POST WRITTEN BY
President and CEO of Engel & Völkers Americas, overseeing the European real estate brand's growth and operations in the Americas.
For luxury real estate professionals looking to level-up their business in 2018, the key to surpassing the competition will lie in the ability to service an increasingly international client base. International buyers purchased $153 billion of residential property between April 2016 and March 2017, marking a significant increase from $102.6 billion during the previous 12-month period (April 2015–March 2016).
Foreign investment in U.S. real estate is on the rise for a number of reasons, the biggest of which is that wealth is growing faster overseas. When we look at the most affluent of buyers, we see that billionaire wealth growth has continued, following a brief 2015 plateau. Worldwide, billionaires' total wealth grew by 17% in 2016, up from $5.1 trillion to $6 trillion, and for the first time, there are more billionaires in Asia than in the U.S. At the same time, the U.S. dollar is softeningwhile the Euro and the Yuan grow stronger, and that doesn’t even take into account the impact of the new tax law on wealthy Americans.
In its final form, the new tax legislation allows interest to be deducted on mortgages up to $750,000 (previously the limit was $1 million), and it also put a $10,000 cap on the amount of state and local taxes that can be deducted from the federal return. Some experts predict that without the associated tax benefits, the wealthiest Americans may hold off on home purchases for the time being. However, these same regulations won’t apply to foreign investors. In fact, international buyers will actually benefit from overall lower housing prices.
Real estate professionals must be able to cater to this growing international client base, and the following best practices can help them do just that.
1. Identify the right international geographies for the market.
The softening dollar and new tax law will impact housing prices for buyers from Europe and Asia alike. For real estate professionals on the east coast in markets such as Hilton Head or Miami, buyers will largely come from Europe, whereas agents in markets like San Francisco or Seattle should be looking west toward Asia for their prospective clients.
It’s also important for real estate professionals to consider their local economy and the impact that international business has on their markets. For example, auto manufacturer BMW just celebrated 25 years in South Carolina and continues to grow its presence there, while Seattle’s technology boomis attracting Asian billionaires. In markets such as these, real estate professionals should focus marketing dollars on appealing to wealthy international executives who do business in Europe and/or Asia and the United States.
2. Don’t get lost in translation.
Time and time again, brands have proven that marketing messages can get lost in translationwhen attempting to reach an international audience. It may seem obvious, but marketing materials that include American catchphrases or idioms — or worse, taglines that when translated mean something different in another culture — can kill international branding efforts. The goal should be to build a brand with which consumers can connect, and it’s crucial to remember that achieving this requires a specialized approach and unique campaigns for different countries.
In the same vein, it’s equally important to understand the differences in the way real estate is conducted in the market where a client is coming from. How are agents perceived? How do contracts and disclosures work? A thorough knowledge of the answers to these and other questions will allow an agent to better articulate how real estate is transacted in differing markets, leading to client confidence and closed deals.
3. Build brand awareness ahead of time.
In attempting to garner international clientele, brokerages and individual agents should try to build brand awareness -- and display leadership through resourceful content -- among potential buyers before those buyers enter a particular market. If potential buyers/sellers know a brand before they come to market, when they do, having brand recognition can make all the difference in winning a client. To this end, a few ways that brand awareness can be built among potential clients is through targeted online advertising, integrated sponsorship of international events or strategic media buying with foreign luxury trade publications.
The coming year will see an increase in foreign investment dollars in U.S. real estate. For real estate professionals looking to get a piece of that pie, the time to start international marketing and branding efforts is now.