It is a long-lasting historical trend that investors from all over the world come to the US with the intention to invest in local real estate, be it for residential or business purposes. In fact, buying property in the States has been a question of fashion and status ever since the 19th century, followed by the more recent OPEC boom in the 70s and an economic boom in Japan. A great deal of funds generated by these skyrocketing global economies have ended up being invested in real estate in America.
Especially in recent years, the percentage of foreign investments in real estate has noted a significant growth. The 8.1% average in the 10 years through 2012 has been almost doubled by 2015, peaking at 16% with Canada, China and Mexico leading the way.
There are, however, some shifts to be observed in the behavior of the foreign investors during the last few quarters. Initially, the biggest cash-flow took place in the most attractive — and also the most expensive — areas, such as New York City, San Francisco, Los Angeles, Washington DC and Chicago. But recently, they’ve started seeking out additional geographic areas in which to invest, including Portland. nasdaq.com reports:
“So far this year, investors from Singapore have focused most of their buying in Los Angeles and Phoenix, while Swiss investors have bought the most property of all nationalities in Portland, Oregon. Also of interest, real estate purchases by foreigners in Philadelphia were dominated by buyers from the UK.”
The PATH Act originating in December 2015 has been one of the main motivations for real estate investors from other countries to allocate their assets to the United States. President Obama’s office has been mainly presenting this as a big package of benefits for the U.S. taxpayer, but aside from that, it also liberates foreign investors from the duty to pay an extra tax when selling a U.S. based real estate asset.
Many view that as a positive development, and consider it a game changer in the real estate industry: “By breaking down outdated tax barriers to inbound investment, the FIRPTA relief will help mobilize private capital for real estate and infrastructure projects,” said Jeffrey DeBoer, president and chief executive officer of the Real Estate Roundtable. This growing trend will most likely result in billions of dollars being injected into our industry, giving taxpayers more security and opening up new partnership opportunities.
According to an Oregon Export, Jobs, and Foreign Investment study by International trade Administration from 2013, foreign investors provided Oregonians with 50,100 jobs. Major sources of foreign investment in Oregon in 2013 included United Kingdom, Germany, Japan, and Canada.
I see these prospects as very positive. What are your thoughts on opening the floodgates to foreign investors?