Conditions are right for home buyers with cash
Wealthy Americans are taking advantage of international property opportunities in the current economy. They’re buying homes abroad, using cash to avoid high interest rates and leveraging the strong dollar against other currencies for long-term gains.
Top international property buying locations for Americans in Europe are Portugal, Spain, Greece, France, and Italy. The dollar goes further right now, and the long-term tax advantages are attractive. For instance, Portugal doesn’t impose wealth, inheritance, or estate taxes and property taxes are a fraction of what Americans pay at home.
Requests from Americans to Greece Sotheby’s International Realty for Greek luxury real estate increased by 59.1% in 2022, versus the same period the previous year.
According to data by Knight Frank, in the first half of 2022, Americans accounted for 14.5% of all overseas prime London property purchases, a 6.2% increase in just the first six months of 2022. Nest Seekers reported a 50% rise in inquiries from U.S. investors, with high-priced neighborhoods such as Holland Park, Notting Hill and Chelsea generating the most interest.
A strong dollar
The U.S. dollar has been gaining strength against the currencies of other major economies, including the Euro. It is now at a decades-long high; the last time it was this strong was 1985.
With the strong U.S. dollar, affluent buyers are capitalizing on international property deals. Buyers in the $5 million–and–up range “are looking for something between a deal and a steal in order to make some moves,” according to Sotheby’s International Realty 2023 Luxury Outlook Report.
The British pound fell to an all-time low in September 2022, creating an opportunity to score big on multi-million-dollar properties at a discount. When properties reach a sales price of £5 million or more, the exchange rates make a huge difference in actual price.
Sotheby’s notes that buyers feel safe buying now, because they expect the British pound will go back up, giving them the window to sell at a profit within three to ten years.
The savings have been seen in recent U.K. purchases, where the currency fluctuations saved the buyer more than $120,000 because the pound dropped between the original offer and closing.
Higher interest rates
The issue of rising interest rates is not a concern for the wealthy, who have the cash to buy without taking on a mortgage. A Sotheby’s realty manager says, “When you move into the luxury spectrum, what you’re finding is the vast majority of homes are selling with no mortgage. The buyers can afford it. It isn’t whether or not they can buy something, it’s whether they feel like buying something.”
Prices are still up
If buyers expect to choose from a large inventory of luxury homes for sale at discount prices, they may be surprised. High-end property prices are generally staying steady.
A continued shortage of housing stock, persistent supply-chain issues, and the rising cost of materials are keeping prices up. Many sellers are choosing not to offload property and take on new, higher mortgages.
The transfer of wealth to the next generation is impacting the luxury home market as well. By gifting a home to their children while they’re alive, owners can avoid some taxes. In the current market, inheritors are keeping the properties for now.
Wealth will increase
The market for luxury real estate is expected to stay high. For one thing, global wealth creation is expected to increase by $169 trillion by 2026, a cumulative rise of 36%, according to Credit Suisse. This indicates that the number and buying power of luxury buyers will increase, supporting price points in high-end property markets around the world.
Additionally, people are spending more of their time at home and putting more of an emphasis on their home lives, even as the world has opened up, due to the Covid-19 pandemic.
Fannie Mae economists believe mortgage rates will steadily fall, but are not expected to drop below 6% any time soon. This condition favors those with cash.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
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