International investors still keen on california

San Francisco, California Photo: WorldAroundTrip

International investors are still keen on California, as overseas sales continued in 2014. The US housing market slowed last year, thanks to falling affordability and lowering supply levels, and California was no exception.

Indeed, the state's housing market started the new year still bearing the scars of 2014’s tight housing inventory and low housing affordability, according to the Californian Association of Realtors, with sales declining both month-on-month and year-on-year.

Sales in January were down 3.9 per cent from a revised 366,130 in December and down 2.7 per cent from a revised 361,790 in January 2014.

"Despite a leveling off of home prices and continued decline in interest rates in recent months, California’s housing market continues to be constrained by low housing affordability, particularly in the San Francisco Bay Area," said C.A.R. President Chris Kutzkey.

Nonetheless, international demand stays strong, despite the headwind of a strengthening US dollar.

One in six (14 per cent) Realtors reported a completed transaction with an overseas client in 2014, the same level as in 2013.

China drove international demand, accounting for more than one in three international buyers (36 per cent), primarily using cash to make purchases. Indeed, two-thirds of international buyers paid all cash.

Canadians were the second most active group of buyers (11 per cent), closely followed by investors from Mexico (9.1 per cent) and the UK and India (both under 5 per cent).

Being more affluent than the average California home buyer, overseas buyers purchased more expensive homes at a median price of $490,000, compared to 2014’s single-family median home price of $447,000. Those who purchased homes below $500,000 had the highest percentage of investment purchases (40 per cent), compared to those who purchased homes between $500,000 and $1 million (17 per cent for investment) or those who purchased homes over $1 million (34 per cent for investment reasons).

Nearly half of overseas buyers purchased a home in the suburbs, while three in four said said they \considered buying in the US primarily to be closer to family and friends, for investment and tax reasons, or because of a child attending college in the U.S.

Those who purchased homes over $1 million bought primarily for investment/tax advantages, because they have a business in the country, or because they have children in school here.