Over the past two decades, real estate has attracted more and more investors worldwide. Real estate has generated cash flow for so many investors all over the world and has become a profitable local and international type of investment. International real estate may be the best possible way for investors to collect a fortune over the coming years. China and the United States are just two of the many countries where international real estate investing became so prominent.
Related: Best Places to Invest in Real Estate: Going International
Before discussing the major topics in both China and the United States real estate, investors need to understand why international real estate is so beneficial. Here are a few of the major advantages that come with investing in international real estate.
1. Abroad savings
Owning foreign real estate moves your savings and wealth abroad. If there was any case of political crisis or economic downfall your real estate investments would not be affected. You would still be making a profit despite the distance between you and your property.
2. More Internationalization Options
Owning international real estate in another country provides investors with more options and opportunities. For example, you have a valid excuse to open a financial account in that foreign country and can gain some sort of residence which can help you get the citizenship in the near future. Your international real estate investment can become like your second home that you can go to if any case of crisis occurs in your home country.
Related: How to Buy an Investment Property in the US from Abroad
Owning international real estate is one of the ways that investors can legally save their wealth abroad while keeping their financial privacy. Investors can also have the advantage of tax benefits in a foreign country as well as their own. So it’s a two-in-one win win scenario.
4. Portfolio Diversification
Foreign real estate is a tangible hard asset that has diversification benefits for a traditional portfolio. It has the potential for capital appreciation as well as the ability to generate cashflow in a foreign currency from rental income.
5. China’s taste for international property
China is huge! And with its population gradually increasing to more than 1.4 billion, this country has an explainable desire for investing in foreign property. Restrictions on home buying in Chain is the reason why much of its real estate investors look for stable investments in the United States, Canada and many other countries around the world. The amount of money pouring into property around the world from mainland China is overwhelming. Li, a director of international project marketing for the US real estate giant CBRE says that 3% of potential Chinese investors in overseas property have so far been found. When we look at 1% of China’s overall population we are talking about 14 million people! Imagine 3% invest in international real estate and own foreign properties. That’s a lot!
What motivates Chinese investors who buy property overseas and invest in international real estate are factors such as:
- Financial security
Many are looking for a country where they hope their children will go on to study. “Some people are buying for their family to use it,” says Li, “some are buying to diversify, some are buying because they want to own a property for investment and some people are buying for prestige.” Others are choosing to invest in foreign countries to secure their money and wealth. Aside from what the reason may be, Chinese investors who are investing in international real estate are increasing more and more every year. So we have to watch and find out what the future for China is and if they will still be in demand for foreign real estate; or will they become the target country that allures investors from around the world?
United States attracts foreign capital
Those who know and understand real estate markets are probably well aware of the foreign capital flowing into the United States. Why are foreign investors buying U.S real estate? One min reason is global economic slowdown. The collapse of crude oil in January 2015 has had a tremendous effect on oil-producing countries like Canada, Mexico, Brazil and Russia where many foreign buyers originate. As these foreign economies have slowed, currencies have decreased compared to the U.S. dollar. Some might assume that the strength of the U.S. dollar would discourage foreign investors as their purchasing power lessens. However, the recent unpredictability in global markets and stability of the U.S. housing market and the U.S. economy overall, has actually had the opposite effect.
Related: What to Expect in US Real Estate Trends Over the Next 10 Years
More foreign investors see the U.S. real estate as a safe place for their capital during any global crisis. According to a report from NAR’s annual report on international activity in U.S. real estate “foreign buyers purchased $102.6 billion of residential property in the U.S. between April 2015 and March 2016”. That is a large amount of property purchased by foreigners. How long will the U.S continue to magnet foreign investors is anyone’s guess. The U.S. economy remains strong relative to global markets, and until there’s a notable slowdown, foreign investments will continue to pour into United States real estate. This increased competition for foreign investors will make it harder for small investors to add to their portfolios, but will present an opportunity for investors looking to sell or diverse their portfolios. Be sure to check out Mashvisor for the latest updates on real estate trends and find out what the future holds for investors.