Capitalizing on the Foreign Property Investment Factor in Miami
Following a lengthy and not unexpected lull in the aftermath of the COVID-19 pandemic, foreign investment in real estate has rebounded over the past two years and is now near pre-pandemic levels. From April 2022 to March 2023, foreign buyers spent more than $50 billion on US real estate. Notably, the homes they were buying were priced 3 percent higher than the nationwide average.
Foreign real estate purchasers in the US come from two main groups: resident foreigners and non-resident foreigners, latter group typically buying properties as vacation homes, long-term investments, and rental-generating investments. The countries investing the most money in US real estate include China, Canada, Mexico, India, and Brazil, which combine for 44 percent of total foreign purchases. Meanwhile, the most popular markets for foreign buyers include North Carolina, California, Arizona, Texas, and Florida, with the latter leading the nation at 23 percent of foreign sales.
Miami Attracts International Attention
As has been the case for a number of years now, Miami remains at the top of Florida’s real estate market, both in general and for foreign investors. Many of the same benefits of the Miami market appeal to both US and foreign buyers, including beach access and other natural attractions, consistently comfortable weather, a thriving nightlife, ample work opportunities, and an all-around quality standard of living. However, there are also a number of factors that appeal specifically to foreign investors, including the city’s status as a cultural melting pot, with regional foods and services available, a high number of multilingual residents, and thriving communities of diverse expatriates.
Foreign investment in Miami real estate follows a number of specific patterns. According to the Miami Association of Realtors, nearly 70 percent of foreigners buying property in the area pay cash, suggesting an elevated level of affluence and an ongoing wealth migration into the area. The median price of a house bought by a foreigner is $482,700, and 71 percent of buyers intend to use their properties for rental or vacation purposes.
In addition, a large portion of the foreign owner population comes from Central and South America, with Argentina and Colombia being the most common countries of origin. Interestingly, Canada also places high on the list, while Latin American countries such as Mexico, Venezuela, Ecuador, and Brazil round out the list. This isn’t too suprising, considering Florida’s proximity to Latin America, in general, as well as Miami’s large Latinx population and rich cultural heritage.
Impact on the Real Estate Market and Regional Economy
This ongoing trend of foreign investment in Miami is having an oversized effect on both the local real estate market and the economy as a whole. In 2022, $6.8 billion flowed into Miami via foreign residential purchases, while another $1.3 billion in commercial development capital added to the boom. These numbers have increased since then as the financial challenges related to the COVID-19 pandemic continue to fade, and the result has been extensive growth of both the residential and commercial real estate sectors.
It's estimated that about 35 percent of all commercial real estate transactions in Miami are from foreign sources, which not only infuses new dollars into the economy, but also exposes the area to new businesses and developers. Some of the largest developments in the area are funded by foreigners, including the Okan tower in the downtown area ($400 million and 72 stories) and the 79th Street Causeway mixed-use project ($300 million), as well as the Genting parcel of land in the downtown area, which was receiving foreign bids of over $1 billion in 2023.
The impact on the residential real estate market is equally notable. In 2022, even as the pandemic hangover was still being felt, nearly 10,000 Miami residences were purchased by foreigners. In the mid-2022-23 12-month period, nearly 50 percent of all international home purchases in Florida were in the Miami-Ft. Lauderdale-West Palm Beach area, with a total value of $5.1 billion. Miami-Dade is the top destination for foreign investors, accounting for more than 60 percent of sales value, while Broward and Palm Beach saw $1.07 billion and $270 million in foreign sales, respectively.
This influx of foreign investment has a number of ramifications for the local market, including rising median home prices, increasing rental rates, and a reduction in overall supply. While all of these impacts are creating barriers to entry for new investors, they don’t seem to be slowing the market down at all. Instead, sales continue despite rising prices, and the ongoing development boom shows no signs of slowing down.
In the meantime, currently established homeowners in the Miami area are benefiting from increased equity in their properties, higher income potential from rent and Airbnb activity, and a bourgeoning local economy that promises to continue to drive growth in the long-term.
Ultimately, it appears that Miami’s status as one of the most desirable US destinations for foreign real estate investment—and for all real estate purchases, in general—will remain stable over the coming years. In the meantime, the local economy and real estate market will continue to benefit, providing ample opportunity for positive return on investment.
