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The US Has A Foreign Buying Problem, and It’s Not China

The US Has A Foreign Buying Problem, and It’s Not China

Mainland Chinese buyers disappeared after China’s new capital controls were rolled out. Despite the lack of capital being exported, anecdotal evidence has been appearing in US media to the contrary. This “evidence” often quotes Juwai inquiries from 2016, before the new controls. Now we finally have a 2017 data point, from a much larger organization, the National Association of Realtors (NAR).

NAR March 2017 data from Realtor.com show Chinese buyers were absent from the list of top countries. Another country did top the list for almost every city though, Canada. Judging from Canadian buying behaviour from 2016, these aren’t snowbirds looking for a warm place to winter either. These are good ole fashioned, non-resident speculators.

Top Markets By Search In 2017

According to NAR, the top 5 markets foreign buyers are searching for are Miami, Los Angeles, Bellingham (WA), Kahului-Wailuku-Lahaina (HI), and New York City. All of those markets reported being hot spots for Chinese buyers in 2016. As of March 2017 though, China wasn’t even in the top 5 countries searching these locations. Instead Canadians topped the list for each one of those cities. In fact, Canadians topped the list for all 20 of the top markets, with the exception of El Centro, California – where they came in second.

Top 5 US Markets By Foreign Search

Miami, FL

  1. 🇨🇦 Canada
  2. 🇧🇷 Brazil
  3. 🇩🇪 Germany
  4. 🇬🇧 UK
  5. 🇦🇷 Argentina

Los Angeles, CA

  1. 🇨🇦 Canada
  2. 🇬🇧 UK
  3. 🇦🇺 Australia
  4. 🇩🇪 Germany
  5. 🇧🇷 Brazil

Bellingham, WA

  1. 🇨🇦 Canada
  2. 🇯🇵 Japan
  3. 🇧🇭 Bahrain
  4. 🇬🇧 UK
  5. 🇦🇺 Australia

Kahulul-Wailuku-Lahaina, HI

  1. 🇨🇦 Canada
  2. 🇦🇺 Australia
  3. 🇬🇧 UK
  4. 🇯🇵 Japan
  5. 🇩🇪 Germany

New York, NY

  1. 🇨🇦 Canada
  2. 🇬🇧 UK
  3. 🇦🇺 Australia
  4. 🇮🇪 Ireland
  5. 🇩🇪 Germany

Source: NAR.

Canadians Are More Likely To Be Non-Resident Buyers

NAR stats show that Canadian and UK buyers are the most likely to buy property for occasional use. Going back to 2016, 80% of Canadian, and 61% of UK buyers were non-resident buyers. To contrast, only 39% of Chinese buyers were non-resident. This means Canadian and UK citizens are more likely to buy property and not move into it. Whereas 61% of Chinese buyers are likely to buy property for relocation.

To understand how impressive this statistic is, you have to look at the relative number of people. China has over 1.317 billion people, and Chinese citizens purchased 29,195 US homes in 2016. That results in 11,386 US homes sold to Chinese citizens for investment or occasional use. To contrast, Canada has 35.85 million people, and Canadian citizens bought 26,851 US homes in 2016. Since 80% of Canadians are non-resident, that’s 21,480 homes for investment or occasional use bought by Canadians just last year.

Note, before you say they’re all resort homes – only 31% of Canadians bought in “resort” areas. The lion’s share of buying was in suburban America, where 38% of Canadians bought.

Canadian Vs. Chinese Speculators For American Property

One of the most interesting stats on US foreign buyers is the type of housing bought. In 2016, Chinese buyers were the largest by dollar volume, pumping in an estimated US$27 billion into US real estate. Canadians were a distant second, spending over US$8.9 billion. Despite the massive gap in dollar volume, Canadians purchased almost the same number of homes. The average Chinese buyer spent US$936,615, while the average Canadian buyer spent US$332,072. The average American spends just over US$271,000 on a home. This means Americans are more likely competing with Canadians than Chinese buyers.

Canadians Are Also Cashing Out

Last year Canadians were also busy realizing profits in the US. Citizens of Canada accounted for 23% of all sales from foreign owners in 2016, the highest of any single country. China was second, but way below at only 15%. Tied for third were residents of the UK, and Mexico with 6% of sales each. So it’s clear Canadians aren’t buying these properties to hand-down to their family, they’re buying them to make a profit.

This data doesn’t tell the whole story, but it does help us pull early details on a post-China real estate market. Speculative demand from China is a hot button issue, but it’s clear Canadians have the same obsession with real estate. Now that China has cracked down on exporting capital for property, will attention turn to Canadian speculators? Or is the issue to most people who is buying, not why they are buying?

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21 Comments

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  • Greg 2 years ago

    Funny to see Bellingham on that list. I live in Surrey, and a few people I know have purchased property to flip. They “want” to rent it out, but it’s too much hassle in their opinions.

    • RE Bear 2 years ago

      Let me get this straight…Canadians are buying with HELOCs, buying speculative property in Toronto and Van, AND speculating in the US. They’re going to be awfully sorry when they learn how deleveraging works.

  • Mike C. 2 years ago

    I’d like to know how many declare their foreign property to the CRA. We have tons of boomers with vacation property they haven’t used in years, hiding their assets from the government. The CRA needs to stop going after the small fish, and go after these massive tax cheats.

  • Bay Street Guy 2 years ago

    Can you do a breakdown on how people are buying these properties? If they’re borrowing against their own home, that they are mortgages on, this is going to be a double whammy.

    People cheat the system, only to find out tules are there to prevent you from overextending yourself.

  • Ahmed 2 years ago

    Funny how it’s such an issue when it’s another race. Now waiting for white Canadian Boomers to flood in and say “no, it’s cute when we do it” or some crap.

    • Myna 2 years ago

      Canadian doesn’t equate to white. It could well be Asians holding Canadian citizenship.

        • Drake 1 year ago

          Canadians, yes, are predominantly white – but if the people investing in Bellingham, WA are from across the border – they are highly likely to be Asian. Just go into the Bellingham, WA Costco. If you look at the Food Court, you would swear that you are somewhere in East Asia – and there aren’t that many Asians who actually LIVE in Bellingham.

          And Bellingham still is one of the top searched places according to Chinese families I know – who by the way, are all Canadian citizens.

  • Rui 2 years ago

    hmmmm…. it is an interesting point in terms of who chooses the boogeyman and for what reason and time… But ultimately… kill speculation on housing/shelter. This is nonsense. Some people claim that own a home as is privilege not a right. Well, what is shelter? Personally, I think speculation in real estate is a dishonest practice – taking away the possibility of shelter from those who just want a home rather than an investment. The fact that these Canadians do it to others and to other Canadians is a troubling social sign.

  • Sergei 2 years ago

    As someone from Vancouver my guess would be two types of people:
    1) “New” Canadians funneling money from another country.
    2) Anyone who recently sold a house and seeking a new investment.

    • Steve 2 years ago

      Only thing is Canadians have been doing this with US real estate since before China had outflows. Besides, if someone immigrates here, they aren’t a foreign buyer.

      I’m from Van too, I’ve heard many developer friends discuss land across the border as cheap and easy to finance.

      • Drake 1 year ago

        Not buying all cash which is what we are seeing.

      • Drake 1 year ago

        But the purchases are largely cash. These are Chinese. Not native born. We Americans can’t buy with financing because sellers are taking cash offers.

    • Drake 1 year ago

      You are correct.

  • lela 2 years ago

    Not surprising at all because Florida is full of snow-birds plus the dramatic dip in US real estate value was enormous, while the Canadian dollar was on par with the US dollar. Anyone who bought in 2010 – 2013 is now selling to reap the rewards and with the CDN/US exchange rate, the 30% premium is too sweet to not flip (depending on the state, renting can be quite the hassle). That said, smart investors are using leverage to their advantage, but the IRS is very very good at collecting it’s piece before the deal closes and they are sharing information with Canada. Buyer beware!

    • Drake 1 year ago

      The stats indicate Canadians are buying now…not selling and flipping. And buying using cash despite a non-fatal exchange rate. This sounds like Chinese investment…not anything else.

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