U.S is Top Country for Foreign Real Estate Investors

The positive news for the U.S housing market continues this week, with the news that it is perceived as the “safest bet” for foreign investors.

This sentiment could be spurred by continuing positivity in the real estate industry; this week alone, the market received good news in both the existing and new homes market.

Increases all round

Thanks to record low mortgage rates, the sales of previously owned homes in October took an unexpected leap, increasing approximately 2.1 percent to 4.79 million annually. This was above what forecasters had predicted, and brought the average value of pre-existing homes to the highest level since 2004.

Meanwhile a ‘sentiment index’, released by the National Association of Home Builders / Wells Fargo, showed that the confidence levels of U.S home builders was at its highest level in six years – well before the start of the global recession. Builders said this was due to a strong demand for new build homes, along with the increasing optimism among real estate industry forecasters and the general public alike.

More popular than Spain

It seems that investors are joining in the positivity that is sweeping the country. With a U.S housing market recovery now seeming imminent – yet with prices still at record low levels – the country has been voted the most sought after investment destination in the world. The study, from The Move Channel, revealed that the U.S had pipped its European rival Spain by 1.01 percent to clinch the top spot for the first time since December 2011.

The Move Channel’s Director, Dan Johnson, said: “The US has become the main rival to Spain’s lifestyle appeal. It replaced France as buyers’ second favourite property destination several months ago. Now the country’s recovery is really gathering steam.”

Second home paradise

Investor interest in the U.S has been consistently growing throughout 2012, thanks to increasing sales, rental yields, new build homes and market confidence. Many of the country’s tourism hotspots, such as Florida, have seen record numbers of repossessions, leading to house prices being cut by as much as 50 percent. As such, the state has seen an influx of foreign buyers snapping up second homes and holiday condos.

The Move Channel’s latest report is part of its monthly Top of the Props series, and this month it revealed that a record 20.91 percent of all international investor enquiries had been about property in the U.S. This is a stark contrast to figures from  the Global Property Guide of the same time last year; the U.S real estate market was experiencing a slump, recording a 7.42 percent fall in property prices nationwide.

Growing popularity

The news that foreign investors are flocking in on the U.S housing market is not new; all year, reports and statistics have been released showing that foreign investment is rife, and the U.S is a destination to watch. In July, the Trulia International House Hunter report revealed that foreign investors spent $82.5 billion on U.S. residential real estate in the preceding year, which were record high levels. Destinations such as Miami and Los Angeles were leading this investment boom, and investors were coming mainly from Europe (the Uniter Kingdom and Germany), Canada and Australia. The report revealed how these investors considered the U.S to be a “safe bet”, a stark contrast from sentiment in previous years following the housing crash.

Will this interest be sustained?

However, many economists started to question whether this trend would continue. After all, we are seeing real estate prices continuing to rise in most sectors of the market. By the end of the summer, 84 of 100 of the country’s largest metro areas had seen house prices increases, for many consecutive quarters. It’s not just metros that are seeing increases; after the metros comes the increase of desirable rural areas. Indeed, those looking to escape the cities and opt for countryside living is also on the up. Research showed earlier this quarter that many people were moving out of New York and into surrounding quieter areas, thanks to rising costs of urban living. As demand in sub-urban and rural areas continues to increase, so will property prices. It was perceived that foreign investors may soon become put off by these rises, and that this trend in buying U.S property may die down.

Dr. Jed Kolko, Trulia’s chief economist, said: “Foreigners attracted to real estate bargains get turned off when prices increase. Investors want to buy when prices are at their bottom, but they’ll start to lose interest when prices rise 15 percent, as they have in Miami and Phoenix. Demand by people looking to scoop up bargains can dry up quickly when prices rise.”

No signs of reversing

However, what is significant about the Move Channel’s survey results is that this trend shows no signs of reversing just yet. The U.S housing recovery is still in its elementary stages, suggesting that opportunity is still rife for investment for a long time yet. It’s true that there will be a ceiling for foreign investors, but they look set to play a pivotal role in the recovery of the U.S housing market going into 2013.