Any one interested in the Golden Gate ?
Foreigners get a piece of the real estate pie
James Temple, Chronicle Staff Writer
Sunday, January 27, 2008
Kevin and Denise McCullough, a couple from Victoria, British Columbia, visited San Francisco nearly 50 times in the past decade, taking in Giants games, jogging along the Embarcadero and eating at favorite restaurants like Farallon and Myth.
They long talked of buying a vacation home here, but early inquiries brought home the twin realities of the city's sky-high housing costs and their country's weak exchange rate. That all changed last year, when the Canadian dollar reached and then passed parity with the U.S. dollar as the local real estate market flattened.
Early last month, the couple closed escrow on a $775,000 condo in Jackson Square, two blocks from the Embarcadero. A house at that price when they started looking six years ago would have cost them $1.3 million. Instead it cost them $711,000 - a difference of nearly $600,000.
"It's mind-boggling," said Kevin McCullough, 43, a criminal defense attorney.
As the U.S. dollar continues to shed value against foreign currencies, more and more foreigners are noticing these sweet deals. Real estate agents and developers report an increasing number of people from Canada, Asia and Europe, where some currencies have lapped the dollar, touring and buying San Francisco homes. Consequently, they have tweaked their sales pitches to target this active pool of investors in an otherwise sluggish market.
Robert La Eace, a broker associate with McGuire Real Estate who is increasingly focusing on international shoppers, said it's an area that for obvious reasons should continue to grow.
"I would love to hop on a 12-hour airplane (flight) and buy a house at half price," he said.
To what degree the foreign buying trend is occurring in San Francisco, and to what extent it could help the market, are both unclear. The city doesn't track home purchases by nationality, and local agents give varying accounts of the frequency. Indeed, some say they haven't personally seen any increase.
"I know that there are a lot of sellers who want that to be true, and I know that the Europeans are definitely buying in New York," said Malin Giddings, who specializes in upscale San Francisco real estate for TRI Coldwell Banker. "But we see very few foreigners buying."
Planeloads of Russians
Still, 25 percent of Realtors nationwide reported an increase in international home buying from April 2006 to April 2007, while only 7 percent saw a decrease, according to a survey by the National Association of Realtors. There is also anecdotal evidence of growing interest from foreign buyers locally.
On a Saturday morning in November, about 115 Russian real estate agents filed off United and American Airlines flights at San Francisco International Airport.
The group, which included executives with the Russian Guild of Realtors, toured a single-family home in the St. Francis Wood neighborhood and then walked through models of luxury apartments under construction at the Infinity's twin towers in Rincon Hill. They had looked at several properties in Los Angeles the day before and would repeat the exercise in Las Vegas a few days later.
They were mainly searching for properties that their clients might want to buy, said Tatyana Oleynikova of Florida Dream Realty & Mortgage, who organized the tour. The Russian ruble gained 12.3 percent against the dollar last year from January through October, the country's central bank estimated, and many of the nation's newly wealthy are looking to diversify their investments overseas, Oleynikova said.
At the Radiance, a 99-unit condominium project about a mile south of the Infinity, 10 of the first 50 buyers are foreigners, said Dennis Serraglio, director of sales and marketing for property owner Bosa Development Corp. That 20 percent came mainly from Canada, the United Kingdom, Korea and China. He anticipates the number and proportion of foreign buyers will increase as the Mission Bay development nears completion, scheduled for midyear.
"There's a perception that there are some good opportunities in the States as the real estate market slows down a little," he said.
The top five countries whose residents are buying U.S. real estate are, in order, Mexico, the United Kingdom, Canada, India and China, the Realtors' report noted.
Almost half of international buyers acquire U.S. properties as vacation homes. They show a stronger preference for condominiums and apartments than home buyers in general, and tend to focus in major markets, such as New York, Los Angeles and San Francisco.
U.S. regulations don't restrict foreigners from buying homes, unless they are flagged as a security risk, said Fanny Chu, a Realtor with Prudential California Realty who teaches certified international property specialist courses for Realtors.
There are, however, specific considerations for international buyers, including additional tax withholdings once they sell the property, higher down payments if they finance, and visa rules that restrict nonresidents, other than those on student or work visas, from staying in the country for more than six months.
'Small piece of the pie'
Few are expecting foreign investment to be the panacea for all that ails U.S. real estate markets.
"It doesn't mean that it protects those markets from a decline or softening real estate conditions," said Jonathan Miller, executive vice president at real estate research firm Radar Logic Inc. "But it's a positive factor in terms of the demand side of the equation."
Likewise, some are hoping it could boost returns for the individual agents and businesses that target these buyers.
Malcolm Kaufman, a Realtor with McGuire Real Estate, is putting together a team of local agents from various firms who speak French, Hebrew, Korean, Spanish, Russian, Cantonese and Mandarin as native languages. He has begun marketing the group, which will trade leads and share referral fees, to wealth managers, relocation businesses and online.
"I feel I can serve that clientele by putting together a team of people who can speak the language and know the culture," he said.
AGI Capital, which most recently co-developed the 246-unit SoMa Grand project on Mission Street, is working with a technology marketing firm to seek overseas buyers. Alexis Wong, the company's president and chief executive officer, said it is using the Internet "as a tool to educate and also influence buyers' decisions to invest foreign monies into Bay Area real estate." Preferably in buildings they've built.
Because many foreign buyers are setting up second homes, as opposed to shifting old stuff into a new space, there are also benefits for local retailers and tradespeople, Kevin McCullough said. The Canadian couple expects to drop close to $75,000 on drapes, flat-screen televisions, electrical work, a Murphy bed and other fixtures and furnishings.
Of course, at today's exchange rates, those who stand to gain the most from foreign buying are the foreign buyers themselves.
"U.S. corporations have been engaged in globalization forever," McCullough said. "When the global economy ebbs and flows and for the moment goes into favor for the Canadian, that's when the Canadian is going to globalize himself and get his small piece of the pie."
Who's buying, and why
The top five countries whose residents are buying U.S. real estate are, in order:
-- United Kingdom
Those from China and the United Kingdom paid the most, with median prices of $340,000 and $335,000.
Nearly half of foreign buyers, 47 percent, buy property in the United States as vacation properties, 22 percent buy it for investment and about a third buy for both reasons.
Source: National Association of Realtors, 2007
Bloomberg News contributed to this report. E-mail James Temple at firstname.lastname@example.org
Foreigners get a piece of the real estate pie