in international buying activity, certainly in the US but it could be across the globe next year.
- [21:51]
C
I got this. This might be naive of me, Lawrence, and I. I would assume you've been doing this a lot longer than me, so I'd love your answer to this question. Because I like to think that just because of my group, of my sphere of influence, the, the people that I surround myself with are at an age where now we're wealthy enough to be looking into international investing. And it's becoming an option for a lot of the people that I surround myself with. But I feel like to, maybe it's just because it's new for me, but do you see international investing becoming much more popular now than it was, let's say, decade, two decades ago?
- [22:24]
B
You know, as people are looking for, you know, alternative return, I think, you know, people are saying, yeah, there is some alpha meaning that people put in little sweat equity into it, you know, make some repairs and other things. There's certainly more potential to get that bigger return by putting their special personal effort into the property while people buy the stocks. You know, they're just waiting. Hopefully it goes up or down. But there's that personal effort component when people buy real estate, I think.
- [22:55]
C
I think also maybe, and maybe, correct me if I'm wrong, that it's the, the information that comes along, like, you know, buying an international property obviously is a little bit nerve wracking for some because there's just limited information or less information. But as the Internet comes of age and more and more information becomes available to the consumers, I feel that it's, it's becoming less of a big scary monster to invest internationally because of all the access to information and I think maybe that's a small portion as to why. At least I think that I see an uptick in international investing.
- [23:27]
B
I agree. More information means more confidence and you need to have confidence to purchase.
- [23:33]
A
Do you notice a trend at all of the like by. I guess it's always hard to assess buyer intention but like people just wanting exposure to like you know, you talked about the stock market. USD is also a big thing that a lot of people want exposure to right now. Like so there's a bit of a forex element as well. Right. Like if it's, you know, Chinese capital coming into Canada or the US do they want exposure to the USD? If it's Canadian capital coming into the US do they want a little bit of a, almost a forex hedge against potentially devaluation of their own domestic currency? Right. Does that element seem to be present in some of your observations?
- [24:05]
B
I think it's more of a capacity. So when the dollar is super strong it makes it more difficult for the foreigners to purchase. But now that the dollar has weakened somewhat from super strong levels, maybe as long as they view us as more growth potential. Certainly all the AI companies, computer technology company, appears to be based here in the US So to the degree that AI led economic growth is clearly dominant in America, that implies strengthening in dollar in the future even though currently dollar has slightly weakened compared to one year ago.
- [24:40]
A
Yeah, no, that's an excellent point. I guess you would assume, you know, if people are bullish on the US economy and they want to get exposure to USD or just the US economy period through real estate, it might actually be a period where we'll see more purchases, especially if prices are rolling over. There's more and more supply. You do have a lot of wealth being created around the world. It could be a period of time where we'll see some more growth on a year over year basis heading into the 2026 report. So we'd be excited to chat with you about that one once it comes out. And I'm sure you're going to be researching it heavily for the next 365 days anyways.
- [25:13]
B
Yes.
- [25:15]
A
Okay Lawrence, thank you so much for your time. If anybody wants to reach out to you or the national association of Realtors for information about this report or any of the other research that you're doing, is there a place that you would prefer that we we connect with them or should I connect you with them?
- [25:30]
B
I would say just a search word as NAR Research. And from that, there are so many options to it very specifically for international home buying. Just NAR Research. International Home Buyer.
- [25:42]
A
Okay. Amazing. Awesome. Thanks so much, Lawrence. I want to be mindful of your time, so we'll let you go. But I just want to say I really, really appreciate you taking the time to come on and chat with us. I learned a lot from this. And keep doing the great work. We'll certainly be tuning in and reading all of it, and we'll hit you up with any questions and opportunities to chat about it whenever we get a chance.
- [26:01]
C
If you need us for any surveys, Lawrence, just send us a message.
- [26:05]
A
Okay, great.
- [26:05]
B
I enjoy that.
- [26:07]
A
Thank you. Take care.