The soaring condo towers added in recent years to Boston’s skyline were not only a testament to the city’s economic strength. International investors saw them as a symbol of the region’s growing status as a global hub and place to park capital.
But international buyers, a key ingredient in new downtown condo projects, have pulled back in the past few years.
Should the average local home buyer even care?
“For a typical buyer in the suburbs, it doesn’t really matter,” said Aaron Jodka, managing director at Colliers International. “There’s favorable financing, and the fundamentals of single-family housing remain relatively less impacted from COVID than other spaces. But that’s not to say housing is affordable. We still have those challenges.”
Coronavirus has pushed many potential home buyers to the suburbs in pursuit of social distancing-friendly backyards and enough bedrooms to house a home office — or two.
International buyers wouldn’t typically pursue the kind of suburban houses coming back into style after years of millennial and empty-nester migration into the city.
“When you get into the high-end condo market in the city, that’s where you tend to see a higher share of international buyers, whether for students or just a place to place capital and own in a global city like Boston,” Jodka said.
Boston isn’t the only US market to see a drop in international interest in condo or apartment buildings. Overall international investment volume in multifamily projects across the United States is down 44 percent compared with last year, according to Real Capital Analytics.
The pullback is a departure from real estate anecdotes in recent years across the country of international buyers gobbling up condos well ahead of a project’s completion.
Millennium Partners’ Millennium Tower in Downtown Crossing was a highly popular project for international buyers around the world, especially China. But the tides have turned in the past few years — and it isn’t all due to coronavirus.
“I tend to think the presidential election might matter more than a virus cure,” said Jason Gell, president of the Greater Boston Association of Realtors. “The people buying these properties are more farsighted than a one- or two-year search for a vaccination.”
Gell, who is also president of brokerage company Boston’s Luxury Properties, works with a client base of international buyers typically looking for condos for their college-aged or post-graduation children and even “sometimes for kids not even born yet,” he added with a laugh.
But those clients are favoring renting over buying lately due to so much uncertainty in the world surrounding travel restrictions.
Others said, however, that the diminished presence of foreign buyers has more to do with the ever-increasing cost of housing in Boston.
The average condo sales price during the second quarter of 2020 in the Seaport was a hefty $1.8 million — which was actually down more than 31 percent from the same time in 2019, according to Warren Residential.
“At some point, the investment doesn’t make sense on a return [to an international buyer],” said Sue Hawkes, managing director at the Collaborative Cos. “I don’t think they’re boycotting coming here to buy because they don’t like Trump. I think it’s truly a financial decision.”
Luxury condo closings in Boston’s urban core dropped 72 percent and 75 percent in May and June, respectively, before actually increasing by 3 percent in July, according to a TCC report.
The most robust activity has been with properties priced below $1.5 million, while those over $2 million take longer to sell, Hawkes said.
But the ultra-luxury condo buyer market is now largely comprised of local buyers, often empty nesters looking to downsize — and it may take a few more months of the stabilizing seen in July to get more demand back.
“There’s no sense of urgency for people who are empty nesters to buy unless they have immediate issues needing to be on one level or are already living here in Boston,” Hawkes said. “Outside of that, they’re comfortable waiting and feel comfortable where they are. There’s a lot of uncertainty out there. People don’t make life decisions amid uncertainty.”