Demand for U.S. Real-estate by foreign investors has exploded over the last year. The first reason has been the weakness of the U.S. Greenback. That has permitted foreign consumers to take a position in U.S. Property that produces favorably high yields, as well as making profits from the currency trade. These two factors compound to give foreign investors bigger returns.
Since 2006 property values in The United States had declined in numerous markets by as much as 70%. Now with the continuing manipulation tactics of the Federal Reserve Bank, Ben Bernanke?s QE to infinity, and suppressed real-estate inventory by the big banks, real estate costs have been bouncing back in most U.S. Real-estate markets. That explains some of the reasons foreign investors are taking their capital and placing it in U.S. investment properties.
World speculators accounted for $82.5 billion, or 8.9%, of the $928 bln spent on home real estate in the 12-month period ending in March 2012 according to a survey released by the Nation’s Association of Realtors last year. That was up 24% from $66.4 bln in the previous-year period.
According to this survey, about 55% of all global investors came from five countries: Canada, China, Mexico, India and the United Kingdom. 5 states accounted for close to 55% of all sales to foreign buyers: Florida, California, Texas, Arizona, and New York.
The survey also revealed that 62% of foreign customers paid money. Curiously up to 50% of all sales countrywide are from money purchasers, and up to 70% of sales in some Florida markets are by money investors.
Investors and newbie home purchasers are having a troublesome time competing with these money financiers; often losing out when their contract contains a financing contingency.
We could also see extra foreign speculators coming from Europe if Problems there flare up again, which I fully expect. Reach Europeans, in an attempt to protect their wealth, will also move their capital to the U. S..
Another major force driving the market are Chinese investors. According to the Nationwide Association of Realtors, Chinese customers accounted for $7.4 bln of sales in the 12 months ending in March 2012, up 24% from the previous 12 months. And according to Real Capital Analysing, backers from China and HK also spent $1.71 bn. on commercial real estate in the U.S. In 2011, more than four-times their investment in 2008.
I envision costs will continue to rise over the next 24 to 36 months, perhaps even longer. This will be driven in large part by the market manipulation caused by state programs and policies, quick cash printing by the Fed Reserve, and artificially low rates.
A note of caution: Wall Street stockholders and hedge funds are purchasing uncountable billions of bucks? Worth of real estate now and are waiting for inflation to drive the costs up. They are also aware that the U.S. Administration has restarted their”no cash down” Loan programme which may unavoidably lead directly to higher real-estate costs. Once these elements come together pushing up real estate prices, the big money stockholders are likely to sell their positions, leaving the market at the top of another bubble.
The base line is that you should usually know what drives a market. Look for changes in those driving factors and plan accordingly. There’s amazing opportunity and money to be in made in real estate now, you just have to know what you’re actually doing.
Marco Santarelli is an investor, author and founding figure behind Norada Real Estate Investments countrywide real estate investment firm providing turnkey investment property in growth markets around the U. S.. “United States Real Estate on Sale?” was initially published on the Property Investing Blog.