Arizona is among the top 10 destinations for foreign buyers purchasing residential real estate, according to a report by the National Association of Realtors.
And the vast majority of Arizona’s foreign buyers — at a whopping 60% — are Canadians.
NAR’s 2024 Profile of International Transactions in U.S. Residential Real Estate covers Realtor transactions with international clients who purchased and sold U.S. residential property during the 12-month period between April 2023 and March 2024.
Arizona ranked No. 4 for real estate investment in the country during that period, with 5% of all foreign buyers looking to the Grand Canyon State for purchases.
Even so, the number of existing homes purchased by foreign buyers during that time period decreased to 54,300 — the lowest level since NAR started tracking foreign buyer purchases in 2009. This represents a 36% decline from the prior period, or 30,300 fewer buyers.
The dollar volume of foreign buyer purchases also decreased to $42 billion, a 21.2% decrease from the prior period.
Canadians rank No. 1 for US investments
Overall, Canada is the top foreign buyer of U.S. residential real estate, representing 13% of foreign buyers totaling $5.9 billion in transactions, according to the study.
China and Mexico account for 11%, with India at 10% and Colombia with 4% of foreign buyers.
Glenn Williamson, CEO and founder of the Canada Arizona Business Council, said Canadian buyers who sell their Arizona properties usually come back to reinvest.
“Canadians are now paying a 43% tax [rate] in Canada,” Williamson said. “A lot of them like to have a second home down here. It’s not just the seniors that come down and spend money.”
A whole new generation of younger entrepreneurs are now opening small businesses in Arizona with 10-30 employees, he added.
Total trade between Arizona and Canada surpassed $5.3 billion in 2023, according to the Arizona Commerce Authority. A Canadian trade office opened in May to bolster ties between Arizona and its second-largest trading partner behind Mexico.
An estimated 500 Canadian companies operate in Arizona, including Bank of Montreal – through its U.S. subsidiary BMO Bank NA – along with Circle K and Cold Stone Creamery. As for recent investments, Montreal manufacturing firm Xnrgy broke ground in Mesa for its U.S. headquarters in April.
Williamson, the former Honorary Counsel of Canada in Arizona, said he’s noticed an increase in international flights since the coronavirus pandemic stalled international travel four years ago.
Canada’s overall passenger levels and air service recovery is a year behind the U.S., but Phoenix continues to lead the way with passenger demand recovery and scheduled capacity, said Alexandria Van Haren, air service development manager for Sky Harbor International Airport.
For the 12 months ending July 2024, Phoenix’s traffic demand to and from Canada is 4.2% below 2019 levels as compared to the U.S. overall average that is down 8.5% from 2019, she said.
Phoenix’s demand compared to 2022 is up 43.35%, she said, citing Sabre Global Demand Data.
“As the Canadian market continues to recover, the amount of capacity the airlines are putting in the Phoenix market is strong,” she said. “The amount of seats for sale this winter is 8% more than winter 2019.”
Foreign real estate buyers prefer all-cash deals
While a good number of Canadians enjoy Arizona, the overall top destination of all foreign buyers is Florida, with 20% of all foreign buyers purchasing in the Sunshine State, followed by Texas, California and Arizona, according to the study.
Despite elevated mortgage rates, pent-up demand and low available housing inventory, U.S. median home prices have remained strong — even increasing on a year-over-year basis, according to the study.
The median purchase price among foreign buyers was $475,000, which is higher than the median price of $392,600 for existing homes sold in the U.S. from April 2023 through March 2024 as well as the median purchase price the prior year, according to the study.
Looking more closely at the luxury market, 18% of foreign buyers purchased properties worth more than $1 million during that time period.
Another trend worth noting: Cash is king among foreign buyers.
More than two-thirds of Canadian (69%) and Chinese (68%) buyers made an all-cash purchase, compared with 44% Mexican and 42% Colombian buyers.
Of the foreign buyers who purchased properties in the U.S., 45% use the property as a vacation home, rental property or both, which is 5% less than last year.
Canadian buyers were the most likely to purchase a home for vacation use, at 49%, while Asian Indian buyers were most likely to purchase a home for primary residence use, at 66%.
Meanwhile, Mexican, Chinese and Colombian buyers were more likely to purchase a home for student use.
While this study represents transactions between April 2023 and March 2024, today’s metro Phoenix housing market is in balance — something that hasn’t happened since 2014, according to The Cromford Report.
The August median home price in metro Phoenix is $445,000, up from $438,000 in August 2023, according to that report.
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