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International Home Buying in Texas Luis Bernardo Torres Ruiz, Ph.D. September 7, 2016 Research Economist International Forum TAR
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 $, %)
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 broadtrade-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
3.0
3.1
3.2
3.3
3.4
3.5
30
40
50
60
70
80
90
100
2012 2013 2014 2015 2016
International Home Purchases World GDP (right y-axis)
The dollar has appreciated in real terms 16.5 percent from 2012 to 2016
$ %
Foreign buyers purchased homes at a higher price — price ratio of almost two (1.8) times higher
Average Home Sales Prices ($)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
266,683477,462
100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000
2012
2013
2014
2015
2016
International U.S. All Existing
Non-resident foreign purchases declined considerably while resident foreign purchases increased
Dollar Volume of Foreign Residential Property Purchases by Foreign Resident Type ($)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
41.2
34.8
46.7
54.5
43.5
41.2
33.4
45.5
49.4
60.3
0 20 40 60 80 100 120
2012
2013
2014
2015
2016
Non-resident (Type A) Resident (Type B)
41% 59%Avg. $491,427 Avg. $477,462
Non-resident foreign purchases are intended more for investment purposes . . .
Intended Use by Foreign Resident Type (%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0% 10% 20% 30% 40% 50% 60% 70% 80%
Vacation home
Residential Investment
Vacation home/ResidentialInvestment
Primary Residency
Other
Property of Use by Student
Don’t know
Non-resident (Type A) Resident (Type B)
. . . and are substantially more likely to pay cash than a resident foreign buyer
Financing by Foreign Resident Type (%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0% 20% 40% 60% 80%
All-cash
Mortgage Loan from U.S. Sources
Mortgage Loan from Home Country
Investors/Other Sources
Don’t Know
Non-resident (Type A) Resident (Type B)
Chinese buyers continue to be the top foreign buyers . . .
Volume Share of International Purchases by Top Five Countries(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
19%
15%
8%6%
5%
9%
27%
5%6%
5%
0%
5%
10%
15%
20%
25%
30%
Canada China Mexico India United Kingdom
2012 2013 2014 2015 2016
. . . and are paying higher prices then the other top four countries
Average Price of Foreign Buyers from Top Five Countries(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
321,745
483,984
396,154418,966
355,921332,072
936,615
266,188
420,352
598,182
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Canada China Mexico India United Kingdom
2012 2013 2014 2015 2016
In the top five countries, the overall intended use is for a primary residency
Intended Use Among of Foreign Buyers from Top Five Countries(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Canada
China
Mexico
India
United Kingdom
Vacation home Residential Investment
Vacation home/Residential Investment Primary Residency
Other Property of Use by Student
Don’t know
The top five countries use cash or a mortgage to purchase a home
Financing of Foreign Buyers from Top Five Countries(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Canada China Mexico India United Kingdom
All-cash Mortgage Loan from U.S. Sources
Mortgage Loan from Home Country Investors/Other Sources
Don’t Know
Majority purchase single-family homes . . .
Type of Residential Property Purchase by Foreign Buyers from Top Five Countries(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Canada China Mexico India United Kingdom
Detached Single Family Townhouse Condominium Residential Land Other
. . . located in suburban areas
Location of Property Purchase by Foreign Buyers from Top Five Countries(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Canada China Mexico India United Kingdom
Central City/Urban Area Suburb Area Small Town Rural Area Resort Area
Five states account for more than half of the international purchases
Sales Share of International Purchases by Top Five States(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
26%
11%
7% 7%
4%
22%
15%
10%
4% 4%
0%
5%
10%
15%
20%
25%
30%
Florida California Texas Arizona New York
2012 2013 2014 2015 2016
Proximity, social safety net, job, educational opportunities, climate and location decisive factors to purchase a home
Origin of Foreign Buyers in Top Five States(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
0% 10% 20% 30% 40% 50% 60% 70%
Florida
California
Texas
Arizona
New York
Unknown Canada Latin America(includes Mexico) Europe Asia/Oceania Africa
One in ten homes purchased by international buyers were purchased in Texas (21,488 home sales with a value of $10.26 billion)
Texas Major Destinations for Foreign Buyers(%)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
3%
8%
35%
20%
6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Canada China Mexico India United Kingdom
Ranked 5th
Ranked 3rd
Ranked 1st
Ranked 1st
Ranked 4th
Homes purchases by international buyers represented 6.8 percent of sales in Texas and 13 percent of the market value, paying a much higher price (1.9 higher)
Average Home Sales Price ($)
Note: Foreign buyer information is estimated from April previous year to March current yearSource: National Association of Realtors
266,683 250,644
477,462 477,476
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
U.S. Texas U.S. Foreign Texas Foreign
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 RankPeople
Share of State (%)
5. Houston-Sugar Land-Baytown 33,856 35.58. Dallas-Ft. Worth-Arlington 28,780 30.226. Austin-Round Rock- San Marcos 6,134 6.428. San Antonio – New Braunfels 5,404 5.732. El Paso 4,403 4.644. 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(%)
Note: Gross domestic product based on purchasing-power-parity (PPP) per capita GDP. Forecasted values from 2016 to 2021Source: International Monetary Fund
0
1
2
3
4
5
6
7
8
9
10
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Canada China Mexico India United Kingdom U.S.
. . . with increased purchasing power, but still below Canada and United Kingdom
GDP per Capita Ratio to the U.S.(%)
Note: Gross domestic product based on purchasing-power-parity (PPP) per capita GDP. Forecasted values from 2016 to 2021Source: International Monetary Fund
0
10
20
30
40
50
60
70
80
90
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Canada China Mexico India United Kingdom
Population growth will be highest in Mexico and India
Population Growth(%)
Note: Forecasted values from 2016 to 2021Source: International Monetary Fund
0.0
0.5
1.0
1.5
2.0
2.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Canada China Mexico India United Kingdom U.S.
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)
Source: Federal Reserve Board and International Monetary Fund
90
100
110
120
130
140
2012 2013 2014 2015 2016
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%
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
