Foreign investments in U.S. real estate have surged nearly 50 percent as of late.
The 2017 Profile of International Activity in U.S. Residential Real Estate from the National Association of REALTORS® (NAR) shows that between April 2016 and March 2017, foreign buyers and recent immigrants purchased over $150 billion in residential property. Marking a new survey high, this boost is a 49 percent increase from last year’s $102.6 billion rank.
“In the face of global economic and political uncertainty—that is, Venezuela upheaval, Brexit, Syrian refugees, Russia meddling, and even the very nasty U.S. Presidential election campaigning—people with money were searching for something very safe,” says Lawrence Yun, NAR chief economist and senior vice president of Research. “As a consequence, both the demand for U.S. Treasury bonds and U.S. real estate rose.”
The list of foreign buyers currently investing in U.S. real estate is topped by China, followed by Canada.
“Canadians bought vacation homes in warm weather states, driven largely by the huge housing wealth accumulation in Canadian markets like Toronto and Vancouver,” says Yun. “Chinese bought partly because its economy continued to grow at 6 percent or better. Such a growth rate, though light by recent Chinese standards, is enough to crank out a new billionaire every week. Then consider how many millionaires are being created in China.”
While the three states with the highest foreign activity are Florida, California and Texas, other cities are seeing a rise in foreign traffic, too.
Taxes may also bring certain foreign buyers to the U.S. “We see that with the Japanese buyers,” says Kitabayashi. “There are certain tax advantages between Japan and the U.S. that might be dissolving in a few years, so we’re seeing Japanese buyers surging before that advantage goes away.”
“America offers equal private property rights protection to U.S. residents and foreigners,” says Yun. “That’s the big attraction as to why foreigners buy in the U.S. But the drawback is that foreign buyers could be gobbling up properties at the expense of U.S. homebuyers, particularly young, first-time homebuyers. To ensure there’s enough, the policy focus should be about constructing more homes in the U.S., rather than trying to limit foreign buyers.”