THE MELTING POT

International investors have kept Florida's Real Estate market hot. Here's a look at the future of this lucrative market.

From snowy Moscow and Toronto to sunny Mexico City and Rio de Janeiro, international buyers are playing an increasingly important role in the Florida market. While demand for second homes is the leading force drawing them, a growing number of international buyers are drawn to Florida for business reasons, and they buy primary homes and commercial properties as well.

Another Strong Year?

A recent study for the National Association of Realtors (NAR) and the Florida Association of Realtors (FAR) found that 15% of the state's properties were purchased by foreign buyers in the 12 month period ending May 2005.

The study also found that Florida attracted buyers from more than 100 different countries - although the three primary sources were Canada, Western-Europe and Latin America. Florida Real Estate professionals are hoping that 2006 will be another strong year for the international market. But its performance may well depend on several key financial factors :

* Will the U.S. dollar strengthen against foreign currencies, making Florida homes relatively more expensive for foreign buyers ?

* Will U.S. interest rates rise, increasing the cost of financing a vacation home?

* Are the state's rising property values pricing mid-range buyers out of the market ?

* will foreign investors continue to purchase units in new residential developments, hoping for quick returns ?

"The biggest increase in international demand over the past few years has been a result of the speculative allure of the fast-appreciating real estate in Florida," says analist Lewis Goodkin, president of Goodkin Consulting in Miami.

A stronger U.S. dollar would slow Canadian and Europian demand, adds Goodkin, but would likely have little effect on demand from Latin American buyers, many of whom are seeking to move capital from their home countries. In fact, demand from various South American countries changes almost year to year, depending on their internal political and economic conditions.

Visitor projections also provide a guide to International real estate activity, particularly in the second-home market. Last year, roughly 4.4 million of the state's 80 million visitors came from overseas (5.5%) and another 1.9 million came from Canada (2.4%), according to Visit Florida, the state's official tourism  marketing corporation. In 2006, Visit Florida is projecting an overall 3.2% increase in U.S. and foreign visitors to the state, well above the projected 2% U.S. average.

International Buying Patterns

International buying patterns differ from region to region. Buyers from different countries favor different cities. For example, there are more buyers from the United Kingdom and Puerto Rico in Orlando than in South Florida. Colombian buyers like both areas, but concentrate on South Florida. We're also seeing more Asian buyers than in the past.

Although Florida attracts buyers from around the globe, 58% of international home purchases were made by Europeans, according to the 2005 NAR/FAR survey. More than half of the European buyers resided in the United Kingdom, which accounted for one-third of all international purchasers. The study noted that almost half of U.K. buyers purchased properties in Orlando and vicinity. The next most popular chice was Naples/Fort Myers, followed by Tampa/St. Petersburg.

The United Kingdom is clearly Central Florida's No. 1 inbound international market, with Colombia and Brazil on the upswing. We have international buyers looking for vacation homes near the major attractions, but Orlando technology and entertainment businesses are also booming, and foreign-owned companies are setting up businesses here in Orlando. So the international market is a lot broader than just second homes.

Central Florida will see more demand from South and Central America in 2006, this will be a strong portion of Orlando's international market. In the NAR/FAR study, 29% of the state's international buyers were from South and Central America, and the Caribbean - with Venezuelians being the largest single nationality. Miami-Fort Lauderdale was the favored destination, attracting 68% of the state's Venezuelan buyers, followed by Orlando and West Palm Beach.

Canadians were also major purchasers of homes in Central and Southern Florida. According to a recent study, "The Canada-Florida Economic Relationship", prepared for the Canadian Cnsulate-General in Miami in 2004, about 136,000 members of the Canadian Snowbird Association own homes in Florida. Canada also appears to be the state's most important source of foreign commercial real estate investment, with a total of $3.6 Billion invested as of 2001.

The Canadian Snowbird market is very similar to the U.S. snowbird market, but the level of buying activity largely depends on the relationship between the U.S. and Canadian dollars, when the Canadian dollar is weak, demand is lower because Florida properties become more expensive.

In most cases, a foreign buyer is seeking a vacation home for personal use or making a short or long-term real estate investment. In SouthWest Florida, European buyers typically like vacation homes in the $700,000 to $1 million range. They feel that's enough money to spend for the time they'll be here, families may come several times a year for 2-3 week visits, while older Europeans may stay a month or two at a time. [In Orlando and vicinity the range for beautiful Holiday Homes is around $350,000 to $500,000, and less than that for Condos. - Eli.]

Many international buyers are interested in new construction. There's also the potential for appreciation of their investment. They want properties that make sense as investments.

Again, foreign exchange rates and U.S. mortgage rates are prime consideration for foreign investors. Naturally, you have to look at prices and rates to see how much it costs to support a second home in Florida, beyond the initial price, and how much revenue can the buyers expect from a rental to offset the costs, and make some money as well. Many buyers are also interested in Florida commercial properties, ultimately, they want to be invested in the United States.

Top International Markets by number of Visitors to Florida

Canada                       1.9 million                                                                                           United Kingdom          1.5 million                                                                                            Germany                        265,000                                                                                            Venezuela                      224,000                                                                                           Mexico                          207,000                                                                                          Colombia                       203,000                                                                                           Brazil                             167,000                                                                                             France                           122,000                                                                                              Italy                               113,000                                                                                            Japan                               82,000     

SOURCE : Visit Florida 2005.

Top Countries of Origin for International Buyers in Florida

1. United Kingdom                                                                                                                    2. Germany                                                                                                                                3. Canada                                                                                                                                  4. Venezuela                                                                                                                              5. Colombia                                                                                                                              6. Brazil                                                                                                                                     7. France

SOURCE : NAR/FAR study, May 2005

Foreign Buyers Buy the USA with Confidence

Foreign investors consider the United States to be the most stable and secure country for Real Estate :

United States         73.5%                                                                                                          United Kingdom      8.8%                                                                                                       Canada                   5.9%                                                                                                        France                    2.9%                                                                                                       Germany                 2.9%                                                                                                        Japan                      2.9%                                                                                                        Austria                    1.5%                                                                                                       Australia                 1.5%

SOURCE : 2005 AFIRE Foreign Investment Survey.

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The article was published by Richard Westlund, a Miami-based freelance writer.  To read it in full length, please refer to Florida Realtor Business Magazine of Florida Real Estate, May 2006.

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 ELI MAGEN, Mortgage Broker.