Over the past decade (2010-2019) foreigners have invested more than a trillion dollars in American residential real estate. This inflow of “flight capital” into U.S. homes reflects financial and political unease around the world and is a testament to the continued safe-haven status enjoyed by the U.S. These inflows have contributed to the persistent strength in the U.S. dollar over this period.
The National Association of Realtors (NAR) in the U.S. publishes an annual report on foreign participation in the U.S. residential real estate (Profile of international activity in U.S. Residential Real Estate Link.) The chart below details the data for the past decade. According to the NAR, foreigners bought $934 billion in residential properties over the period. Because buyers may frequently not reveal their nationality or/and carry out purchases through legal entities, the NAR figures significantly understate reality. Also, these figures do not include commercial real estate transactions which also were pronounced over the period. Nevertheless, the data can provide some color on the scale and trends of the activity and who the buyers are .
Canada and the UK represent mainly buyers of vacation and retirement homes. The remainder of the primary buyers and the majority of the “others” category represent “flight capital” from a wide variety of emerging markets. These buyers have as their primary objective s to diversify their financial holdings away from their home country and to secure a “safe haven” residence for their families. Chinese buyers have been prominent over the period, particularly between 2014-2018, when capital flight from China was elevated. 2019 saw a large decline in purchases in general and from Chinese buyers in particular. This may be explained by the sharp appreciation of the dollar, the U.S.-China trade tensions and tighter capital controls in China. The election of the anti-business populist AMLO in Mexico, has triggered a sharp increase in Mexican capital flight into residential properties across the northern border.
The top four destinations for foreign buyers are Florida, California, Texas and Arizona. Canadian “snowbirds” flock mainly to Florida and Arizona, while the Chinese prefer California, and Mexicans go to Texas and California. Aside from the Mexicans, Latin Americans largely prefer Florida, where they are the dominant buyers in the Miami and Orlando areas and up the eastern coast.
The NRA’s Profile of International Real Estate Investing in Florida 2019 (Link) details Latin American flight capital into Florida. The chart below shows the total purchases by foreigners in the Florida market over the past 10 years in both units and values. Latin Americans represent about 45% of the foreign buyers in Florida, led by Brazil, Venezuela, Argentina and Colombia. Mexico and smaller Latin American countries represent about 40% of the “others” line. Mexicans represent only about 2% of foreign buyers in Florida.
Foreign Buyers of Florida Homes, 2010-2019
The table below details the value of purchases by year. The past decade was turbulent in Latin America with political chaos and economic collapse in Venezuela and stagnation or deep recessions in most countries. The decade also started out with overvalued currencies in most Latin American countries and a depressed real estate market in Florida, which was a combination that favored inflows into Florida’s market. The scale of the flight capital from these savings-poor countries is very concerning, and a clear indication that elites are increasingly estranged and disassociated from the fortunes of their home countries.
