International Home Buying in Texas Luis Bernardo Torres Ruiz, Ph.D. September 7, 2016 Research Economist International Forum TAR
Contents 1. Residential Impact 2. Client Country Profiles 3. Concluding Remarks
During the last two years, global economic conditions have deteriorated U.S. and advanced nations are stuck in slow growth mode, emerging economies are decelerating, and global trade is stagnant The medium-term outlook is for low commodity prices Doubts and concerns on monetary policy and divergences among developed countries are present Worries over China persist, while uncertainty is rising on geopolitical issues Heightened risk aversion is causing volatility in financial markets and discouraging business investment
Purchases by foreign home buyers have declined in a strong dollar and lackluster global growth (uncertain) environment Foreign Buyer Home Purchases and World GDP Growth (Billion $, %) $ International Home Purchases World GDP (right y-axis) % 100 90 80 The dollar has appreciated in real terms 16.5 percent from 2012 to 2016 3.5 3.4 70 60 50 40 30 2012 2013 2014 2015 2016 3.3 3.2 3.1 3.0 Note: Foreign Buyer Purchases in 2016 are estimated from April 2015 to March 2016. World Economic GDP growth in 2016 is a forecasted value. The real broad trade-weighted value of the U.S. dollar estimated by the Federal Reserve is used to estimate the appreciation of the U.S. dollar versus other currencies. Source: National Association of Realtors and International Monetary Fund
Foreign buyers purchased homes at a higher price price ratio of almost two (1.8) times higher Average Home Sales Prices ($) International U.S. All Existing 2016 266,683 477,462 2015 2014 2013 2012 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
Non-resident foreign purchases declined considerably while resident foreign purchases increased Dollar Volume of Foreign Residential Property Purchases by Foreign Resident Type ($) 41% Avg. $491,427 59% Avg. $477,462 2016 43.5 60.3 2015 54.5 49.4 2014 46.7 45.5 2013 34.8 33.4 2012 41.2 41.2 0 20 40 60 80 100 120 Non-resident (Type A) Resident (Type B) Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
Non-resident foreign purchases are intended more for investment purposes... Don t know Intended Use by Foreign Resident Type Non-resident (Type A) Resident (Type B) Property of Use by Student Other Primary Residency Vacation home/residential Investment Residential Investment Vacation home 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
... and are substantially more likely to pay cash than a resident foreign buyer Financing by Foreign Resident Type Non-resident (Type A) Resident (Type B) Don t Know Investors/Other Sources Mortgage Loan from Home Country Mortgage Loan from U.S. Sources All-cash Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors 0% 20% 40% 60% 80%
Chinese buyers continue to be the top foreign buyers... Volume Share of International Purchases by Top Five Countries 27% 30% 2012 2013 2014 2015 2016 25% 19% 20% 15% 15% 9% 8% 5% 6% 6% 5% 5% 10% 5% Canada China Mexico India United Kingdom Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association ofrealtors 0%
... and are paying higher prices then the other top four countries Average Price of Foreign Buyers from Top Five Countries 936,615 2012 2013 2014 2015 2016 1,000,000 900,000 800,000 321,745 483,984 332,072 396,154 266,188 418,966 420,352 355,921 598,182 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Canada China Mexico India United Kingdom 0 Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
In the top five countries, the overall intended use is for a primary residency Intended Use Among of Foreign Buyers from Top Five Countries 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% United Kingdom India Mexico China Canada Vacation home Vacation home/residential Investment Other Don t know Residential Investment Primary Residency Property of Use by Student Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
The top five countries use cash or a mortgage to purchase a home Financing of Foreign Buyers from Top Five Countries Canada China Mexico India United Kingdom 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% All-cash Mortgage Loan from Home Country Don t Know Mortgage Loan from U.S. Sources Investors/Other Sources Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
Majority purchase single-family homes... Type of Residential Property Purchase by Foreign Buyers from Top Five Countries 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Canada China Mexico India United Kingdom 0% Detached Single Family Townhouse Condominium Residential Land Other Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
... located in suburban areas Location of Property Purchase by Foreign Buyers from Top Five Countries 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Canada China Mexico India United Kingdom 0% Central City/Urban Area Suburb Area Small Town Rural Area Resort Area Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
Five states account for more than half of the international purchases Sales Share of International Purchases by Top Five States 26% 22% 2012 2013 2014 2015 2016 30% 25% 20% 15% 15% 11% 10% 7% 7% 10% 4% 4% 4% 5% Florida California Texas Arizona New York Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors 0%
Proximity, social safety net, job, educational opportunities, climate and location decisive factors to purchase a home Origin of Foreign Buyers in Top Five States Unknown Canada Latin America(includes Mexico) Europe Asia/Oceania Africa New York Arizona Texas California Florida 0% 10% 20% 30% 40% 50% 60% 70% Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
One in ten homes purchased by international buyers were purchased in Texas (21,488 home sales with a value of $10.26 billion) Texas Major Destinations for Foreign Buyers Ranked 1st 35% 40% 35% 30% Ranked 1st 20% 25% 20% 15% Ranked 5th 3% Ranked 3rd 8% Ranked 4th 6% 10% 5% Canada China Mexico India United Kingdom 0% Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
Homes purchases by international buyers represented 6.8 percent of sales in Texas and 13 percent of the market value, paying a much higher price (1.9 higher) Average Home Sales Price ($) 477,462 477,476 500,000 450,000 400,000 350,000 266,683 250,644 300,000 250,000 200,000 150,000 100,000 50,000 U.S. Texas U.S. Foreign Texas Foreign - Note: Foreign buyer information is estimated from April previous year to March current year Source: National Association of Realtors
Strong immigration benefits Texas, where almost one out of ten people who immigrated to the U.S. moved to Texas Texas Immigration 95,295 (9.4 percent of U.S. total) U.S. MSA Rank People Share of State 5. Houston-Sugar Land-Baytown 33,856 35.5 8. Dallas-Ft. Worth-Arlington 28,780 30.2 26. Austin-Round Rock- San Marcos 6,134 6.4 28. San Antonio New Braunfels 5,404 5.7 32. El Paso 4,403 4.6 44. McAllen-Edinburg-Mission 3,045 3.2 Source: U.S. Census Bureau, 2010-2014 American Community Survey (ACS)
Contents 1.Residential Impact 2. Client Country Profiles 3. Concluding Remarks
China and India are expected to register the highest growth rates... GDP per Capita Growth Canada China Mexico India United Kingdom U.S. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 10 9 8 7 6 5 4 3 2 1 0 Note: Gross domestic product based on purchasing-power-parity (PPP) per capita GDP. Forecasted values from 2016 to 2021 Source: International Monetary Fund
... with increased purchasing power, but still below Canada and United Kingdom GDP per Capita Ratio to the U.S. Canada China Mexico India United Kingdom 90 80 70 60 50 40 30 20 10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0 Note: Gross domestic product based on purchasing-power-parity (PPP) per capita GDP. Forecasted values from 2016 to 2021 Source: International Monetary Fund
Population growth will be highest in Mexico and India Population Growth Canada China Mexico India United Kingdom U.S. 2.5 2.0 1.5 1.0 0.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0.0 Note: Forecasted values from 2016 to 2021 Source: International Monetary Fund
Exchange rates for top five countries have registered strong devaluations versus the U.S. dollar Nominal Exchange Rate with the U.S. Dollar (Index 2012=100) Canada China Mexico India United Kingdom Devaluation 2012-16 Canada 32.5% China 4.1% Mexico 38.3% India 26.1% United Kingdom 13.0% 140 130 120 110 100 2012 2013 2014 2015 2016 90 Source: Federal Reserve Board and International Monetary Fund
In a weak global growth environment, what is the outlook for the top five countries? Canada Positive: Growth is expected to rebound in 2016, supported by exchange rate depreciation and accommodative monetary and fiscal policies. Negative: Uncertainty about oil prices, challenges in sustaining the global recovery and domestic vulnerabilities (household debt and divergent trend in household prices) China Positive: Rebalancing from industry to services and from investment to consumption to achieve a more balanced sustainable growth Negative: Transition will continue to be complex, challenging, and potentially bumpy (reduce state led intervention) Mexico Positive: Implemented a broad range of structural reforms, which should help lift potential growth over the medium term Negative: Faces a short-run complex global environment
In a weak global growth environment, what is the outlook for the top five countries? India Positive: Economy is on a recovery path, helped by a large terms of trade gain, positive policy actions, and reduced external vulnerabilities Negative: Persistently high household inflation expectations and large fiscal deficits. Continued weakness in corporate financial positions and public bank growth as well as setbacks in the reform process Great Britain Positive: Economic growth consistently near the top among major advanced economies and the employment rate at a record high Negative: Heightened uncertainty on Brexit could weigh on investment and hiring going forward
Contents 1.Residential Impact 2. Client Country Profiles 3. Concluding Remarks
Concluding Remarks In the short-run a strong dollar and lackluster global growth (uncertainty) will negatively affect foreign purchases If China and especially India can maintain current growth rates, have the potential to increase the number of potential foreign buyers Mexico s economic linkages and proximity with the U.S. will continue to make it an important source of foreign buyers The U.S. and Texas economic attractiveness to foreign buyers will continue: U.S. is the leading world economy that offers private property rights complemented by strong institutions and very high qualify of life to its residents Texas energy, technology and health care industries will continue to attract foreign buyers
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