7 minute read
London
As international buyers return to the market, luxury properties are fetching record prices. “Historically in San Miguel we’ve only sold about a dozen homes a year that were $1 million or more in value. For the last 18 months, it’s been about triple that,” Mr. Gunter said.
The strength of the U.S. dollar makes properties in Mexico a favorable investment for American buyers. While house prices are quoted in U.S. dollars, they are recorded on the deed in pesos, so property prices can appreciate once the dollar value tamps down.
United Kingdom After a two-year lull, international buyers are beginning to return to the British market, albeit somewhat slowly, said Martin Bikhit, managing director of Berkshire Hathaway HomeServices London Kay & Co. International buyers “accounted for 75% of any sale over £10 million prior to the pandemic, but that completely reversed during the pandemic,” he said. In their absence, domestic buyers “managed to secure properties at some very competitive levels,” contributing to record-setting price growth.
But demand from international buyers is ramping up for properties in prime central London, particularly luxury properties close to Hyde Park. “I expect that we’ll probably move towards a 60/40 situation in terms of global versus domestic buyers,” Mr. Bikhit said, adding that international buyers will once again be in the majority by the end of 2023.
The strength of the U.S. dollar advantages certain international buyers. “We are seeing more and more American buyers, and indeed Canadian buyers, and I think a big part of that is taxation driven,” Mr. Bikhit said. “Middle Eastern currencies are tied to the dollar, and Middle Eastern buyers are quite prevalent here in the U.K., and indeed in London in particular.”
Berkshire Hathaway HomeServices London Kay & Co. 7%
At the height of the pandemic, international investment in U.S. real estate fell to nearly record lows of 7%, according to Deloitte.
41%
In 2021 the number of international buyers increased by 41% year over year in Spain. TOP MARKETS
Marylebone Square off ers an elegant living experience in the heart of central London.
London
As International Travel Grows, British Buyers May Take Back Seat
For the fi rst time in 20 years, British buyers dominated the luxury market during the pandemic, as they took advantage of the unique opportunity to have foreign investors kept at bay due to travel restrictions, according to Martin Bikhit, managing director of Berkshire Hathaway HomeServices London Kay & Co.
“Now that international travel is re-opening, however, foreign aspirational buyers are once again looking to London as a safe haven to park their cash, due to low taxes and strong appreciation,” Mr. Bikhit said.
London luxury pricing is still strong, especially in wellestablished neighborhoods such as Belgravia, Chelsea and Knightsbridge; however, buyers are shifting away from properties based on location alone, and toward choosing primary homes with their lifestyle preferences in mind.
“Buyers are asking themselves how they want to live rather than where. If someone has a choice between an okay building in Belgravia and one in a less favorable neighborhood with amazing views of the Thames, they’re choosing the latter,” Mr. Bikhit said.
Inventory in the London luxury market is low, but sales did go up over the past year. “London was in a new-construction drought from 2000 to 2010, and then in 2010 to 2020 there was an explosion. London goes through generational phases. But now, we’re coming to the end of the new-construction pipeline because there is only so much space available.”
Looking ahead, Mr. Bikhit predicts the rest of the year is going to be especially interesting.
“For the fi rst time in three years, London will have its tourism season, so the luxury market should be busy through September. I’m cautiously optimistic that we are headed for a realization of real pent-up demand, and I hope that’s going to manifest,” Mr. Bikhit said.
International Buyer Interest
A summer 2022 survey of Berkshire Hathaway HomeServices network members found long-distance buyers are coming back, though slowly.
YES
29%
NO
71%
Are you seeing buyers coming from other countries?
LOCAL (< 50 MILE RADIUS)
55%
FAR AWAY (> 100 MILES)
26%
Where are most of your buyers coming from?
CLOSE BUT NOT LOCAL (< 100 MILES)
19%
Source: Berkshire Hathaway HomeServices 2022 Luxury Report Survey Results
United States International buyers are returning to the U.S. market, but buying patterns have changed. Foreign real estate investment accounted for as much as 20% of total real estate investment activity prior to the second quarter of 2020, according to professional-services company Deloitte. At the height of the pandemic, it fell to 7%, the lowest since the 2007–2008 financial crisis. As international buyers return, they are thinking beyond major metropolitan areas and starting to invest in more markets throughout the U.S., particularly cities in the Sun Belt.
In New York, “it’s only in the last six months where you can walk down the streets and you see the tourists
STEVEN JAMES
President and CEO Berkshire Hathaway HomeServices New York Properties everywhere,” said Steven James, president and CEO of Berkshire Hathaway HomeServices New York Properties. The foreign buyer is buying, he said, but not at the same levels as before the pandemic.
Even prior to the pandemic, he estimates that international buyers accounted for only 2% to 5% of luxury residential real estate sales in New York. “There was a great myth about the foreign buyer, that they were buying most of the market,” he said.
Mr. James expects more international buyers to return to the Big Apple in the coming months, “but I still think we have residual Covid-19 issues here,” he said, with some buyers more reticent to invest in a city that was hit hard during the worst of the pandemic. In addition, some buyers might be biding their time in hopes of securing a better deal once price growth slows later in the year.
Canada Oakville, located just outside Toronto, has one of the highest concentrations of luxury properties in Canada. Thanks to its excellent schools, it has long been a favorite spot for high-net-worth international buyers looking for a family home, said Duncan Harvey, branch partner and broker at Berkshire Hathaway HomeServices West Realty.
After a lull in the early months of the pandemic, prices for luxury properties began to climb swiftly, driven by domestic buyers seeking to upgrade to larger homes. But the ratio of domestic to international buyers is set to shift in the coming months as interest rates rise.
King’s Hills is an exclusive collection of villas located minutes from the prestigious marina of Puerto Banús and Marbella City in Spain.
“For the local buyer right now, it’s going to be very expensive to borrow money, so this is typically when I think we’re going to see a big spike in the international buyers, because they’re usually the ones coming in with cash,” he said.
Even as the overall market is predicted to slow, high-end family properties, particularly in Vancouver and the Greater Toronto Area, will remain in high demand with international buyers moving to Canada. Some of the reasons: “healthcare, the schools, it’s a safe country, and quality of life is very high here,” Mr. Harvey said.
Spain Property prices in Spain’s luxury market have risen by up to 30% since the onset of the pandemic. “There has been an incredible demand on properties that has led to a lack of inventory,” said Bruno Rabassa Roig, CEO of Berkshire Hathaway HomeServices Spain, adding that in 2021 the number of international buyers increased by 41% year over year.
Buyers who hold money in U.S. dollars are in a strong position. The majority are Latin American buyers—primarily from Chile, Colombia, Mexico, Peru and Venezuela—seeking high-end properties in Madrid. European buyers—most hailing from Britain, Germany, France and Belgium—are interested in the Balearic Islands, the region of Valencia, Alicante and the region of Málaga, he said.
DUNCAN HARVEY
Branch Partner and Broker Berkshire Hathaway HomeServices West Realty
Data from the Spanish Ministry of Transport, Mobility and Urban Agenda shows sales by nonresident foreigners in Spain were up 5.6% in 2021 when compared with 2019, while sales to resident foreigners rose 8% in the same period.
Mr. Roig expects interest from international buyers to remain strong, even as the overall market slows later in the year as a result of interest rate hikes. “The only thing that seems to be slowing down the market is the lack of stock.”
