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The New Global Luxury Buyer

For decades, the caste of global elites who influenced the real estate market worldwide may have been reliable and predictable. They were well-heeled, well-traveled millionaires and billionaires who focused their attentions on traditional pockets of luxury, like Monaco, London or New York. That has all changed with the explosion of digital technology and multiple factors ranging from political uncertainties and currency fluctuations to structural shifts in industries such as oil. A new generation of high-net-worth players from newly wealthy economies of China, India, Brazil and Southeast Asia has given rise to new global luxury centers, and an array of varying tastes, desires and concepts of status that are highly nuanced and complex. Where are the new international centers for luxury real estate? Who is this new global luxury buyer, and what do they want?

For a look at what’s happening in three key global cities — Paris, Miami and Vancouver — we turned to three real estate insiders and influencers within the Coldwell Banker® network: Laurent Demeure, founder and CEO of Coldwell Banker France & Monaco; Tina Mak, a real estate veteran and founding president of the Vancouver Chapter of the Asian Real Estate Association of America; and Danny Hertzberg, a specialist with Miami’s The Jills who has been named one of the 30 under 30 most influential people by Forbes magazine.

Coldwell Banker Global Luxury When you look at your local market in the context of the global landscape, what has been the most surprising thing to you this year, so far?

Laurent Demeure, founder and CEO of Coldwell Banker France & Monaco

Laurent Demeure When I look at the France market, it is very interesting today to see American buyers coming back. We have been very surprised this year because it’s been a real increase. We receive referrals from American buyers weekly now; and that’s a difference from a few years ago when we were getting more seller referrals. So, we see the cycle starting over again. Prices are just starting to increase, and we expect the new peak of the housing market to be in 2020.

Danny Hertzberg, a luxury specialist with Miami’s No.1 real estate team, The Jills.

Danny Hertzberg It’s interesting that Laurent says Americans are coming back — because in Miami, it’s been the return of the American buyer. For the past 5-6 years, they’ve been out of the market while affluent buyers from South America, Central America and Russia were in the market. When you looked at price and volume of transactions, it was dominated by international buyers. Now, because the dollar is so strong, we are seeing the American buyers are coming back. They were also priced out of the market. American buyers from New York, New Jersey, California and South Florida who were priced out of the market are returning.

Tina Mak, founding president of the Vancouver Chapter of the Asian Real Estate Association of America

Tina Mak I have to say a similar thing! Since November 2016, I would say I have been servicing a lot more Americans, and especially Californians. The Vancouver market has been strong since 2010 because right after the Winter Olympics, we began to see mainland Chinese buyers coming into our market. Since the 1980s, Vancouver has always attracted a lot of Asians; it started with Hong Kong and Taiwan and now, it has expanded to mainland China. But since 2010, we have had double-digit growth every year. Between 2015 and the first half of 2016, detached homes increased by 30% and the condo market increased by 25%. Because of that, the locals complained, and in response, the B.C. government imposed a 15% tax on properties sold to foreign nationals. However, in my opinion, that was a political move because we had elections coming up. They had to do something. It has impacted the market. The average sales volume has gone down 30 to 40% and in some areas, as high as 70%. In the $5 million+ segment, we have seen a 15-20% drop in prices.  For most middle class Chinese, their price point for properties is about $1.2 million. But that’s the media version of the story. On the surface, it looks like luxury home sales to foreign nationals are cooling down. There’s much more going on.  If you look at the whole of British Columbia, for example, foreign nationals only make up an average 5% of the entire market. Also, the 15% tax hit in July 2016, and our market was already turning down in May. And, now that our election is over, the market is already bouncing back in Vancouver. I have an $18.8 million listing right now, and only Chinese buyers are looking at it.

Because of Vancouver’s tax, Chinese homebuyers have spilled into Toronto and Seattle. But that’s already changing because Toronto is following us with a similar foreign national tax as well as a home vacancy tax. So, if you choose to come to Canada, there are two major cities with these taxes. Another contributing factor is that it’s still very difficult to get money out of China. Starting July 1st, each person only allows to withdraw $50,000 RMB per day, however, US$50,000 remain the same. This is less of an issue for ultra wealthy Chinese buyers, who likely already have overseas accounts and have no problem getting money anywhere in the world.  For the wealthy Chinese who are fleeing unstable political environments or simply would like to have better living environment, that 15% tax is nothing to them. But there are 100 million middle class Chinese, and they are really the buying force, and they tend to follow the rules and have less channels for getting their money out of the country. This is why I think the luxury market will suffer a bit in the coming years and real estate in lower price ranges would be in favor.

It’s one reason why I’ve created my own referral platform in connection with the new Coldwell Banker Development Division — to connect Chinese who are already in the U.S. and Canada to potential new luxury construction projects near good schools. It’s a way to just start a conversation with them, because I understand their emotional spots and the importance they place on living near schools and universities. I will be a hub of information, and will be able to introduce them to other Coldwell banker agents representing new construction projects. The trend is towards new.

Coldwell Banker Global Luxury In past years, each of your respective markets has been heavily influenced by foreign investment. In Canada, Asian buyers have been key players. In Miami, it’s South American and Russian buyers. In Paris, it’s been primarily the British, Russians and those from the Middle East.  Is it still the case today?

Laurent Demeure We have seen a change in the makeup of our international buyers, especially with respect to Russia — because France took sanctions against Russia. So, right now, apart of the sanctions are restricting Visas. If they want to come to the EU, they need 4-5 weeks to go to France. In Italy, it takes two days. So, most Russian buyers have shifted focus to Italy because they can find lower prices. Italy’s housing prices and economy have not recovered from the crisis of 2003. For Middle Eastern buyers, they bought large properties in the past. They wanted to buy a property a three-bedroom, three-bath apartment in Paris and they wanted to walk to the Champs d’Elysee.  Now, for the first time, the state can have some deficit. Oil prices are low. So, we don’t see them a lot today. Fortunately, a new group of international buyers are now coming to France as a result of Brexit. It’s a real strategic opportunity for us. Coldwell Banker France did a survey, and we found an estimated 35,000 to 50,000 buyers are interested in relocating to Paris and France. We have already seen this activity in the last six months, as many French and British expats are interested in buying properties in Paris or the South of France or the West Coast because they expect the country to move in a different direction after the election. Brexit is a real opportunity for us.

Danny Hertzberg We had a similar thing happen in Miami. Russians were buying everything in Miami before sanctions. They were buying ultra luxury $30 and $40 million properties, but also the $500,000 condos and million dollar homes. We just saw their buying power, largely impacted by the price oil and the sanctions, decline. That happened a while ago.  The big change for Miami — from two years to today — is the loss of the South American and Central American buyers. The big three are Brazil, Venezuela and Argentina. Brazil was the biggest player in Miami. Even though these buyers were only a small percentage of the overall market, they drove the market because they were paying top dollar for properties and they were hyper focused on Miami. When their economy was booming, we felt it here. Their demand drove a lot of the new development here. At one time, there were 14,000 new condos expected to be built in Miami, and 50% had deposits. Now, with their economy struggling, many of those same projects have been canceled. It’s changed the dynamic of the condo market here, especially new development. Single-family homes are still selling well in Miami, thanks in part to local buyers. In terms of the foreign market, we are seeing a bit of an influx from France, particularly French Jews who left from Paris. We’ve also had an increase in Turkish buyers. Where there is a lot of unrest in the world, you see people come here. That was the case for Venezuela. So, that’s really the trend here — and the return of the domestic market.  Our low tax base has always been attractive, so we are seeing a lot of people in the finance sector from the Northeast and a lot of buyers from California’s tech industry.

Tina Mak There has not been a major shift in global trends for Vancouver. Of course, the media is obsessed with the Chinese purchase, so the story is: “if the Chinese are not buying, nobody’s buying.” The luxury sector has declined a little bit, but the statistics show that is rebounding. The condo market in Vancouver is crazily hot right now, especially in the $500,000 to $600,000 range. There are multiple offers, with buyers sometimes paying as high as $85,000 over list price for a $500,000 property. That is all local market which also including Chinese. There are a number of factors driving this demand, including low interest rates and government incentives for first-time buyers. This is true for all attached products — townhomes, triplex and fourplexes — they are all very hot.  Chinese are still buying a lot of attached product, as well as Indians and millennials in their 30s who don’t want to rent anymore. As far as detached homes, anything under $2 million is selling very well.

Coldwell Banker Global Luxury What do you think is really driving international investment in your local market?

Danny Hertzberg I think the driver for the international purchase in Miami is, first and foremost, safety and security. It’s also about proximity and language for many wealthy families, especially those coming from South and Central America. If you are moving your family from Argentina, for instance, it’s relatively easy to settle here. A lot of people want to be close to their language, food and culture. There is the lifestyle aspect too. Colombia might be safe, but buyers still want to come here because they like the art, culture, beach and close flights to South and Central America. For European buyers, too, lifestyle is important.

Tina Mak International investors in Vancouver are looking for the same — they want lifestyle. This is especially true for the ultra rich. There are two types of wealthy buyers in Vancouver: 1) the very rich, who seek out properties with parking and lifestyle and 2) luxury millennials, especially the Chinese who want investment return. In Vancouver, we are seeing the Asian market lead the way — in part, because we are closer in proximity and further away from Europe. By July of this year, we will have over 100 direct flights from Asia to Vancouver every week. Vancouver is a gateway for Asians coming to North America. There are 1.4 million Chinese already in Canada — approximately 700,000 in Toronto and 430,000 in Vancouver. We have continued to attract these investors for a number of reasons. Canada has opened its orders to international students; they can obtain a work permit after their studies, allowing them to work anywhere in Canada, for any employer, for up to three years. Work experience gained on this permit will make them eligible for permanent immigration programs, so they can remain in Canada and work while an application for permanent residence is in process. Vancouver has open arms when it comes to children being born here. The Chinese plan 20-30 years ahead. They have money to spend, and they can go anywhere in the world. By the time the kids are grown up, they will be retiring. They bank their currency through property.

Laurent Demeure I really believe that it comes down to the economy of their country for international buyers. Because when oil prices or their currency drops, they leave the market. When their currency is high and the economy is booming, they go abroad to buy property. Also, it comes down to the cycle of the individual countries they are interested in investing in. Nowadays, investors have a global vision of where to buy. They try to put the investment in the market at the right time, at the start of a cycle. They have a true investor vision. Of course, real estate is also about buying a dream. It’s a tangible asset, which also brings them pleasure. For that reason, in France, right now, we are starting a new cycle. They are coming back to France. We are now seeing the China investors coming to our market. They have a financial plan. They are buying companies, vineyards and soccer clubs and of course, they’re buying properties too. So, it’s an increasing market for us. In the next few years, we expect the Chinese trend to catch up to the Russian trend of a few years ago.

Coldwell Banker Global Luxury To that end, where are the global buyers concentrating in your marketplace and why?

Tina Mak The Chinese prefer to buy properties with land over luxury condos. Knowing that, Chinese buyers buy in a few areas in Vancouver. Richmond is one area, which is almost like a China City and you don’t need to speak a word of English. West Vancouver and Vancouver West are popular neighborhoods because there are high-ranking schools in those areas.

Laurent Demeure I really believe that it comes down to the economy of their country for international buyers. Because when oil prices or their currency drops, they leave the market. When their currency is high and the economy is booming, they go abroad to buy property. Also, it comes down to the cycle of the individual countries they are interested in investing in. Nowadays, investors have a global vision of where to buy. They try to put the investment in the market at the right time, at the start of a cycle. They have a true investor vision. Of course, real estate is also about buying a dream. It’s a tangible asset, which also brings them pleasure. For that reason, in France, right now, we are starting a new cycle. They are coming back to France. We are now seeing the China investors coming to our market. They have a financial plan. They are buying companies, vineyards and soccer clubs and of course, they’re buying properties too. So, it’s an increasing market for us. In the next few years, we expect the Chinese trend to catch up to the Russian trend of a few years ago.Everybody dreams about Paris. For buyers from the Middle East and first generation Russians, they look in the Golden Triangle. Americans tend to congregate in the left bank, a cultural center. Second generation of Russians are also going to the left bank; right now it is the most expensive areas in Paris. Italians tend to look in the historic center of the city. The French Riviera continues to attract Russians. This is where a lot of the old money resides. The new money goes to the West Coast — Biarritz, up to Arcachon — because it’s less showy. It’s like the Hamptons in the U.S.

100 S Pointe Dr | Unit 3803 | Miami Beach, FL 33139 | $16,950,000 USD

Danny Hertzberg In general, the market in Miami has pulled back. Miami Beach is still really moving. The countries keep changing — right now it’s France and Argentina with a lot of domestic buyers from New York. We’re still seeing record prices set for properties in South of Fifth, with ultra luxury high-rises like The Continuum and Apogee South Beach, commanding $2,500-3,000 per square feet. The Four Seasons Private Residences in Surfside is another one of our new developments. It’s coastal and within walking distance to the beach. There has been a trend toward walkability and urban centers, so there is an oversupply in downtown. The Brazilians and Russians have left Sunny Isles, so we are seeing a cooling there. Condo inventory is building up in Miami, making it a prime buying opportunity here right now. Some of my clients have been waiting for years to jump into the market. On the condo side, the inventory is just starting to be delivered. Sellers, though, are still able to get historically good prices.

Coldwell Banker Global Luxury What are they looking for in a real estate purchase?

Laurent Demeure The trend right now in France is affluent buyers want to own an apartment in a historic building or property near a 5-star hotel. They want the French dream with the five-star amenities and services right near them. Many of my international clients, when you go to their house, whether it’s in France, Italy or Spain, there is nothing — it’s just water, some espresso and tea. They will take their breakfast outside and we will go to the hotel.

For example, if you buy near the Tuileries Gardens, you will have a wonderful view of the garden and riverbank, but you also have The Ritz and Le Meurice hotels nearby. It’s a historic part of Paris, and it is becoming one of the most desirable places to live. Because you don’t need to have a kitchen. Everything’s around you. That’s typically what they are looking for.  It’s true for the South of France too. There is the Four Seasons in Saint Jean Cap Ferrat — one of the most expensive places in Europe —and it’s very important for people. They want their own place, but near all of the services of the hotel — the restaurants, spa and more.  So the five-star properties are driving everything in Europe. That’s a huge change.

Paris, France | $ 9,007,067 USD

Danny Hertzberg We have a similar trend happening in Miami. A lot of international buyers want hotel amenities in Miami. The Four Seasons Private Residences at Surf Club in Surfside is a great example. It’s really interesting. The Four Seasons bought a historical building, and built new towers — so it’s this combination of old and new. We sold a bunch of units there. People like it because they are getting a private residence and also, the amenities and services of the Four Seasons. In terms of style, they want modern here. If it’s a condo, it’s modern. If it’s a single-family detached, it’s a giant glass modern box.  That’s the Miami style. Even if a buyer comes from overseas and wants to build something, they will hire a local Miami architect to ensure their house has the Miami modern style. We’ve had a few of those kinds of requests from our clients. The trend Laurent mentioned about the importance of the kitchen going away among ultra high-net-worth international buyers is true. A lot of our international buyers are not cooking when they’re here. For that reason, they want to be in close proximity to good restaurants and cafes. In fact, I was showing a property this morning — a $30 million home — and it has this new kitchen concept, where the kitchen is more for looks. It serves as more of a bar and entertaining area with a small center island and catering prep kitchen behind it. So, I think it’s really interesting to see the kitchen trend come full circle — it went from closed kitchens to open kitchens to the catering kitchen, now.

Tina Mak Chinese buyers don’t function that way! We need our kitchens! We also love our food, and the location needs to be close to restaurants and other amenities. The Chinese coming to Vancouver like the modern style. But some tell me that they already have too much modern design in China, and they would like to see European style — Spanish and French properties and we don’t have too many of them —

Laurent Demeure They should come to France! [laughing]

Tina Mak We just have to combine both countries! As I said, Chinese buyers prefer land —especially our freehold properties. Land in China belongs to the government and are therefore leased land with 70 years lease term. Their comfortable price point is around $3 million, wherever they buy in the world.  However, the Vancouver real estate market has increased so much and $3 million really doesn’t go too far in prime subareas; many of them are only land value.  Therefore, they start to look further away from the prime locations in order to spend the same amount of money for a detached house under 10 years old.

5787 Newtown Wynd | West Vancouver | B.C., Canada | $13,685,480 USD

Coldwell Banker Global Luxury Where do affluent Millennials fit into this picture? What do they want?

Danny Hertzberg They’re looking for much of the some things — except they’re looking for a property for “now, not 20 years from now. They want walkability too.

Coldwell Banker Global Luxury And smart home technology?

Tina Mak Vancouver is one of the greenest cities in the world, so smart homes are part of that equation. But that speaks to the city itself, not to any influence of Chinese Millennial buyers.

Danny Hertzberg Millennials do expect it more than other generations of buyers. They want to control everything from their phone — just from a touch of one button.

Coldwell Banker Global Luxury Interesting. Well, that’s wrap everyone. Thank you for your time. It was enlightening… and entertaining!

 

 

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The New Global Luxury Buyer

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