In the historic neighborhoods of Brooklyn, N.Y., a short train ride from Wall Street, international homebuyers are helping to keep the condominium market afloat.
“Thank goodness for these folks, so we aren’t in the same doldrums as the rest of the country,” said Terry Robison, a broker for Prudential Douglas Elliman in Brooklyn. One in five of Robison’s customers comes from outside the United States.
For years, experts have predicted that condominium markets nationwide would collapse under the weight of new condo units planned by developers, and from South Florida to Las Vegas, many markets have suffered steep losses.
But in a few places, condo prices have held steady and even increased, thanks in part to the support of condo buyers from overseas. Many other markets would certainly be hurting more if not for international buyers.
In Miami, the median price of a new condominium fell to $263,500 in December, a 10 percent decline from a year earlier, when the median was $294,000. The number of sales also slumped to 308 in December, down from 559 the year before, according to the Florida Association of Realtors and the University of Florida Real Estate Research Center.
With condo values declining, investors hoping to rent their properties in the short term and sell within a few years have left the Miami market, according to Fabian Garcia-Diaz, a real estate agent with Miami’s Fortune International Realty.
These days, as many as two-thirds of condo buyers are purchasing their units as second or even third homes in many submarkets, Garcia-Diaz said. Most of the buyers in this category are foreigners, including wealthy buyers from Mexico, Venezuela, Colombia, Argentina, and Brazil. Garcia-Diaz also helps second homebuyers from Europe and Canada find condos in Miami.
“They come here for vacation and for shopping,” he said. These buyers look for condos within easy walking distance of attractions and amenities, especially beaches.
Foreign nationals who work in Miami also buy condominiums, said Garcia-Diaz. At many buildings on Brickell Avenue downtown, a quarter of the buyers are foreigners who work nearby, he said. Many commute from other countries, working five days in Miami and then flying home for the weekend.
International buyers are drawn to the condominium market in part by the falling value of the dollar compared to other currencies (see story on page 26). The U.S. dollar has sunk even compared to the usually lessstable currencies of Mexico and Argentina. That, combined with falling real estate prices, has made Miami condominiums much more affordable to those with foreign currency to spend.
New York’s foreign connection
New York City’s condominium market seems to be the opposite of Miami’s. The average price of a Manhattan condo rose 17 percent in 2007 to reach $1.4 million, according to Steven Spinola, president of the Real Estate Board of New York.
“New York City’s residential real estate market continues to prove that it is unlike any other market in the country,” he said.
However, Manhattan does have something in common with Miami: international buyers. About a quarter of the condo and co-op apartment buyers here are foreigners, according to Nancy Pakes, president of Halstead Leasing Co., a New York City-based real estate brokerage.
And their numbers keep increasing. At 75 Wall St., a former bank tower converted to condominiums, a quarter of the buyers since the project began selling units last summer have been from overseas. By February, threequarters of the visitors to the sales office were foreigners.
“In 2008, more purchasers are international than domestic,” said Larry Kruysman, managing director for the Hakimian Organization, the New York City-based developer of 75 Wall St.
“The traffic surprises me,” said Kruysman. To keep the interest from international buyers coming, the developer is considering advertising in foreign media and has established relationships with six real estate brokers in other countries.
Location, location, location
Most of the buyers at Hakimian’s tower have business reasons to visit New York. They tend to be drawn to the high-rise first for its location. “The address 75 Wall St. resonates around the world,” said Kruysman. The condos are selling at a rate of 30 a month at prices averaging between $1,200 and $1,300 per square foot.
Location is also the feature that draws international buyers to Aqua, a condominium tower now under construction in Chicago, where 10 percent of the units have sold to international buyers, many of whom do business nearby.
“They look down here because of the close proximity to the Loop and the lake,” said James Loewenberg, founder of Near North Properties, Inc., a Chicago-based mixed-use developer. Ninety-five percent of Aqua’s 281 condos, which began selling about a year ago, are now under contract at prices averaging $515 to $550 a square foot.
Developers are pleased by the international attention but say they could sell even more to international buyers if not for the difficulty and delay involved in international travel since the Sept. 11 terrorist attacks. Many travelers must wait up to a month for a visa, a delay that slows the flow of international capital into U.S. real estate, according to Fortune’s Garcia-Diaz.
“Many visitors are really fed up with that,” he said.