Demand for U.S. properties by foreign investors has exploded over the past year. The 1st reason has been the weakness of the U.S. Greenback. That has permitted foreign customers to speculate in U.S. Real estate that produces favorably high yields, as well as making profits from the currency trade. These two factors compound to give foreign investors greater returns.
Since 2006 property values in The United States had declined in numerous markets by as much as 70%. Now with the continuing manipulation methods of the Fed Reserve Bank, Ben Bernanke’s QE to infinity, and suppressed property inventory by the major banks, real-estate costs have been springing back in most U.S. real estate markets. That explains some of the explanations foreign stockholders are taking their capital and placing it in U.S. Investment properties.
International investors accounted for $82.5 billion, or 8.9%, of the $928 bill spent on residential property in the 12-month period ending in March 2012 according to a survey released by the National Association of Realtors last year. That was up 24% from $66.4 billion in the previous-year period.
According to this survey, about 55% of all world buyers 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 NY.
The survey also exposed that 62% of foreign consumers paid cash. Apparently up to 50% of all sales nationwide are from cash purchasers, and up to 70% of sales in some Florida markets are by cash buyers.
Investors and inexperienced house buyers are having a tough time contesting with these cash stockholders; frequently losing out when their contract contains a financing contingency.
We could also see additional foreign investors coming from Europe if Problems there flare up again, which I absolutely expect. Wealthy Continentals, in an attempt to protect their wealth, will also move their capital to the U. S.
Another major force driving the market are Chinese backers. In the opinion of the State Association of Realtors, Chinese buyers accounted for $7.4 bill of sales in the 12 months ending in March 2012, up 24% from the previous 12 months. And according to Real Capital Analysing, financiers from China and Hong Kong also spent $1.71 bn. on commercial real-estate in the U.S. In 2011, more than four-times their investment in 2008.
I forecast costs will continue to rise over the next 24 to 36 months, maybe even longer. This will be driven largely by the market manipulation due to government programs and policies, fast cash printing by the Fed Reserve, and artificially low rates.
A note of caution: Wall Street stockholders and hedge funds are buying many billions of dollar’s worth of real estate at this time and are waiting for inflation to drive the costs up. They also understand that the U.S. Government has restarted their ?no money down? Loan program which should necessarily lead straight to higher property prices. Once these factors come together pushing up real-estate costs, the big money financiers are probably going to sell their positions, leaving the market at the very top of another bubble.
The final analysis is that you should generally know what drives a market. Look for changes in those driving factors and plan in an appropriate way. There is incredible opportunity and money to be in made in real estate at this time, you simply have to know what you are actually doing.