UPDATED: JUNE 24, 2016 3:34 PM — British developers, real estate brokers and investment advisors based in Greater Orlando scrambled Friday morning to react to Great Britian's vote late Thursday to leave the European Union, and the effect that would have on Orlando-Kissimmee's no. 1 foreign buyer of area homes.
Following the Brexit vote, the pound sterling's exchange rate hit a 31-year low against the U.S. dollar (US$1.36 to GBP1 Friday afternoon).
Omar Andraesen, real estate agent with The A Team Orlando, a brokerage under Keller Williams Classic Realty, actively recruits international buyers and was conferencing Friday morning with his A Team agents in London.
There's uncertainty abound over how much more the pound sterling could reduce in value, and how inflation may affect the British economy. He said his team reported multiple British buyers with homes under contract in Turkey called to cancel the deals Friday.
"We think it could be six months to a year until the situation stabilizes there, until people are confident in making investment purchases here or coming over (to Orlando) for their holidays," Andraesen said.
The United Kingdom's rank among foreign homebuyers for Florida as a whole has decreased over the past decade, but at the same time has concentrated heavily in the Orlando-Kissimmee market.
For June 2014-June 2015, the latest annual data available from Florida REALTORS, U.K.-based buyers made up just 5 percent of international home buyers in the state, down from a leading 21 percent in 2008, as buyers from Latin America have steadily increased their market share in recent years.
However, while buyers from Brazil, China, Canada and Latin America heavily favored South Florida or the Gulf Coast for residential investments, British buyers were the lone group last year to heavily focus in Orlando-Kissimmee, with 44 percent of their purchases made locally. The U.K. accounted for 28 percent of foreign homebuyers in Greater Orlando last year, leading all international groups.
Garrett Kenny, CEO of Davenport-based The Feltrim Group, a developer of vacation homes in ChampionsGate and Reunion Resort that recruits buyers primarily from China and Great Britian, said it may take a few weeks for British real estate players to see how the currency and markets respond to the news. But he's on edge due to all the variables that could lead the area's biggest foreign homebuyer group to turn cold.
"I am concerned because we just completed a deal with a major UK agent who had agreed to take 25 homes in our Balmoral development," Kenny said via email while traveling in China, referring to Balmoral at Waterfront, a new 245-unit vacation home resort in Haines City. "He reckons if the pound sterling stabilizes around US$1.40 (today it dropped to US$1.34) we should be good with our deal.
"He and I also see this as an opportunity, as some investors may decide to put more of their cash into U.S. assets," Kenny continued. "And where better to invest than in real estate in Central Florida."
That drastic drop in the pound sterling's value overnight has the potential to halt real estate purchases for British buyers who were currently in the closing process and had yet to transfer funds, or didn't lock in a rate through a forward-looking contract with a group like Moneycorp, said Kelly Cutchin, U.S. manager for the U.K.-based wire transfer firm, which has its North American office in Orlando.
"This morning I'm seeing a whole lot of happy (British) people who sold their properties here over the past few months and decided at the time not to convert their proceeds back into pounds," said Cutchin, who is also chairman of the Global Real Estate Council of Orlando. "Those people are now booking those transactions today as fast as they can to get their money back into pounds."
In the short term, prospective British buyers are likely on hold until the currency stabilizes, however many weeks or months that may take, she said.
Long term, Cutchin sees the British economy stabilizing, a process that could take up to two years for a complex withdrawal process from the European Union. But Brits are not typically drawn to converting their funds to U.S. dollars when the rate is below US$1.50, she said.
There may be a minority of investors that opt to move savings into a safehaven currency like the dollar, but until the pound regains its strength, mid- and entry-level investors will be advised to sit on funds.
"My suggestion for realtors today is to contact every British customer they sold a property to in recent years and find out if they're interested in selling," she said. "They'll make a huge return on their investment just in the exchange rate moving in their favor (with a weaker pound), not to mention we know inventory is low in Orlando right now, so they shouldn't have trouble selling it."
Short-term uncertainty in Britian's economy could draw international real estate investment funds out of that country and to perceived safehaven markets in the U.S., though Orlando may not be the first to benefit, said Brad O'Connor, chief economist at Florida REALTORS.
"A significant amount of London real estate is foreign-owned, Chinese and Middle Eastern money, so that may move and U.S. markets may be a destination for it," he said. "Orlando on the commercial side may be attractive for large foreign investors, but they likely won't turn there until more popular markets like Miami seem overpriced and out of reach."
U.K. buyers spent an average of $289,600 on Florida homes bought last year, the lowest mean price among seven foreign buyer groups tracked by the state realtor association. However, they ranked second after Canadians with the highest level of all-cash purchases, at 82 percent.
British buyers were more likely than any other foreign group to use their Florida property for vacation or rental, at 81 percent of documented sales, compared to an average of 66 percent among all foreign buyers. U.K. buyers favored properties in a resort setting last year, and bought more single-family detached homes than other product.
Don Wherrett, British national and president of Davenport-based Contempo Group, a real estate brokerage and vacation home manager that has partnered with developers like Feltrim Group and Park Square Homes, said he expects to see a slowdown from British homebuyers in the short term, but believes Orlando-Kissimmee's market dynamics will draw back vacation home investors.
"In defense of those owners, they've gone through a situation where the nightly rates for rental homes here were too low for too long," he said. "But now supply and demand is improving, rates are increasing. Ten years ago I was probably renting a four-bedroom home for an owner at $80 per night, now it's up to $120 gross figure, and on its way to $150."
There are more than 14,000 British owners of short-term rental homes in the Greater Orlando market, based on analysis by the Central Florida chapter of the Florida Vacation Rental Managers Association, which Wherrett founded in the early 1990s.
In April, Orlando was named the fourth best market for real estate investing in the United States for the first quarter of this year, the top Florida city among 10 ranked nationally by HomeVestors and Local Market Monitor.