Stories, trends, deal makers and breakers, investors and seekers. Read about PE investment deals, M&A, capital markets and business in general, right here!

Getting Real

The appetite for U.S. real estate, continues to flourish although international buyers are shifting their sights from luxury to less-pricey properties.

After the financial crisis, which sent prices sharply lower, commercial real estate in the U.S. has enjoyed growth with solid fundamentals. Rents have steadily increased and demand generally continues to exceed supply.

With capital flows becoming unstable over the past year due to fears over interest rate hikes and, more recently, events such as political and economic uncertainty in China, instability began to show in the public commercial real estate markets.

But, the appetite for U.S. real estate, continues to flourish although international buyers are shifting their sights from luxury to less-pricey properties. This may be due to overall higher home prices, along with a stronger U.S. dollar, which both cost foreign buyers more.

Foreign buyers purchased $102.6 billion of residential property in the U.S. between April 2015 and March 2016, according to the National Association of Realtor’s annual report on international activity in U.S. real estate. That is a 1.3 percent lower in terms of dollar volume from the previous survey. The number of properties purchased, however, rose 2.8 percent to 214,885. The value of homes bought by foreigners was typically higher than the median price of all U.S. homes.

Another major shift was in the overall mix of international buyers. Chinese buyers continued to outpace all others, with their dollar volume exceeding the total of the next four ranked countries combined. Their dollar sales amounted to $27.3 billion, a slight decrease from last year’s survey but still three times as much as Canadian buyers, who were ranked second. Chinese buyers also bought the most expensive homes at a median price of $542,084.

Given the current volatility in global financial markets, real estate is one of the safest investments available. U.S. real estate in particular is relatively inexpensive compared to properties in Asia.

London had been a favorite of foreign investors, but the impact of the Brexit vote is already hitting the housing market there. Buyers from the United Kingdom were the fourth-largest consumer of U.S. real estate in the data that was gathered before the Brexit vote.

According to the NAR report, five states accounted for half of foreign buyer purchases: Florida, (22 percent), California (15 percent), Texas (10 percent), Arizona and New York (each at 4 percent). Latin Americans, Europeans and Canadians, who historically favor warmer climates, were most prevalent in Florida and Arizona. Asian buyers flocked to California and New York. Texas was more a mix of buyers from Latin American, the Caribbean and Asia. Texas may be more of an investment play, as demand for single-family rentals there remains strong.

Comments