House not home: Foreigners buy up American real estate
MIAMI — Earlier this year, real estate marketer Melissa Rubin took some South American clients to a party to promote a new condo that developers hoped to sell before a shovel hit the ground.
Even by Miami standards, the party was exotic. There were tigers, chimps, human flamethrowers, jumbo TVs, and the usual red-carpet food and drink. There was also a bikini-clad woman covered in chocolate. "If we take them to a party, it helps them get excited about the project," says Ms. Rubin of Platinum Properties International.
Indeed, developers are going all-out to charm their clients, and more and more those clients include the world's wealthy elite from such countries as Argentina, Mexico, Australia, and Germany. These foreign buyers, in fact, are one of the important reasons the housing bubble continues to grow in hot markets like Miami, New York, and Las Vegas. In many cases, they're taking advantage of the strong euro or trying to get their money into a dollar-denominated hiding place.
The result: In Miami, for one, some condo buildings have as much as two-thirds of their units owned by foreigners. Call it America for Sale.
"No question, foreigners are part of the bubble," says Stephen Wayner, first vice president at Bayview Financial Exchange Services LLC in Miami.
Although there are no numbers indicating how much foreigners are pouring into the United States to buy condos, there are some eye-opening anecdotal signs:
• In Las Vegas, wealthy foreign buyers - mostly from Mexico - have snapped up 12 percent of the condos at Icon, twin 48-story towers that are now almost sold out even though they won't start construction until next month.
• New York City real estate brokers estimate that up to 33 percent of new condos sold in the city are going to non-Americans, especially Europeans, who one broker describes as "very aggressive."
• Asian buyers are jumping in, too. Real estate agents are flying to Shanghai, Beijing, Bangkok, and Kuala Lumpur to talk up the property market. Recently, a large group of Korean finance, construction, insurance, and engineering executives conducted a "study tour" of southeast Florida real estate. They plan to return next April.
Part of the allure of American real estate is the cost. While some of the prices may seem high to Americans, to Europeans and others the real estate feels like a bargain, particularly when figured in euros or pounds sterling.
Miami has long had a history of attracting Latin American investment. The weather reminds Central and South Americans of home, and they've visited Miami's shops for years, lugging home everything from appliances to designer sneakers. In addition, Spanish may be the first language of south Florida instead of English. And the South American elite have long viewed the city as a safe place to stockpile dollar-denominated assets, whether it be in cash or real estate.
"Every planeload comes in with potential buyers," says Ronald Shuffield, president of Esslinger-Wooten-Maxwell Realtors in Coral Gables, which is also representing Met 3, a 74-story condo tower. "Almost every Latin American who buys a condominium here has in the back of their mind, 'That's my safe refuge. If I have to leave, that's where I can go.' "
What's also changed is the active selling of US real estate on foreign shores. Within the past month, Mr. Shuffield has sent brokers to Argentina and Spain for real estate trade shows. ("They are just like yacht trade shows," he says.) Recently, he had a broker in Mexico City meeting with people who might want to plunk down up to $2 million for a condo.
Recently, Rubin's partner rented a hotel suite in Caracas, Venezuela, to show floor plans to brokers and their clients. "He came back with lots of leads and sold a few," says Rubin, who tries to maintain a relationship with her foreign clients by sending birthday cards and calling them every six weeks to update them on the market.
The next wave of buyers might well be from Asia. Several new Miami condos have Asian names such as Mei, the mythical Chinese symbol for beauty.
This week, John Pinson, a real estate agent in Palm Beach and president of the International Real Estate Federation (FIABCI-USA), is traveling to China and Malaysia. He has also scheduled future trips to Hong Kong, Thailand, Japan, and India. "Some of the newest buyers are Vietnamese and Thais," he adds.
Whoever the prospective foreign buyers, marketers say it is important to create a "buzz." One way to do this is a launch party where no money exchanges hands. In Las Vegas, the Icon tower party featured a chocolate fountain and South American, Asian, and Californian cuisine. And, says Sarah Prinsloo, president of Related Prinsloo Realty Services in Las Vegas, there were foreign real estate brokers who speak English. So far, 12 percent of the units have been sold to Mexicans. "They are coming for second homes and an investment," says Ms. Prinsloo.
Fortune International, exclusive brokers for Avenue, two new towers in Miami, are even more successful at attracting foreign buyers. In four months, Fortune has sold almost one-third of the units to South Americans and another third to Europeans. The company has a large network of foreign brokers who help to line up potential customers. They also do major events, says Lucrecia Lindemann, the sales director, such as hot-air balloon rides and special lunches.
"I'm just back from Paris, and sales to the Jewish community there are good," says Ms. Lindemann. "And the Italians are coming here for security and personal reasons."
For many of the foreigners, it's been a beneficial purchase. Lindemann says in less than a year, prices on condos along Brickell Avenue, where her buildings are rising, have soared almost 75 percent.
"Everything here has been a good investment for them," she says.