Posts Tagged as Foreign Real Estate Buyers

Shutting Down the Money - Chinese Real Estate Investments Dry Up

Shutting Down the Money – Chinese Real Estate Investments Dry Up

In surprising real estate trends, China’s investments in the U.S. real estate market are speedily drying up. A recent Cushman and Wakefield report highlighted the trend, noting a drop from $16.2-billion to $7.3-billion in 2016, and estimating a 55% drop in commercial real estate investments in 2017.

Why are Times Changing?
The unusually hasty retreat has been fueled by at least two factors:

Beijing’s Leaders Restricting the Flow of Cash Out of the Country
In August, China’s State Council imposed new regulations on outbound investments designed to keep capital at home and reduce the risk of runaway debt. With a massive impact on real estate trends, the move highlights the potentially dramatic effects of state-directed capitalism. Ordered by the government to sell or dispose of foreign properties, investors from state-controlled conglomerates are selling rapidly after acquisition – in some cases, before building.

Federal EB-5 Program Funding Drops, Limiting Green Card Access
The federal EB-5 program, which allows foreigners to apply for U.S. citizenship in exchange for investing $500,000 or more in a business that makes or preserves at least 10 jobs, is losing fuel. With a huge drop-off in funding, EB-5 cash from China has dropped to just 28% of its normal flow compared to the three preceding years. In the past, the millions of dollars raised in the green card program have funded major projects, including the Courtyard Los Angeles L.A. Live and the Dream Hotel complex in Hollywood.

Big Picture
Though the drop is dramatic, Cushman and Wakefield still predict Chinese capital will continue to play a significant role in the U.S. economy. Despite pulling back on new purchases, Chinese investors are not jumping ship, and are still buying more than they’re selling. However a shift is being seen, from state-controlled conglomerates to very high net worth individuals.

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Foreign Buyers – a Real Estate Trend to Watch in 2016

Foreign Home Buyers
Foreign Home Buyers

A new survey by the Association of Foreign Investors in Real Estate (AFIRE) to detect upcoming real estate trends has found foreign investors will dominate the market in 2016. How big of a factor might foreign investors play in your business?

Not backing down
Sixty-four percent of roughly 200 respondents plan to make modest or major increases in U.S. real estate investments, and 34% expect to maintain holdings or reinvest sales proceeds into other U.S. assets. None plans a major decrease.

Why the bump in U.S. real estate purchases?
This strong response is attributable to a number of factors contributing to the rise in U.S. purchases in real estate trends…

  • Economics
    Europe’s immigration crisis, China’s economic slowdown, and Brazil’s recession make the U.S. a safe bet.
  • Tax legislation
    New legislation easing taxes for foreign pension funds invested in U.S. real estate will further boost sales, simplifying the investment process and opening doors to real estate deals that won’t require property purchases with U.S. domestic majority partners, as they have in times past.
  • The market
    Foreign investors from Asia, Europe, Australia, and Canada have been increasingly buying into the U.S. real estate market since the financial crisis, with purchases jumping from $5 billion in 2009 to $87.3 billion last year, in search of higher yields in retail space, hotels and apartments, warehouses, and office towers.
  • Price appreciation
    The U.S. ranked first for countries with the best opportunity for price appreciation in 2016, trailed by Brazil, Spain, Ireland, and the U.K.

What markets are hot?
In the survey, New York City and Los Angeles were at the top for investments over foreign cities like Paris, London, and Berlin. For property types, multifamily and industrial led the pack, then retail, office and hotel space.

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