Last year foreign investment in US real estate topped $7 billion in single family home purchases alone. As a new report by CNBC reveals, four of the top five cities for global real state investment were in the United States, investors from countries around the world still flock to buy residential and commercial properties in a stable, secure environment free of the obstacles facing foreigners in many other countries.
Although London topped CNBC’s list of attractive cities for foreign real estate investment, the rest were in the US. And while all of those listed are major metropolitan areas with high-end real estate markets, foreign investment is taking place in markets all around the country as investors from countries such as China and India seek secure, private paces to invest funds. That’s a phenomenon US investors need to watch closely – and a reason to follow Jason Hartman’s’ recommendation to diversify holdings whenever possible.
Foreign investment in US property comes in many forms. Commercial investment is of course high on the list of the kinds of properties that are attractive to foreigners, In residential real estate, multifamily properties ranging from condos and apartments to smaller multiplexes are also high on the list, with single family homes coming in last in the latest survey.
The jump in foreign investing comes as new US lending regulations tighten standards for US mortgage applicants, and interest rates are starting to creep higher as the Federal Reserve’s stimulus program begins to taper off. The number of available proprieties in some markets may fluctuate too, as home prices rise and more of the foreclosure backlog held by banks and other institutions begins to hit the market.
That means US investors may find themselves dealing with competitors from around the world – and conducting transactions with them as well. Some are choosing to partner with investors from outside the country to increase their chances of buying a particular property, too. And outside those large metropolises that attract wealthy foreigners with high-end real estate, smaller markets in the heartland may also be facing a kind of culture shock, as smaller investors also look to diversify by buying in those smaller markets.
Foreign investment on American soil has come under fire from those who see a threat to US investment, national security and the growth of the housing market. Others welcome foreign money as a shot in the arm to a still struggling economy. Either way, international investors are here to stay, drawn by a stable government and lack of special regulations on foreign purchasing.
For US investors, it may be time to brush up on international business etiquette and take a new look at diversifying into the country’s other housing markets, since a shifting landscape creates new opportunities and challenges for buyers both local and foreign. (Top image:Flickr/PhilipTaylor)
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