A White Paper for the Research Division of the NATIONAL ASSOCIATION OF REALTORS®

By Frederick E. Flick, Ph.D.

Real Estate Economics Consultant and

Lawrence Yun, Ph.D.

National Association of REALTORS®

Preface

Any recent media report about labor markets, the financial sector, or trade is likely to include at least a mention about the “globalization” of the worlds' economies. That globalization applies to housing as well.

NAR Research regularly reports on the level of foreign investment in U.S. real estate. Recently the Association has begun a series of surveys to determine the level of home-buying activity in the U.S. by non-U.S citizens or part-time U.S. residents (non-immigrants) whose primary home is in another country. Gathering data for these reports is relatively easy – there are public records of foreign companies purchasing stock in U.S. real estate companies, and NAR has developed the capability to survey its members relatively quickly about their experience with home buyers from other countries purchasing a U.S. property. With the U.S. dollar valued lower against many foreign (particularly European) currencies, the trend of foreign purchases of and investment in U.S. real estate is a trend that will probably continue for quite a while.

But the trend of Americans purchasing foreign real estate is not as easily discerned. The data is difficult to gather. Most REALTORS® do not broker properties located in another country. Other national (non-U.S.) real estate professional organizations – many which of which have cooperative agreements with NAR – do not necessarily survey their members about their business with American buyers of homes outside the U.S. While the U.S. Census Bureau, in its regularly scheduled surveys of all households residing in the U.S., does ask whether or not the household lives in a rented or owned domicile, it does not inquire whether or not the household owns a foreign-based property. Additionally, concerns about the number of and locations where Americans have purchased a foreign-based home raises issues of privacy and security.

To begin to answer the question – what is the level of foreign-home buying activity by

U.S. citizens and permanent residents – NAR commissioned a study to look at indirect measurements of those Americans moving, working and/or living abroad and whether or not they purchased a residential property in foreign countries. This report is just the start of a process to measure that level of home buying by Americans abroad. Although it does not provide direct, clean statistics on such activity, we hope this report does provide some approximations on the prevalence and direction of activity (increasing or decreasing) of home-buying by Americans in various foreign locations.

Introduction

Donald Trump is building condos to sell to Americans in Baja California (Mexico). In that same country, the Lake Chapala area near Guadalajara has been a popular retirement area for Americans for decades. Recently, condos in Costa Rica have become popular, as have as villas in Tuscany and the south of France. Even properties in the Balkans have become short-stay vacation residences for many Americans. Exclusive real estate property listing magazines such as Sotheby’s International and real estate ads in The Wall Street Journal promote properties in places from Morocco to Patagonia. All this is evidence that for many, owning a home abroad is as much a part of the “American Dream” as is owning a home in the U.S.

Given the apparent rise in international real estate transactions by U.S. citizens, the National Association of REALTORS® commissioned an investigation to determine what if any measures exist on the number of residential homes in foreign countries purchased by Americans.

The project also specified that several possible indicators of trends in this activity should be examined. These included U.S. State Department data on the numbers of Americans living abroad, Social Security Administration data on the number of American retirees collecting Social Security benefits abroad, and Internal Revenue Service statistics on the number of tax returns claiming the housing exclusion based on foreign-earned income.

This white paper looks at those indicators and analyses and discusses the issues and challenges involved in measuring American foreign-home buying trends. As part of this study, several experts on publicly available housing data were consulted. The organizations they represented included the New York Federal Reserve Bank Research Department, the Federal Reserve Board of Governors International Flow of Funds Section, the U.S. Department of State Consular Affairs Bureau, the Statistics of Income Branch of the Internal Revenue Service, and the Social Security Administration’s Policy Statistics Branch.^*

Finally, a Google search of private property listing sites on the Web suggested that while there are many online sources of information on buying properties in various foreign countries, neither they nor the three sources cited above provide any statistics measuring the aggregate numbers of properties owned by Americans (stock currently owned), or the flow of homes (sales volume trends) sold to Americans over a recent period.

Conclusions from the Research

It will always be difficult to accurately measure the stock or flow of foreign homes owned/purchased by Americans. This is because individuals can purchase property abroad and they do not necessarily file forms with the IRS or any government entity regarding these purchases. At this point, it is not known whether any foreign countries collect data on American real estate ownership or whether they have data processing systems that can produce any estimates. But even though there are no available official figures for the number of homes or vacation properties Americans have purchased in foreign countries, we can make some estimates based on an examination of the data from the State Department, the Social Security Administration and the IRS.

* The Bureau of the Census was also asked whether it had any measures of foreign-home ownership by Americans; unfortunately, the Bureau does not currently collect such information.

The most accurate potential source of information about American home purchases abroad on a country-by-country basis is the IRS Foreign Earned Income schedule, Form 2555, that is filed with the Form 1040. Form 2555 includes a line asking the filer whether he/she purchased a home abroad. Data from the U.S. State Department is also worth examining, as the department maintains records on the number of Americans living and working (even part-time) abroad. The Social Security Administration's (SSA) record-keeping includes information about the number of beneficiaries who receive SSA checks and where those checks are mailed.

A set of simulated estimates of potential housing purchases were constructed from the three data sources using known American rates of homeownership, household sizes, and a Census Bureau staffer’s estimate of the number of American retired workers living overseas. The figures varied widely by data set and essentially cover distinct segments of the market of possible American foreign property buyers. (Note: for purposes of this study, “Americans” includes U.S. citizens as well as those classified as “permanent” U.S. residents who may not be citizens.)

 Americans living abroad. An evaluation of the data series that were analyzed suggests that there were possibly as many as 500,000 to 600,000 foreign properties owned by Americans living abroad.

 American retirees living abroad. Analysis of retired American workers living abroad suggests their ownership rate is likely to be in the range of 54,000 to 63,000 properties.

 U.S. workers working abroad. Examination of Americans working abroad and filing Form 2555, suggests that their foreign-home ownership rates are probably in the range of 80,000 to 100,000.

Comparison of the estimates from the retirees (based on Social Security data) and those working abroad with the State Department base, suggests that domestic demand for vacation and short-stay foreign properties may be in the range of 370,000 to 440,000 units.

Overall, the latter two segments suggest approximately 150,000 foreign properties owned by retirees and Americans working in a foreign country.

One segment not explicitly analyzed was the number of Americans residing in the U.S. who own properties in North American, Caribbean or Central American countries. This is likely a substantial number given the easy access to countries in these regions through air transport or even automobile. These figures could substantially exceed the estimates for the last two segments.^*

* Unfortunately, even the Census Bureau cannot answer any questions regarding foreign properties owned by U.S. residents. There is currently no question on the Census Form addressing this. And while the National Association of REALTORS® conducts a regular survey on vacation/second-home purchasers, its study focuses on domestically owned properties.

Americans Living Abroad: A Baseline Measure

As part of the initial investigation, a general search of the Internet was undertaken seeking information on Americans buying homes abroad. This work uncovered a set of estimates of the number of Americans living abroad by country. A Geneva, Switzerland-based organization for Americans abroad provided a 1999 list, sourcing the “U.S. State Department Website.”¹ This file contains the most recently published figures on the number of Americans overseas and provides a baseline; however, no further data exists to determine a trend. A search of the State Department website turned up no similar information. Conversations with the State Department's Public Information Counselor Affairs section revealed that after the events of September 11, 2001, these statistics were no longer compiled in a public database for security reasons.

The 1999 figures are estimates and enumerate, by country, the number of American citizens living or working in foreign countries, including U.S. government employees and military personnel stationed abroad. It is important to note that these figures do not differentiate among these three groups. It is most likely that the demand for owner housing abroad is strongest for those who are private citizens, as they usually have to provide their own housing. But, there are Americans whose primary residence is in the U.S. and who spend time abroad working. They are more likely to have foreign residences as part-time or vacation properties. It is also likely that the State Department data do not reflect many of these individuals. Nevertheless, the State Department figures provide some base for honing in on those countries where Americans have been and may be likely to purchase homes.

Table 1 shows that just over one-half of Americans living abroad in 1999 were located in the Americas – Canada, Mexico, Central America, South America, and the Caribbean islands. Europe was next with 28%, followed by Asia/Pacific at 12%.

Table 1. American Citizens Living Abroad By Major Region: 1999

Region	U.S. Citizens in Country	% of All U.S. Living Abroad
Americas Europe Asia/Pacific* Middle East Africa Total World	2,113,295 1,169,438 517,800 295,645 67,632 4,163,810	50.8% 28.1% 12.4% 7.1% 1.6% 100.0%

*includes Australia as well as Oceania Source: U.S. State Department, July 1999

Americans seem to like to stay close to home. Table 2 lists the estimates for the top 10 countries, the cumulative total and percentages. In 1999, Mexico accounted for about 25% of all Americans living abroad, with Canada a distant second at 17%. Note that the numbers and percentages drop off dramatically after Mexico and Canada. The United Kingdom (England, Scotland, Wales, and Northern Ireland) is ranked third at just over 5%, with Germany accounting for about the same percentage of American residents. Israel and Italy comprise 4% each. Finally, the Philippines, Australia, France, and Spain each claim about 100,000 residing Americans with percentages ranging from 2% to 2.5%. In the rest of the world, the percentages drop to 1% or less for other countries.

Table 2. American Citizens Living Abroad

Top Countries: 1999
U.S. Citizens		% of All U.S.
Country/Region	in Country	Living Abroad
Mexico	1,036,300	24.9%
Canada	687,700	16.5%
United Kingdom	224,000	5.4%
Germany	210,880	5.1%
Israel	184,195	4.4%
Italy	168,967	4.1%
Philippines	105,000	2.5%
Australia	102,800	2.5%
France	101,750	2.4%
Spain	94,513	2.3%
Total of Top 10	2,916,105	70.0%

Chart 1 visually depicts the predominance of Mexico and Canada in terms of American foreign living locations.

Chart 1. Top Ten Foreign Countries (percentage distribution of Americans living abroad)

In the Caribbean, Central and South American areas, the Dominican Republic accounted for 2% of Americans living abroad, followed by Brazil at 1%. Colombia and Argentina each accounted for 0.7%, Venezuela 0.6%, Costa Rica and Panama each one-half of a percent, and Peru only registered one-third of a percent. Within Europe, Greece claimed 1.7% of Americans living abroad, followed by Ireland at 1.1%.

In Asia, ranking below the Philippines and Australia, was Japan with 1.7%, followed by China at 1.6% and Taiwan with 0.9%. Israel accounted for 4.4% of Americans living abroad, but other countries in the Middle East reported lower percentages: Saudi Arabia less than 1%, the United Arab Emirates and Yemen at 0.4%, and Lebanon, Jordan, Kuwait, and Turkey at 0.2%. South Africa led the African region with almost 11,500 Americans, accounting for 0.3%, with Egypt close at just under 11,000, about 0.3%. Nigeria followed at 0.2%, but the remaining African nations were at most about 0.1% of all Americans abroad. (More detail can be found in the Appendix tables at the end of this report.)

Analysis of Social Security Administration Beneficiaries

Most Americans anticipate receiving Social Security retirement benefits when they retire in their 60s or 70s. It is also the case that legal aliens who pay Social Security taxes are allowed to collect Social Security benefits when they retire. Table 3 shows the top 25 countries where these benefit checks are sent. The most recent data available is for December 2005. The data are taken from the Annual Statistical Supplement of the Social Security Bulletin which reports the total number of beneficiaries, retired worker beneficiaries, as well as the number receiving disability benefits, widowers’ benefits, and child beneficiaries.² We have reproduced the data for all beneficiaries and retired worker categories only. Not surprisingly, retirees are the largest group among all beneficiaries and the benefits largely accrue to that group.

Table 3. Top 25 Countries by Number of Social Security Benefit Recipients Living/Working Abroad- December 2005

All		Retired	Pct. All	Total	Pct. Retired	Total
Beneficiaries		Workers	Beneficiaries	Percent	Workers	Percent
All countries	441,693	263,387	100.0%		100.0%
Canada	100,747	59,022	22.8%	22.8%	22.4%	22.4%
Mexico	47,384	22,973	10.7%	33.5%	8.7%	31.1%
Italy	33,865	20,010	7.7%	41.2%	7.6%	38.7%
Germany	33,448	20,837	7.6%	48.8%	7.9%	46.6%
U.K.	30,210	18,884	6.8%	55.6%	7.2%	53.8%
Greece	22,640	13,416	5.1%	60.7%	5.1%	58.9%
Philippines	19,309	9,165	4.4%	65.1%	3.5%	62.4%
Portugal	12,050	8,243	2.7%	67.8%	3.1%	65.5%
France	10,661	6,930	2.4%	70.3%	2.6%	68.1%
Spain	9,875	5,817	2.2%	72.5%	2.2%	70.4%
Israel	8,571	4,879	1.9%	74.4%	1.9%	72.2%
Ireland	8,518	5,738	1.9%	76.4%	2.2%	74.4%
Japan	7,972	3,980	1.8%	78.2%	1.5%	75.9%
Australia	6,656	4,310	1.5%	79.7%	1.6%	77.5%
Dom. Repub.	6,503	4,270	1.5%	81.1%	1.6%	79.2%
Switzerland	6,435	4,367	1.5%	82.6%	1.7%	80.8%
Norway	6,432	3,820	1.5%	84.1%	1.5%	82.3%
Poland	5,268	3,607	1.2%	85.3%	1.4%	83.6%
Netherlands	4,407	2,798	1.0%	86.2%	1.1%	84.7%
Costa Rica	3,540	2,418	0.8%	87.0%	0.9%	85.6%
Sweden	3,464	2,287	0.8%	87.8%	0.9%	86.5%
Colombia	3,301	2,427	0.7%	88.6%	0.9%	87.4%
Argentina	3,221	2,052	0.7%	89.3%	0.8%	88.2%
Jamaica	2,724	2,182	0.6%	89.9%	0.8%	89.0%
Austria	2,452	1,559	0.6%	90.5%	0.6%	89.6%

Source:Table 5.J11, Annual Statistical Supplement 2006, Social Security Bulletin, 2006.

Examining the 2005 data, we find that the top 25 countries, by all beneficiaries and retired workers categories, account for 90% of all recipients in those groups. Canada and Mexico account for almost one-third of all beneficiaries living abroad. The percentage rises to 54% when including Italy, Germany, and the U.K. Finally, the Philippines, Portugal, France and Spain push the cumulative percentage total to around 70%; and, Israel and Ireland bring it to 75%.

Similar to the results from the State Department data in which the top five countries account for slightly more than half of all Americans living abroad, the the top five countries comprise about 50% of all Social Security beneficiaries, and another seven countries raises the cumulative to 75%. Canada and Mexico are the top countries in terms of Social Security beneficiaries, followed by Italy, Germany, and the U.K. (Interestingly, the top 5 countries in terms of residence also included Mexico, Canada, the U.K. and Germany.)

Charts 2 through 4 graphically depict the trends for all beneficiaries and retired workers, in aggregates and on a country-by-country basis. For the most part the relationships are linear with a slight positive slope, reflecting gradual increases. There have not been any dramatic changes in the figures over the period 1999-2005. Canada and Mexico are by far, the top locations. However, these numbers and locations could show significant change in a few years as the number of baby-boomers – who are affluent and have traveled more extensively – retire.

9

Over the past decade, private ownership of housing has dramatically increased around the world, with many countries experiencing ownership and building booms. Housing in many of western European countries is expensive, relative to that in other foreign countries and to the

U.S. national median home price. But housing in a number of countries on this list are quite affordable when compared to the price of homes in large U.S. metropolitan areas. A retiree who has worked for years in the U.S. and owned property could easily afford to relocate to Mexico, Canada, and southern and eastern Europe.

Analysis of Internal Revenue Service Data

Those Americans with jobs located abroad and who are residing overseas do not have to pay taxes on foreign earned income; however, they are required to file a 1040 return. Along with the 1040, they file a Form 2555, Foreign Earned Income.

Under U.S. tax law, citizens and resident aliens living and working abroad can exclude a certain amount of foreign earned income and foreign housing costs exceeding those provided by an employer. For those who are self-employed, a housing deduction can be taken above a certain base housing cost. An individual has to have a foreign tax home, which usually means the taxpayer has established and maintained residence in a foreign country for an uninterrupted period that included an entire taxable year.

Foreign-earned income includes the standard components (wages and salaries, consulting fees, etc.) as well as employer-provided allowances, overseas compensation differentials, quarters, education allowances, and the full rental value of property or facilities provided by an employer. Allowable housing expenses for the most part include rent, utilities, property insurance, lease fees, and household repairs. However, they do not include interest and taxes, the cost of buying or improving a home/property, mortgage principal payments, or depreciation of the home. These limitations on deductions do not favor home purchasing.

Among various questions about the employer and foreign residency period, Form 2555 contains a blank for the name of the country and a check-box to indicate whether the housing deduction is related to ‘purchased house’, rented property, or employer-provided housing. There is also a question asking whether the taxpayer maintained a home in the U.S. while living abroad.

The Internal Revenue Service publishes analyses of its tax return databases in the Statistics of Income Bulletin ^3,4,5 and provides downloadable summary data for many of its tax schedules. A major limitation of this data is that these results are available only at five-year intervals. This is because the databases are very complicated and database creation takes years to complete before analysts can start ‘mining’ the results. The available databases cover only the four tax years: 1987, 1991, 1996, and 2001. The 2006 tax year file data will be available in 2009.

Obviously, the IRS data should be further investigated as a future source of information about Americans who have purchased homes or own homes abroad. A request to the Internal Revenue Service for a special detailed cross-tabulation of data on Form 2555 would be needed in order to perform specific technical analysis. A detailed tabulation frequency by country for those filers who checked ‘purchased house’ could provide some useful information. Unfortunately, this information is not publicly reported and would have to be obtained through special computer tabulations by the IRS. This requires a Freedom of Information Request and would take several months or perhaps longer to process.

This specially tabulated data would provide estimates of the flow of housing purchases for Americans who are earning income abroad through working; however, it would not cover home purchases by Americans who work and reside in the U.S. and have purchased a foreign property; or, retirees who purchased a home overseas and still live in the U.S. Another limitation of the data gleaned from Form 2555 is that it only indicates that a taxpayer was living overseas for a tax year and lives in a purchased home. But that home could have been purchased earlier, so such a tabulation would measure only a year's worth of information that does not tell us much about either the stock of houses purchased over a period of time or the flow of purchases in a particular year.

Form 2555 Country-by-Country Data

We can, however, examine the aggregate use of the deductions for the latest year data is available. In tax year 2001 there were 130,255,237 individual tax returns filed with the IRS. Of these, 294,763 filers – 0.2% of all returns --submitted a Form 2555 with their 1040. Table 4 presents data from the 2001 Form 2555. The table shows, for the top 28 countries, the number of returns filed and average amounts of the foreign income earned. The countries are ranked by percentage of returns with Forms 2555 filed. [Note, the IRS does not provide the number of returns filed claiming the income exclusion, housing exclusion, or housing deduction on a country-by-country basis. This is likely due to sample size considerations on an individual country basis.]

Europe and Asia accounted for almost 70% of the Form 2555 filings. The percentage increases to 80% when one includes North America. Foreign income earned was about $100,000 in Europe and Asia.

On an individual country basis, most Americans earning foreign income were working in the U.K. (11.3% of all filers), followed by Canada (8.4%), Japan (8.3%), with Germany (7.9%) close behind. Hong Kong is 5^th on the Form 2555 list (accounting for 4%), most likely for international business reasons. France (3%), Israel (2.9%), and Australia (2.7%) are also well ranked, and Saudi Arabia-based filers accounted for 2.5% of all Form 2555 filers. All of these countries taken together pushed the cumulative percentage figure to 51.4%. Switzerland, Taiwan, and ‘other Asian’ contributed 2.4%. But unlike the rankings based on the State Department and Social Security data, Mexico was in 13^th place (at 1.9%), Italy (1.5%) was ranked 20^th with the Philippines and Spain only 1%. Obviously, the rankings are following the top international business locations. Three of the top five top countries on this ranked list – the U.K., Canada and Germany – are similar to the top five in the previous analysis.

In 2001, of the 294,763 filers submitting foreign-earned income, 292,615 took the foreign earned income exclusion; the average foreign-earned income exclusion was $48,097. However, only 64,349 taxpayers filed for the housing exclusion which averaged $29,765 per filer and totaled $1.915 billion for all who took the exclusion. For the housing deduction only 4,186 filed (for a total of $92.1 million) with the average amount $21,996. The end result was that approximately 55% of those who claimed the foreign-earned income and housing exclusion, or housing deduction, or any foreign tax credit (Form 1116) had no U.S. income tax liability.

Table 4: Number of 2001 Form 2555 Filers by Top 31 Countries and Average Foreign Earned Income

Number		Percent	Cum.	Avg. For.
Region/Countries	of Returns	of All	Percent	Earn. Inc.($)
All Areas	294,763	100.0%		$93,024
Europe	105,590	35.8%	35.8%	$100,488
Asia	98,037	33.3%	69.1%	$101,815
North America	30,493	10.3%	79.4%	$77,350
South America	15,307	5.2%	84.6%	$80,224
Oceania	11,521	3.9%	88.5%	$64,616
Africa	10,661	3.6%	92.1%	$63,731
Caribbean	5,525	1.9%	94.0%	$86,203
United Kingdom	33,344	11.3%	11.3%	$165,449
Canada	24,790	8.4%	19.7%	$72,023
Japan	24,578	8.3%	28.1%	$93,141
Germany	23,432	7.9%	36.0%	$52,461
Hong Kong	12,476	4.2%	40.2%	$139,000
France	8,975	3.0%	43.3%	$82,714
Israel	8,491	2.9%	46.2%	$61,039
Australia	7,864	2.7%	48.8%	$75,046
Saudi Arabia	7,449	2.5%	51.4%	$112,479
Other Asian	6,977	2.4%	53.7%	$80,208
Taiwan	6,840	2.3%	56.1%	$72,236
Switzerland	6,370	2.2%	58.2%	$99,780
Mexico	5,571	1.9%	60.1%	$102,856
China	5,103	1.7%	61.8%	$140,248
South Korea	4,885	1.7%	63.5%	$92,637
Singapore	4,624	1.6%	65.1%	$185,018
Brazil	4,466	1.5%	66.6%	$88,717
Italy	4,301	1.5%	68.0%	$67,730
Unit. Arab Emir.	4,100	1.4%	69.4%	$90,334
Netherlands	3,926	1.3%	70.8%	$90,057
Thailand	3,368	1.1%	71.9%	$110,463
Philippines	3,266	1.1%	73.0%	$56,425
Belgium	3,121	1.1%	74.1%	$94,674
Spain	2,874	1.0%	75.0%	$59,546
New Zealand	2,569	0.9%	75.9%	$41,953
Indonesia	2,519	0.9%	76.8%	$128,328
Egypt	2,403	0.8%	77.6%	$80,665
Venezuela	2,281	0.8%	78.4%	$85,257
India	1,906	0.6%	79.0%	$70,199
Russia	1,816	0.6%	79.6%	$123,687
South Africa	1,626	0.6%	80.2%	$74,040

Source:Statistics of Income Bulletin, 2006.

Examining the amounts of income earned, we see that most of those earning foreign income earn at least in the six-figure range. Charts 5 and 6 present trends in the number of Form 2555 filers and average foreign earnings by region. As indicated above Europe and Asia, by far, are the top locations and provide the highest incomes.

Conclusions from the Form 2555 Data

We need to be careful in assessing the overseas home purchase potential of these households. The figures represent those who are currently making high incomes overseas and many of whom receive housing allowances from employers. Nevertheless, those in lucrative jobs such as finance, business consulting, and technology can afford to purchase property overseas. Analysis of Form 2555 data can provide estimates. However, the Form 2555 filers likely comprise a small subset of American foreign-home buyers.

In addition, while many Americans may live and purchase property overseas, they may not necessarily earn foreign income. For these households, any purchasing decision is probably driven less by a foreign employment situation than by a desire for a location. Also, some countries where the earnings are most lucrative may not be the most culturally comfortable for many Americans.

Estimating the Stock of American Owned Homes Abroad

Based on the data discussed above, we suggest a procedure to derive a range of initial estimates regarding the stock of homes owned abroad by Americans. This process will generate a baseline set of figures that can be used as ‘ball park’ comparison measures. It will have obvious limitations, but it may be useful as a ‘first-cut’ effort until we obtain more data.

A Summing Up

Table 5 provides estimates under various homeownership rate assumptions. The estimates have been rounded to emphasize the relative magnitudes. We are using a low homeownership rate of 40%, along with the relatively current U.S. homeownership rate of 68%, and a higher rate for older homeowners. Household sizes for retirees are provided for ratios of 2 and 1.5 persons, respectively. The number of countries is most important for the State and IRS bases and we have selected the most reasonable assumptions there.

Table 5: Simulated Property Ownership Abroad Assumed Homeownership Rates

40% 68% U.S. State Dept. (1999) (Americans Abroad) Top 20 countries 527,000 896,000 All countries 641,000 1,100,000	80% 1,100,000 1,300,000
Social Security (2005) (Retired Workers) Household size: 2 24,000 40,000 Household size: 1.5 32,000 54,000	47,000 63,000
IRA SOI (2001) (Form 2555 filers) Top 25 countries 88,000 149,000 All countries 101,000 171,000	175,000 201,000
Source: Consultant Estimates

Examining the State Department overseas figures, depending on the assumed homeownership rate of Americans abroad, they suggest a very wide range of from 500,000 to

1.3 million properties. One obvious drawback of using this data is that much of the demand for foreign ownership will likely come from Americans who are not routinely abroad but purchase properties for vacation or short-stays. This group is not represented in the State Department figures. The State Department data also include Americans employed by the government, civilian and military. Because most of these individuals are not likely to purchase housing abroad , to some extent they can compensate somewhat for the missing domestic demand. But, that extent at this point is not knowable. The bottom line: we can conservatively estimate in the range of 500,000 to 600,000 potential properties owned abroad.

While the Social Security and IRS data are more likely to give us close estimates, they ignore large segments of the U.S.-based demand for foreign properties. On the conservative side, if retired workers abroad are about as likely to own as domestics, their ownership numbers probably are in the 54,000 to 63,000-property range, given the assumption of a small household size. Examining the IRS figures for this group of private sector workers, it is more likely that their ownership rates are more conservative, at best the national average. Many of these well-compensated households are receiving some housing subsidies and extra compensation to cover their living costs. In extreme cases, they are living in employer-provided housing, or housing developed by the foreign country to house Americans during their working period. This would argue for a conservative ownership rate parameter. At this point, an educated guess is that for this group, the ownership of property abroad probably is in the range of 80,000 to 100,000 properties.

Combining the optimistic range from the Social Security data and the conservative figures from the IRS data, the ranges suggest roughly 130,000 to 160,000 properties owned abroad by these segments. These estimates contrast dramatically with the State Department figures. What is most likely is that many Americans have a principal residence in the U.S., but are purchasing seasonal stay and vacation properties located in our closest neighbors. However, since many Americans, especially upper-middle income households, own multiple properties in the U.S., the likelihood of owning a similar property outside the U.S. borders has to be lower.

Accordingly, the conservative 500,000 to 600,000 figure from the State Department may be a good estimator of the total world ownership abroad by all Americans, with roughly 370,000 to 440,000 properties owned by Americans who have a principal residence in the U.S. These figures seem very reasonable, with roughly three-quarters of the foreign properties near the

U.S. and used primarily as second/vacation homes.

Limitations of the Analysis

Purchases in foreign countries have likely been occurring much more frequently over the recent decade of housing boom times and significant wealth accumulation by the Baby Boomer generation. However, there are large segments of the American demand for foreign property, which we cannot address with the above methodology.

We are also ignoring time-shares; they offer competition to individual ownership and provide an attractive short-stay/vacation option. Many time-shares are located in close-by foreign countries only a few hours away by airplane. However, without some very survey specific data we cannot be more accurate than this.

Our procedures provide no information on the flow of sales over time. Furthermore, the lack of contemporaneous time series for the three segments is a consistency limitation.

REFERENCES

1. American Citizens Abroad, http://aca.ch/amabroad.pdf . The list is sourced as the U.S. State Department Website.
2. Table 5J.11, Annual Statistical Supplement, 2006, Office of Policy Data, June 2007; and similar data supplements from 2000 to 2005. http://www.ssa.gov/policy/docs/statcomps/supplement/2006/
3. Curry, Jeff and Maureen Keenan Kahr, Individual Foreign-Earned Income and Foreign Tax Credit, 2001, Statistics of Income Bulletin, Spring 2004, Internal Revenue Service. http://www.irs.gov/pub/irs-soi/ftcredit.pdf
1. Lissa Redmiles, Statistics of Income Studies of International Income and Taxes, SOI Bulletin, Summer 2006, Internal Revenue Service.
2. http://www.irs.gov/pub/irs-soi/intertax.pdf
1. Curry, Jeff, Maureen Keenan Kahr, and Sarah E. Nutter, Individual Foreign-Earned Income and Foreign Tax Credit 1996, SOI Bulletin, Summer 1999.
2. http://www.irs.gov/pub/irs-soi/96iniar.pdf
4. The State of the Nation’s Housing 2004, Harvard Joint Center for Housing Studies, Appendix Table xx., Cambridge, Mass. http://www.jchs.harvard.edu .
1. U.S. Bureau of the Census, Table 15, Homeownership Rates for the United States, by Age of Householder and by Family Status: 1982-2006.
2. http://www.census.gov/hhes/www/housing/hvs/annual06/ann06t15.html
1. U.S. Bureau of the Census, Table 1. Projections of Households by Type: 1995 to 2010, Series 1,2, and 3. May 1996.
2. http://www.census.gov/population/projections/nation/hh-fam/table1n.txt
5. Granitsas, Alkman, Americans are Tuning Out the World, YaleGlobal Online, November 24, 2005. http://yaleglobal.yale.edu/display.article?id=6553 .

APPENDIX I

APPENDIX II

Number of Recipients and Dollar Amounts of Social Security Benefits : 1999 - 2005

(Countries with 500 or more beneficiaries; totals include all foreign residents)

Total Monthly Benefits

All		Retired	All	Retirees Avg. Monthly Benefits
December 2005	Beneficiaries	Workers	($000s)	($000s)	All	Retirees
All countries	441,693	263,387	235,254	149,425	$533	$567
Canada	100,747	59,022	45,396	28,116	$451	$476
Mexico	47,384	22,973	24,820	13,033	$524	$567
Central America
and Caribbean	22,407	15,743	15,521	11,537	$693	$733
Barbados	1,036	860	810	692	$782	$805
Costa Rica	3,540	2,418	2,790	2,020	$788	$835
Dominican
Republic	6,503	4,270	3,983	2,823	$612	$661
El Salvador	973	685	609	443	$626	$647
Guatemala	1,240	832	825	574	$665	$690
Honduras	954	611	696	479	$730	$784
Jamaica	2,724	2,182	1,880	1,564	$690	$717
Panama	1,117	692	813	523	$728	$756
Trinidad and
Tobago	881	691	675	547	$766	$792
South America	14,925	10,213	10,065	7,197	$674	$705
Argentina	3,221	2,052	2,091	1,431	$649	$697
Brazil	1,956	1,171	1,412	895	$722	$764
Chile	1,382	935	997	708	$721	$757
Colombia	3,301	2,427	2,190	1,645	$663	$678
Ecuador	2,350	1,736	1,513	1,153	$644	$664
Peru	911	612	639	447	$701	$730
Uruguay	776	590	499	396	$643	$671
Africa	1,887	1,114	1,331	878	$705	$788
Asia	45,034	23,293	29,127	17,397	$647	$747
Cyprus	508	295	320	204	$630	$692
Hong Kong	929	517	588	368	$633	$712
India	912	619	649	455	$712	$735
Israel	8,571	4,879	5,760	3,782	$672	$775
Japan	7,972	3,980	5,641	3,276	$708	$823
Philippines	19,309	9,165	11,509	6,253	$596	$682
Thailand	1,552	1,118	1,374	1,023	$885	$915
Turkey	685	426	502	329	$733	$772
Yemen	1,456	452	710	333	$488	$737
Europe	201,217	125,795	103,720	67,578	$515	$537
Austria	2,452	1,559	1,263	812	$515	$521
Belgium	1,722	1,062	892	574	$518	$540
Croatia	1,485	899	1,119	717	$754	$798
Czech Republic	572	416	481	357	$841	$858
Denmark	868	538	643	405	$741	$753
Finland	815	519	470	302	$577	$582

France	10,661	6,930	5,839		4,076		$548			$588
Germany	33,448	20,837	14,896		9,095		$445			$436
Greece	22,640	13,416	11,678		7,409		$516			$552
Hungary	1,903	1,436	1,609		1,265		$846			$881
Ireland	8,518	5,738	5,113		3,688		$600			$643
Italy	33,865	20,010	17,461		10,975		$516			$548
Malta	584	312	418		239		$716			$766
Netherlands	4,407	2,798	1,942		1,261		$441			$451
Norway	6,432	3,820	2,571		1,550		$400			$406
Poland	5,268	3,607	2,992		2,017		$568			$559
Portugal	12,050	8,243	6,547		4,645		$543			$564
Serbia	959	592	666		415		$694			$701
Spain	9,875	5,817	5,606		3,566		$568			$613
Sweden	3,464	2,287	1,502		974		$434			$426
Switzerland	6,435	4,367	2,654		1,850		$412			$424
United Kingdom	30,210	18,884	15,599		10,155		$516			$538
Oceania	8,092	5,234	5,275		3,689		$652			$705
Australia	6,656	4,310	4,196		2,909		$630			$675
New Zealand	1,003	695	783		593		$781			$853
			Total Monthly Benefits
	All	Retired	All	Retirees			Avg. Monthly Benefits
December 2004	Beneficiaries	Workers	($000s)			($000s)	All	Retirees
All countries	431,138	254,985	220,839			139,528	$512	$547
Canada	98,390	57,160	42,778			26,414	$435	$462
Mexico	47,363	22,938	23,697			12,488	$500	$544
Central America
and Caribbean	21,777	15,121	14,344			10,591	$659		$700
Barbados	1,081	894	806			686	$746		$767
Costa Rica	3,341	2,257	2,496			1,800	$747		$798
Dominican
Republic	6,302	4,043	3,659			2,552	$581		$631
El Salvador	887	605	529			373	$596		$617
Guatemala	1,205	806	767			531	$637		$659
Honduras	925	578	633			431	$684		$746
Jamaica	2,725	2,151	1,796			1,475	$659		$686
Panama	994	611	678			443	$682		$725
Trinidad and
Tobago	887	688	654			523	$737		$760
South America	14,190	9,587	9,086			6,417	$640		$669
Argentina	3,101	1,954	1,908			1,297	$615		$664
Brazil	1,870	1,107	1,279			798	$684		$721
Chile	1,283	852	887			622	$691		$730
Colombia	3,063	2,224	1,930			1,433	$630		$644
Ecuador	2,281	1,663	1,393			1,045	$611		$628
Peru	849	567	566			392	$667		$691
Uruguay	730	541	444			345	$608		$638
Africa	1,829	1,065	1,222			798	$668		$749
Asia	43,585	22,027	26,725			15,701	$613		$713
Cyprus	529	304	317			199	$599		$655

Hong Kong 877 471 531 321 $605 $682 India

820 555 565 392 $689 $706 Israel 8,478 4,767 5,446 3,556 $642 $746 Japan 7,435 3,708 5,070 2,931 $682 $790 Philippines 18,955 8,732 10,656 5,651 $562 $647 Thailand 1,324 946 1,113 826 $841 $873 Turkey 653 402 458 298 $701 $741 Yemen 1,581 465 714 327 $452 $703 Europe 196,537 122,340 98,257 63,854 $500 $522 Austria 2,406 1,524 1,223 796 $508 $522 Belgium 1,656 1,027 851 553 $514 $538 Croatia 1,478 859 1,052 646 $712 $752 Czech Republic 541 387 430 315 $795 $814

Denmark

877 535 620 382 $707 $714 Finland

780 496 447 282 $573 $569 France 10,340 6,708 5,476 3,814 $530 $569 Germany 31,957 19,826 13,912 8,481 $435 $428 Greece 22,512 13,234 11,188 7,058 $497 $533 Hungary 1,882 1,414 1,520 1,195 $808 $845 Ireland 8,263 5,618 4,848 3,532 $587 $629 Italy 34,098 20,136 17,027 10,667 $499 $530

Malta

577 310 395 224 $685 $723 Netherlands 4,218 2,661 1,827 1,195 $433 $449 Norway 6,283 3,702 2,460 1,469 $392 $397 Poland 4,863 3,310 2,716 1,811 $559 $547 Portugal 12,032 8,181 6,208 4,381 $516 $536

Serbia

963 579 636 380 $660 $656 Spain 9,646 5,668 5,261 3,342 $545 $590 Sweden 3,231 2,129 1,410 920 $436 $432 Switzerland 6,125 4,137 2,447 1,702 $400 $411 United Kingdom 29,305 18,263 14,662 9,563 $500 $524

Oceania 7,467 4,747 4,730 3,265 $633 $688

Australia 6,126 3,905 3,772 2,588 $616 $663

New Zealand 942 644 700 526 $743 $817

Total Monthly Benefits
All		Retired	All	Retirees			Avg. Monthly Benefits
December 2003	Beneficiaries	Workers	($000s)		($000s)		All	Retirees
All countries	423,062	248,012	$211,538		$132,725		$500	$535
Canada	96,810	55,848	$41,212		$25,352		$426	$454
Mexico	48,328	23,302	$23,386		$12,315		$484	$528
Central America
and Caribbean	21,288	14,675	$13,561			$9,921	$637		$676
Barbados	1,060	873	$765			$643	$722		$737
Costa Rica	3,171	2,116	$2,281			$1,626	$719		$768
Dominican
Republic	6,106	3,869	$3,425		$2,344		$561		$606
El Salvador	853	583	$490		$346		$574		$593

Guatemala	1,164	769	$706	$488	$607	$635
Honduras	923	578	$621	$425	$673	$735
Jamaica	2,734	2,159	$1,755	$1,442	$642	$668
Panama	955	579	$625	$400	$654	$691
Trinidad and
Tobago	849	664	$609	$486	$717	$732
South America	13,540	9,057	$8,358	$5,839	$617	$645
Argentina	2,959	1,853	$1,756	$1,182	$593	$638
Brazil	1,808	1,050	$1,184	$720	$655	$686
Chile	1,200	789	$806	$556	$672	$705
Colombia	2,858	2,040	$1,733	$1,264	$606	$620
Ecuador	2,230	1,614	$1,315	$981	$590	$608
Peru	796	533	$513	$360	$644	$675
Uruguay	681	508	$397	$310	$583	$610
Africa	1,717	994	$1,114	$723	$649	$727
Asia	42,198	20,947	$24,846	$14,379	$589	$686
Cyprus	522	310	$304	$195	$582	$629
Hong Kong	846	439	$488	$283	$577	$645
India	713	485	$474	$330	$665	$680
Israel	8,363	4,716	$5,227	$3,431	$625	$728
Japan	6,924	3,431	$4,600	$2,633	$664	$767
Philippines	18,688	8,371	$10,056	$5,201	$538	$621
Thailand	1,131	804	$908	$673	$803	$837
Turkey	649	400	$433	$284	$667	$710
Yemen	1,583	442	$679	$295	$429	$667
Europe	192,433	118,941	$94,753	$61,225	$492	$515
Austria	2,323	1,478	$1,167	$763	$502	$516
Belgium	1,629	1,017	$819	$538	$503	$529
Croatia	1,471	834	$1,017	$605	$691	$725
Denmark	878	520	$592	$359	$674	$690
Finland	760	496	$433	$279	$570	$563
France	9,911	6,414	$5,138	$3,569	$518	$556
Germany	30,659	18,889	$13,316	$8,095	$434	$429
Greece	22,394	13,027	$10,889	$6,801	$486	$522
Hungary	1,804	1,360	$1,418	$1,115	$786	$820
Ireland	8,093	5,490	$4,680	$3,407	$578	$621
Italy	34,223	20,080	$16,772	$10,418	$490	$519
Malta	590	315	$387	$219	$656	$695
Netherlands	4,083	2,567	$1,780	$1,165	$436	$454
Norway	6,169	3,589	$2,402	$1,430	$389	$398
Poland	4,540	3,039	$2,500	$1,642	$551	$540
Portugal	11,932	8,029	$5,963	$4,155	$500	$517
Serbia	959	557	$622	$355	$649	$637
Spain	9,427	5,541	$5,046	$3,211	$535	$579
Sweden	3,062	2,022	$1,343	$881	$439	$436
Switzerland	5,889	3,979	$2,330	$1,624	$396	$408
United Kingdom	28,607	17,705	$14,117	$9,190	$493	$519
Oceania	6,748	4,248	$4,307	$2,971	$638	$699
Australia	5,481	3,454	$3,447	$2,364	$629	$684
New Zealand	871	599	$620	$465	$712	$776

Total Monthly Benefits

All		Retired	All	Retirees	Avg. Monthly Benefits
December 2002	Beneficiaries	Workers	($000s)	($000s)	All	Retirees
All countries	415,179	242,128	$203,428	$127,212	$490	$306
Canada	94,693	54,488	$39,887	$24,537	$421	$259
Mexico	49,105	23,782	$23,195	$12,322	$472	$251
Central America
and Caribbean	20,636	14,099	$12,755	$9,272	$618		$449
Barbados	1,048	850	$736	$608	$702		$580
Costa Rica	3,020	2,010	$2,082	$1,488	$689		$493
Dominican
Republic	5,763	3,639	$3,155	$2,152	$547		$373
El Salvador	821	555	$457	$318	$557		$387
Guatemala	1,142	732	$665	$450	$582		$394
Honduras	937	568	$612	$409	$653		$436
Jamaica	2,711	2,124	$1,694	$1,382	$625		$510
Panama	880	534	$554	$354	$630		$402
Trinidad and
Tobago	855	663	$590	$468	$690		$547
South America	13,065	8,677	$7,859	$5,473	$602		$419
Argentina	2,866	1,794	$1,656	$1,115	$578		$389
Brazil	1,757	1,022	$1,118	$685	$636		$390
Chile	1,133	736	$749	$515	$661		$455
Colombia	2,692	1,904	$1,590	$1,153	$591		$428
Ecuador	2,187	1,592	$1,267	$949	$579		$434
Peru	755	501	$474	$333	$628		$441
Uruguay	635	463	$353	$269	$556		$424
Africa	1,566	890	$970	$619	$619		$395
Asia	41,076	19,983	$23,375	$13,337	$569		$325
Cyprus	527	302	$291	$183	$552		$347
Hong Kong	830	398	$464	$248	$559		$299
India	691	455	$435	$296	$630		$428
Israel	8,326	4,677	$5,096	$3,333	$612		$400
Japan	6,527	3,176	$4,225	$2,376	$647		$364
Philippines	18,408	8,070	$9,538	$4,856	$518		$264
Thailand	1,004	720	$775	$581	$772		$579
Turkey	633	389	$407	$265	$643		$419
Yemen	1,589	419	$656	$273	$413		$172
Europe	189,007	116,406	$91,530	$58,980	$484		$312
Austria	2,252	1,463	$1,118	$747	$496		$332
Belgium	1,610	1,012	$804	$535	$499		$332
Croatia	1,452	789	$966	$552	$665		$380
Denmark	876	530	$575	$359	$656		$410
Finland	745	485	$422	$270	$566		$362
France	9,728	6,318	$4,932	$3,446	$507		$354
Germany	29,500	18,141	$12,717	$7,743	$431		$262
Greece	22,235	12,767	$10,598	$6,544	$477		$294
Hungary	1,771	1,330	$1,354	$1,061	$765		$599
Ireland	7,893	5,356	$4,461	$3,240	$565		$410
Italy	34,651	20,211	$16,697	$10,304	$482		$297
			31

Malta

595 308 $376 $211 $632 $355 Netherlands 3,999 2,497 $1,743 $1,130 $436 $283 Norway 6,130 3,583 $2,381 $1,429 $388 $233 Poland 4,134 2,718 $2,257 $1,465 $546 $354 Portugal 11,858 7,927 $5,753 $3,984 $485 $336

Serbia

971 535 $618 $328 $636 $338 Spain 9,217 5,404 $4,797 $3,038 $520 $330 Sweden 2,950 1,951 $1,291 $851 $438 $288 Switzerland 5,693 3,862 $2,221 $1,559 $390 $274 United Kingdom 27,854 17,311 $13,551 $8,862 $487 $318

Oceania 6,031 3,803 $3,857 $2,673 $640 $443

Australia 4,849 3,079 $3,093 $2,140 $638 $441

New Zealand 804 541 $546 $405 $679 $504

Total Monthly Benefits
All		Retired	All	Retirees			Avg. Monthly Benefits
December 2001	Beneficiaries	Workers	($000s)		($000s)		All	Retirees
All countries	407,466	235,797	196,861		122,452		$483	$519
Canada	92,418	52,990	38,670		23,772		$418	$449
Mexico	49,734	23,903	23,065		12,256		$464	$513
Central America
and Caribbean	20,159	13,609	12,154			8,768	$603		$644
Barbados	1,013	813	699			572	$690		$704
Costa Rica	2,859	1,876	1,906			1,347	$667		$718
Dominican
Republic	5,608	3,476	2,987		2,011		$533		$579
El Salvador	774	514	414		289		$535		$562
Guatemala	1,082	690	616		413		$569		$599
Honduras	967	590	627		420		$648		$712
Jamaica	2,735	2,128	1,685		1,369		$616		$643
Panama	856	516	528		338		$617		$655
Trinidad and
Tobago	829	638	557		441		$672		$691
South America	12,823