High-net-worth-individuals (HNWIs) are becoming increasingly global in their investment outlook. Extensive fluctuations in global exchange rates—the US dollar hit a 10-year high in mid-2015 after climbing from an all-time low just four years earlier—have presented exceptional opportunities, as well as challenges, for buyers seeking to acquire prime property outside their resident country.
As part of Luxury Defined 2016, our annual report on the prime property market, we explore the impact of exchange rates on the cross-border movements of important buyer groups and examine how currency-strong buyers may benefit from exchange rates that are positioned in their favor.
Gateway US markets such as Phoenix and Miami, where overseas buyers were a steadying post-financial crisis force, have seen the number of international buyers trending down as the rising dollar made US luxury homes more expensive.
Overseas buyers now comprise 35 percent of luxury sales in Miami, a nine percent decrease from 2014. “This reflects the financial uncertainties of countries whose residents have historically been active purchasers of South Florida real estate,” says Ron Shuffield of EWM Realty International. “Despite the downward trend, affluent foreign buyers continue to purchase property in Miami as a currency hedge and a safe store of wealth.”
Although many of our 100 surveyed markets reported decreases in buyers from oil and commodity-dependent countries including Russia and Canada, there has been limited dropoff in Chinese buyer interest.
Wealth has grown fivefold in China since the beginning of the century and Chinese nationals now make up eight percent of the global UHNWI population. After years of widely reported capital outflows, the country’s slowing economy has yet to have significant impact on the global luxury real estate market, with most brokers reporting an increase in Chinese buyers and only a few observing a slight dropoff.
Amid this headline-grabbing national turmoil, Chinese buyers are still purchasing prime property at top prices across the globe. 2015’s highest price residential sales in several important markets (Sydney, Hong Kong, Seattle, and the New York Adirondacks, among others) were sold to Chinese nationals or recent emigrees. And wealthy Chinese nationals aren’t just buying real estate—they are also purchasing art at the top end of the market. A $170 million Modigliani painting, sold at Christie’s in November, went to a Chinese art patron.
A declining euro is also presenting opportunities for affluent second-home buyers in Europe as well as several destinations in the Caribbean. “2015 saw a boost to the market from American clients who are starting to reinvest thanks to the strengthening of the dollar,” notes Zarek Honneysett of Sibarth Real Estate in St Barths.