Sinking dollar gives foreigners ‘upper hand’
MIAMI – March 11, 2008 – From atop any gleaming, half-sold condo project, South Florida’s housing market looks bleak.
Viewed from abroad, it looks brighter.
Just like everyone else, foreigners turned away from Florida’s housing market as the downturn took hold. Now, international shoppers from Europe and Latin America to Canada and South Africa are again scoping out bargains, agents say.
So far, most shoppers are just looking, and high property taxes and maintenance fees and the tightening mortgage market are a deterrent. But the outsiders see opportunity: The U.S. dollar has slid to record lows against the euro and some other currencies, home prices are falling, and the selection is huge and getting bigger. And the region remains a safe haven for sheltering wealth from tyrants and turmoil.
“The most willing money, the most ready to deploy, is from offshore,” says Philip Spiegelman, a principal in International Sales Group, an Aventura condo sales and marketing firm.
A recovery in Florida’s housing market hinges, of course, on a broader rebound in U.S. housing and the resolution of the credit crisis triggered by mortgage woes. Still, foreigners – long a mainstay of South Florida’s real-estate picture – will play a major role in the market’s future.
‘Good to buy’
Florida, by far, leads the U.S. market, accounting for an estimated 26 percent of all foreign purchases for the year period that ended in April 2007, the National Association of Realtors reports. Within the state, Miami and Fort Lauderdale are the top markets.
“The market is very weak at the moment, and I’m feeling good to buy,” says Ryan Ramkisoensing, who has been prowling the Web for Florida real-estate bargains from Holland ever since completing six months of financial services work here. He plans a shopping expedition to Miami, probably within six months.
International buyers are scouting properties in the usual haunts along Brickell Avenue and in Key Biscayne as well as more recent internationally popular enclaves such as Doral and Weston.
To court buyers, Condo Vultures Realty of Bal Harbour has added international staff with language and cultural skills. Principal Peter Zalewski says the firm is getting inquiries from Dutch, Irish, French, German, British and Canadian shoppers, among others. “Everyone. Simply because of their rich currency, they’re coming here,” he says.
Going far and wide
Spiegelman’s firm, ISG, has stepped up its focus on Europe and Latin America and has agents trekking to India and Russia.
Classes that coach agents in how to work with foreign buyers are full, according to Richard Barkett, CEO of the Realtors Association of Greater Fort Lauderdale.
Latin America’s political shift to the left – particularly Venezuela – has renewed the periodic surge of money stashed into Florida real estate as a safe haven.
“We say Hugo Chavez is our best salesman,” says Rose Marie van Blommestein, an ISG sales director who speaks four languages. Roughly a third of the units sold so far at the 28-story, 267-unit Ocean Marine Yacht Club in Hallandale Beach have gone to international buyers, says van Blommestein, who is Italian.
Venezuelan real-estate agent Roseangela Acosta is considering buying several units in the building and proposing a bulk sale to investors in Caracas. “With the crazy president we have, we live with one foot here and one foot in Venezuela,” Acosta says.
Of course, potential buyers from abroad share domestic trepidations about overpaying in a declining market. Agents are seeing international clients shopping around until the market hits bottom.
But with the euro at an all-time high against the dollar – up 28 percent in two years – Europeans realize it might be time to pounce. “They’re playing the currency and also playing the discount [on prices],” says Zalewski, of Condo Vultures. “They really have the clear upper hand.”
Some are looking for a vacation home; others see an investment opportunity.
“All of them are looking for bargains,” says Michael Schnabel, a Miami-based Realtor with Esslinger Wooten Maxwell who has seen low-ball offers of 65 percent to 70 percent of list prices. “They’re all aware of what’s going on: a lot of construction, a lot of supply.”
Most seem prepared to buy and hold. “This is long-term. They know it’s not a flip situation,” Schnabel says.
Danielle Aguiar, a French agent at RE/MAX Partners in Plantation, says one French client is looking for foreclosures and “short sales” – deals in which a bank agrees to give up its lien for less than the amount owed.
Despite the foreigners’ strong appetite for a place in the sun, Realtors see many hurdles to closing deals.
Sophie Mavroleon, a Realtor with Dynamic Realty Group in Bal Harbour, markets $500,000 to $1.5 million properties to Europeans, especially the French. She says she has watched many potential sales evaporate over taxes and maintenance, which have spiraled upward because of insurance costs.
“Foreign buyers will buy beautiful views on the ocean; it’s an easy sale – until people realize how much taxes and maintenance costs are,” Mavroleon says.
Exorbitant property insurance costs in the wake of the 2004-05 hurricane seasons were a key reason foreigners accounted for just 7.3 percent of Florida’s home sales during 2006, down from 15 percent in the year period that ended in May 2005, according to the National Association of Realtors.
The tax burden
Also off-putting is the two-tier nature of Florida property taxes. Only U.S. citizens and those with green cards are eligible for Florida homestead status and the Save Our Homes cap that limits assessment increases to 3 percent a year. Many foreign buyers can’t deduct property taxes from income taxes back home.
“The tax situation is a huge issue with our members,” says Michael Mackenzie, a spokesman for the Canadian Snowbird Association. Canadians, he says, are now looking to alternative sunny spots. “Arizona is stepping up its marketing.”
Another hurdle for foreigners is the tough U.S. stance on granting admission to the country. “Were it not for the challenges to foreigners getting a visa, we’d be selling a lot more,” says Alicia Cervera Lamadrid, CEO of Miami’s Related Cervera Realty, which handles sales for condo projects. “For Russia, it’s a huge problem.
“We’re exploring helping people with visa information. We can do a little research, help them find a lawyer.”
Banks, meanwhile, “are making it more complicated and more difficult for foreign nationals to obtain loans,” says Tony Acquaviva. He owns U.S. Mortgage of Florida in Boca Raton, which is seeing many South Africans, Brits, and other Europeans interested in the region.
Though foreigners are more likely than Americans to pay cash for U.S. homes, an estimated 69 percent rely on mortgages, the NAR says.
Banks limit the nationalities they will lend to, some generally avoiding Venezuelans because of perceived political instability, Acquaviva says. Banks have stiffened documentation requirements and are requiring bigger down payments, especially for foreign buyers, Acquaviva adds.