The Future of International Real Estate Transactions: The Role of Emerging Technologies in Inbound Investments to the USA — by Vanessa Saunders
International real estate transactions have been a key part of the global property market for years, with the U.S. consistently ranking as a top destination for foreign buyers. Major cities like New York, Los Angeles, Miami, and San Francisco have attracted billions of dollars in investment from buyers worldwide. However, recent years have seen a shift in this landscape due to various geopolitical, economic, and regulatory factors.
At the same time, emerging technologies like blockchain, artificial intelligence (AI), and digital currencies are beginning to disrupt the real estate sector, providing new opportunities for efficiency and transparency. As I prepare to participate in the Emerging Technologies panel at the International MLS (IMLS) Forum in Milan on October 7-8, 2024, this article will explore how these innovations will impact international real estate transactions, particularly inbound to the U.S., and what we can expect in the near future.
The Current State of International Real Estate Transactions Inbound to the U.S.
Foreign buyers have long considered the U.S. a safe and attractive place for real estate investment. However, several factors have contributed to a decline in these transactions recently:
- Geopolitical Tensions and Economic Sanctions: Countries like China and Russia have faced increasing difficulties in investing abroad due to government-imposed capital controls and economic sanctions. In China, strict capital outflow restrictions and tighter regulations on overseas investments have significantly slowed the once-robust influx of Chinese buyers. Russia, heavily impacted by sanctions following the 2022 Ukraine conflict, has seen its wealthy buyers face frozen assets, exclusion from financial systems, and volatile currency devaluation, all of which have curtailed their ability to purchase properties abroad.
- Currency Fluctuations: Economic instability in emerging markets has reduced the purchasing power of many international buyers. Countries like Brazil, Turkey, and South Africa have seen local currencies weaken, making U.S. real estate less affordable to foreign investors.
- Regulatory Changes: Some countries have introduced regulatory measures to address housing affordability issues, indirectly affecting foreign buyer activity. For example, Canada and Australia have implemented restrictions on foreign ownership of residential properties. While the U.S. hasn’t imposed such broad national policies, local taxes in cities like New York and Los Angeles and rising mortgage rates have made some markets less attractive.
- Impact of COVID-19: The global pandemic severely disrupted international travel and economic activity. Though there has been a rebound in interest from international buyers, the pace of recovery has been slow, particularly due to travel restrictions and uncertainty around property prices.
Global Shifts in Real Estate Investment
While inbound investments into the U.S. are facing challenges, several countries are experiencing a surge in foreign real estate transactions, making them attractive alternatives for international investors:
- India: Foreign investors contributed $3.5 billion to Indian real estate in the first half of 2024, particularly in the industrial and warehousing sectors. The country’s rapid growth in infrastructure has positioned it as the third most attractive destination for land and development site investments .
- United Arab Emirates (UAE): Dubai, with its favorable tax policies and residency visas tied to real estate purchases, remains a hotspot for international buyers. Property values in Dubai rose by 18% in 2023, and its status as a global trade hub continues to attract investors .
- Mexico: Coastal regions like Los Cabos and the Riviera Maya are becoming increasingly popular among foreign investors due to affordable real estate prices and strong short-term rental yields .
- Southeast Asia (Thailand and Indonesia): Thailand offers low-cost, fully furnished properties with significant rental income potential, while Bali in Indonesia continues to attract real estate investors due to its year-round tourism and high return on investment .
EB-5 Investment Program and the U.S. Housing Market
One critical area that has seen a significant reduction in activity in recent years is the EB-5 Immigrant Investor Program. This program was designed to attract foreign investments into the U.S., particularly in areas such as real estate, by offering permanent residency to investors who meet certain investment criteria, such as creating jobs in high-demand areas. However, the EB-5 program has not received much attention in recent years, which may be contributing to some of the housing shortages the U.S. is experiencing.
The political outcome of the upcoming elections could have a profound impact on the future of the EB-5 program. If revitalized, it could once again become a major driver of foreign investment in U.S. real estate, especially in regions struggling with housing shortages. Moreover, Economic Development Corporations (EDCs) and other stakeholders should step up and champion the return and expansion of EB-5 investments to address these critical housing gaps and bolster local economies.
How Emerging Technologies Will Transform International Real Estate Transactions
As the world becomes increasingly interconnected, emerging technologies are set to revolutionize international real estate transactions, making cross-border investments more accessible, efficient, and transparent. Here are some of the most significant technologies reshaping the market:
- Blockchain and Smart Contracts
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Blockchain technology offers a decentralized, secure, and transparent system for conducting real estate transactions. The introduction of smart contracts, which automatically execute the terms of a contract when pre-defined conditions are met, can streamline cross-border real estate deals by:
- Reducing Intermediaries: Blockchain technology allows buyers and sellers to transact directly without needing intermediaries such as banks, lawyers, or notaries, saving time and money.
- Ensuring Transparency: Blockchain enables the transparent recording of property titles and transaction histories, reducing fraud and disputes—key concerns for international buyers unfamiliar with U.S. regulations.
- Accelerating Closings: Smart contracts can automate key parts of the transaction process, such as releasing funds or transferring titles, dramatically speeding up closings.
- Artificial Intelligence (AI) and Big Data
AI is changing the way real estate professionals analyze markets and assist international buyers. With the power of big data, AI can:
- Enhance Market Predictions: AI can analyze millions of data points to identify trends, predict property value changes, and even assess the impact of economic fluctuations. This is especially useful for foreign buyers who need reliable data when investing from afar.
- Personalized Property Searches: AI can tailor property searches based on a buyer’s preferences and financial situation, streamlining the decision-making process for international buyers.
- Virtual and Augmented Reality (VR/AR)
Virtual reality (VR) and augmented reality (AR) have become indispensable tools in real estate, particularly for international buyers who can’t easily travel to view properties. These technologies allow buyers to:
- Take Virtual Property Tours: VR technology enables buyers to tour homes and commercial properties from anywhere in the world. This capability has become essential in a post-pandemic world where travel may still be restricted.
- Visualize Customizations: AR allows buyers to view potential renovations or design changes in real time, helping them make more informed purchasing decisions.
- Digital Currencies and Global Payments
Cryptocurrency is becoming a growing part of real estate transactions, especially for international buyers. Using digital currencies like Bitcoin or stablecoins allows buyers to:
- Bypass Traditional Financial Systems: For buyers in countries with strict capital controls, digital currencies offer a way to transfer funds internationally without government interference.
- Lower Transaction Costs: Cryptocurrency transactions often come with lower fees and faster processing times, making them an attractive option for high-value international deals.
Looking Ahead: Milan and the Future of Real Estate
At the upcoming International MLS Forum in Milan on October 7-8, industry leaders will gather to discuss the future of real estate technology and how it will reshape the global property market. I am excited to be part of the Emerging Technologies panel, where we will delve deeper into how blockchain, AI, and other innovations will transform international real estate. Here are some of the questions I plan to explore with other International attendee’s in Milan.
- How can blockchain technology provide greater transparency and security for international buyers?
- What role will digital currencies play in circumventing capital controls and enabling faster cross-border transactions?
- How can AI and big data personalize the property search process for foreign buyers, and what market insights can they offer?
- What role can the EB-5 program play in solving U.S. housing shortages, and how can EDCs advocate for its revitalization?
ABOUT THE AUTHOR
Vanessa L. Saunders, MBA MIMC Founder, CEO, and Principal Broker of Global Property Systems
Vanessa is recognized internationally for her expertise in blockchain, frequently teaching and presenting on its use in real estate. This October 7 and 8, Vanessa is speaking at the 2d Annual MLS International Forum in Milan, Italy. https://mlsforum.org/
For more information or to connect with Vanessa, visit Global Property Systems
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