When buyers spend time shopping for homes online, it's not surprising that one of the first parameters they use to narrow their search is price. However, if a buyer is searching for homes in another country, they may be surprised by the extent to which currency markets alter their price expectations. Over the past year, in particular, the purchasing power of major currencies has shifted dramatically, primarily driven by the strength of the U.S. dollar.
According to NAR's 2015 Profile of Home Buying Activity of International Clients, international sales of U.S. properties dropped 10 percent1, but total sales volume was up—$104 billion, compared to the previous year's estimate of $92.2 billion. The strengthening of the dollar in relation to foreign currencies likely impacted purchase demand in the U.S., as well as generally negative economic conditions in Latin America and Europe, and slower growth in China.
To illustrate the impact of exchange rates, the chart below shows how much different buyers would need to spend, in their local currency, to purchase a $400,000 home in the U.S.—in June 2015 versus one year earlier. For example, British buyers would have to put 9 percent more pounds on the closing table, whereas Brazilians and Russians are encountering whopping 42 and 50 percent increases, respectively!
Not surprisingly, as foreign sales in the U.S. have slowed, more U.S. buyers are setting their sights on buying abroad. Buoyed by the strong dollar, interest in overseas property is up sharply. International experts cite France, Spain, Italy, Germany and Canada as some of the top markets attracting American buyers.
Transaction data is hard to come by, but another way to gauge U.S. buyer interest is to examine their behavior when searching online for properties. Based on recent data supplied by realtor.com®/International (see page 7), it's apparent that destinations in Mexico, Jamaica and Honduras are most popular among U.S. residents using the search portal.
The numbers, however, also point to interest beyond south-of-the-border vacation homes. Paris ranked among the top five overseas destinations and Madrid held the 15th spot.
Regardless of where buyers are searching, most global real estate markets are firm and hot deals are a thing of the past. In fact, the most recent Global Housing Watch survey by the International Monetary Fund found that, in 2014, housing prices increased in most countries over the past year. (See page 7.)
Connecting the Dots: Business-Building Tips
As prices and currencies shift, buyers' interest in various markets is bound to ebb and flow. Spotting these shifts—then capitalizing upon them in your business development efforts—can be a savvy strategy. Consider executing a currency-based marketing plan that includes these steps:
Identify target market(s) – Follow the currency markets to spot relative exchange rate strength (or weakness) that might translate into new global transactions. U.S. buyers, for example, can now buy a home in Mexico for roughly 20 percent less than a year ago, making this already-popular destination even more attractive. Likewise, weakness in your domestic currency relative to another market means it's time to let fellow CIPS designees in that country know you're ready to assist any interested buyers they might send your direction.
Reach out to key professionals – Rely on the CIPS Network to establish professional connections wherever they're needed. (Refer to page seven of the April 2014 issue of Global Perspectives for best practices when making and receiving cross-border referrals.) Connecting with other designees can also help you understand the differences in local practices and get recommendations for other key resources, including developers, attorneys, property managers, etc. in their market.
Promote to local clients – If your local clients have been debating an international purchase and currencies have shifted in their favor, make sure they know it's a good time to buy. Create a marketing campaign explaining that, as a CIPS designee, you have the network and resources to help them find a property—and it's more affordable now than in recent years.
1For April 2014 through March 2015, compared to the previous one-year period.