Although diplomacy is important when representing any luxury consumer in the luxury home market, it is especially important when understanding the international luxury home buyer because of the many variables at play. For example, cultural orientation, customs, protocol and policies, just to name a few. In developing your skill set as a luxury real estate professional, it is important to understand the distinctive customs of many cultures as the luxury home market will expose you to more cross cultural opportunities.
While this in theory seems simple enough to master, something as trivial as poorly executed nonverbal communication signals can make or break your networking efforts. We encourage you to take some time to learn about the “unspoken social rules” of other cultures to be as sensitive and politically correct as possible and expand your market reach in the process.
For centuries, and in cultures all over the world, the acquisition of wealth and land have gone hand in hand. Although this connection has become looser for the younger generations, land (especially private residences) is still a status symbol for many in the upper class. The global market has built up rapidly for UHNWIs, and they are major world players in their search for both business bases and private residences. A growing population of UHNWIs has had a significant effect on real estate markets at a global level; this trend is important to recognize for anyone involved in cross-border investments.
Due to the growing number of UHNWIs, it is important to keep up with changes in the world market. Government intervention, ever changing economies and the idea of a “global tribe” (individuals eschewing nationalism in favor of borderless living) change the ways international luxury home buyers are buying real estate. Below, we break down a few of the major markets for international real estate.
The most significant change for the Chinese buyer has been government intervention. As of 2017, fear of capital flight and a weakening currency has lead to stricter regulations for the Chinese buyer. Individuals are only permitted to take $50,000 out of the country per year and are not allowed to spend that money on real estate. These changes mean that a Chinese homebuyer often has to pool money from several relatives to purchase real estate abroad. Beijing based app Uoolu is enabling Chinese millennials to buy property overseas, although it does not handle the exchange of funds within the app. Uoolu reports that 80% of its users are between 20 and 39, and about 20,000 have bought, or are in the process of purchasing, a home overseas.
Chinese property portal Juwai.com creates custom reports, starting at $10,000, for banks, real estate companies and others to see where Chinese homebuyers are looking for property. The top markets searched by Chinese homebuyers in 2015 were Melbourne, Sydney, Los Angeles, Seattle and New York. In March of 2015, Chinese citizens surpassed Canadians as the top international population buying real estate in the US. Although there are various shortcomings in international real estate statistics, there is a noticeable influx of Chinese and East Indian buyers looking for homes in Seattle, due to a booming tech industry.
Despite many reasons for the Chinese buyer to look for real estate abroad, there are common themes to note: International real estate presents a stable investment in the midst of a depreciating yuan and parents look for cities with cleaner air where they can send their children to study abroad. Chinese homebuyers in the luxury market often look for second living spaces for parents and second kitchens, specifically designed for their style of cooking and well ventilated. Second living spaces are also catching on in the luxury market at large, even among Americans without Chinese roots.
The latest attempts to draw buyers from the Caribbean include “citizenship by investment”. The trend, starting in St. Kitts, allows buyers to obtain a second passport by investing at least $500,000 in real estate; this allows those investing to travel visa-free to 132 countries. The managing director of Coldwell Banker Island Affiliates, Randy Chavers, hypothesizes that the idea of a “global tribe” will grow in popularity, especially in light of citizenship by investment. The current changes are most likely connected with Brexit.
The effects of Brexit are more acutely felt in Europe, and France specifically. Brexit has created a unique buying opportunity, with low interest loans and a changing USD/euro rate contributing to a boost in the European real estate market. The low euro rate has led to an increase in affordable property, and international buyers are seeing it as a strategic investment opportunity. With Paris as one of the top ten destinations for wealthy buyers, this creates a significant opportunity for luxury real estate professionals in the French market.
The largest shift in American wealth over the last decade has come from self-made billionaires; growth in self-made billionaires in the United States has come from the tech and finance industries. The tech industry accounts for 12% of billionaires in the US, and finance accounts for 40%, compared to 5% and 14% in Europe, respectively. (Peterson Institute for International Economics)
The US is still the top destination for those with a net worth of $30 million or more looking for real estate valued at $1 million or more, according to Wealth X and Soethby’s International Reality. A stable government, good colleges and a larger number of wealthy individuals are drawing international buyers to US cities, with NYC still being the top destination for wealthy individuals. Approximately 40% of wealthy buyers in NYC work in finance, with the most international residents coming from the UK.
Although cities tend to be the top destination for luxury homeowners, there are several other luxury hotspots in the US popular for lifestyle purposes, such as Southhampton, NY; Aspen, CO; Naples, FL; Greenwich, CT and Palm Beach, FL.
UNDERSTANDING HOW THE WEALTHY BUY HOMES –
A large number of wealthy buyers use mortgages to purchase property. According to reports from Wealth X and Soethby’s IRE, wealthy individuals keep approximately 25% of their net worth in cash – primarily for business dealings. Mortgages keep more of that money available.
The same reports also show that females prefer to invest into higher end property than wealthy males, holding about 16% of their net worth in real estate, as opposed to 10% for men.
Globalization in the luxury home market requires that you solidify yourself as a name in the international luxury markets. Those looking to list their homes are being advised to list with a company who has a true international presence. The Institute offers specialized training from certified luxury real estate professionals with decades of experience and provides the knowledge necessary to be the luxury real estate professional the international markets are looking for. If you’re interested in our flexible live and online training you can learn more here.