While the historic link between Canada and the USA continues to see billions of dollars invested in US property by Canadian investors, there is no doubt that China is now playing a pivotal role in the US property market. A report by the National Association of Realtors confirmed that Chinese investors accounted for 12% of overseas investment in US properties in 2012 which equates to around $8.2 billion. Even though this is a 10% decrease on the 2011 figure it is still a very large element of the US property market especially bearing in mind the ongoing economic difficulties in the USA and around the world.
While there has always been overseas investment interest in California and other prominent states of the US, it is interesting to see that areas such as Detroit, which recently filed for bankruptcy, are attracting record amounts of overseas investment.
What is pushing US property prices higher?
If you look at the US economy in isolation you could easily assume that the ongoing economic difficulties are set to prevail for many years to come. However, the economy is showing signs of life, the US Federal Bank is actively looking at scaling back its fiscal stimulus program and slowly but surely budget issues which continue to hover over the US government are starting to fade away. Nobody is suggesting that the US economy is set to return to more traditional growth rates seen in recent times but it does seem as though the short to medium-term outlook is perhaps not as bad as many people had assumed.
Quote from PropertyForum.com : “Residential property sales and prices in Miami, one of the United States most active real estate markets, continued to surge last month due to tight supply. The current situation is generating rapid sales and offers close to asking prices, according to the latest report from the Miami Association of Realtors.”
Interestingly the fact that US property prices are moving ahead, broadly across a number of states, will also loosen the financial noose around the necks of many US citizens who were stuck in a very difficult situation, with many facing negative equity issues.
Is overseas investment welcome?
In recent times the more prominent US property investors have come from the likes of the UK, China, Canada, Mexico and India. These are areas of the world which have experienced differing economic climates over the last few years with China and India powering ahead up until recently, Canada showing enormous resilience in the face of a difficult worldwide situation, while Mexico continues to benefit from the re-emergence of Latin America with the UK only recently showing signs of recovery.
The reality for many investors is that if the US economy does not recover then the worldwide economy will struggle therefore acquiring US property is a long-term play on the worldwide and US economies. As we mentioned above, the ongoing increase in property prices will in many cases loosen the financial noose under which many US families have lived for some time. It will also be interesting to see how US property prices perform as and when the worldwide economy, in particular the European Union, finally show signs of life.
The simple fact is that US property is in many ways a play on a worldwide economic recovery although it is interesting to see areas such as Detroit, which have effectively been cut adrift for many years, attracting significant overseas investment. Perhaps now is the time to look at underperforming US property sectors of the past? Perhaps the worldwide economy is on a recovery path?
Or are we forgetting the enormous amounts of sovereign debt which are still building up each and every day around the world?