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Thursday, May 19, 2011

Fair Exchange: Weak dollar leads to stronger U.S. property sales

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        When I published an article 16 months ago predicting increased British investment in American golf communities, the exchange rate for one pound of British sterling was $1.63 US.  When I checked today, it was $1.62.  With that kind of buying power and the over-supply of leisure residential properties in the southern U.S. driving prices lower than they were 1 ½ years ago, a modest Euro-invasion of American golf communities is not unlikely.  In fact, according to the National Association of Realtors, the $82 billion foreigners spent on U.S. real estate in the year ended in March was one of the highest levels in recent years, up $16 billion from the prior year.

        Some interesting data emerge from the NAR survey of its members concerning their foreign clients.  Almost 80% said they would use their new home in the U.S. to entertain family and friends or as their primary home,

More homes were bought in the U.S. over the last year by Chinese nationals than by any other country except for Canada.

or both.  The top five nation's whose citizens purchased property in the U.S. included Canada and Mexico, which is not surprising given their proximity, and the UK, also not surprising given the longstanding connection between the countries.  But the second-most number of purchases was from China.  Florida, California, Texas and Arizona accounted for 58% of total real estate sales to foreigners; North Carolina, Tennessee, Georgia and Virginia each accounted for 2% of total sales. Only 3% of the purchases were for “commercial properties,” with all others for residential (61% for single-family homes).  A full 80% of the realtors who participated in the survey said the value of the dollar relative to other currencies played a major role in their foreign clients' purchases.

DanielIslandholewithhomes

British citizens looking for an investment in a place like Daniel Island, SC, will be pleasantly surprised at the prices for golf homes, relative to those in the UK.

 

        Let’s face it:  The United Kingdom is a small country, and all of France is barely larger than Texas.  They aren’t making any more land on which to put European golf courses, and if you think environmentalists are aggressive in the States, try building a new course in Europe.  We may bemoan our own economy but it is still considered a safe haven by many investors around the world.  Continuing worries about U.S. debt can only work against the value of the dollar, giving Europeans even greater leverage for large-scale purchases in the U.S.  And considering the economic problems in Greece, Portugal and other bailed-out countries, Europeans seem to be more worried about rampant inflation than we in the U.S. are.  As many economists tell us, real estate investment is one of the most effective hedges against inflation (especially when “safe” investments today are yielding barely 2% interest rates).

        On an apples-to-apples basis, properties in Europe, especially in the UK, are more expensive than comparable properties here in the U.S.

To Europeans worried about Greece, Portugal and other countries, U.S. real estate looks like a good investment.

For example, a lovely four-bedroom home at the St. Mellion Resort in Cornwall, which features 36 holes of golf (including a Jack Nicklaus layout), is currently listed at £450,000 ($729,000 US).  The farmhouse, at 2,300 square feet, is described as “in need of some improvement” (translate “much improvement”); and St. Mellion is a long way from anywhere in the UK.  Contrast that with a four-bedroom, 4 ½ bath, 3,550 square foot home listed on Daniel Island, 15 minutes from the wonderful city of Charleston, SC, and a cart ride from 36 holes of golf by Rees Jones and Tom Fazio, for $719,000.

        Foreign dollars just could have a stimulating effect on one sector of the floundering U.S. housing market.  If you are contemplating a purchase of a golf retirement or golf vacation home, keep an eye on this trend, as it might just push up prices in golf communities that look like a bargain today.  If you would like some help in identifying the golf communities that best fit your criteria, please contact me.

Read 2518 times Last modified on Friday, 27 September 2013 11:29
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Larry Gavrich

This blog was conceived and is published by me, Larry Gavrich, a former corporate communications executive who founded HomeOnTheCourse, LLC, in 2005.  Our firm advises baby boomers and others seeking a lifestyle in which golf is a major component.  My wife Connie and I own a home in Connecticut (not on a golf course) and a condo at Pawleys Plantation in Pawleys Island, SC, on a Jack Nicklaus layout.  We began our search for our home on the course more than 15 years ago, and the challenges of the search inspired me to research golf communities and write objective reviews of them.

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