U.S. assets like real estate may be more attractive to foreign investors in the months ahead.
In contrast to much of the industrialized world’s easy money policy, the Federal Reserve chose to tighten slightly with the start of a rate hike cycle on Wednesday. The divergence in monetary policy is seen as a potential source of volatility in the coming year.
According to Mitch Roschelle, partner at PricewaterhouseCoopers, uncertainty in global currencies, stocks, and bonds could benefit hard assets like U.S. real estate.
“Whenever there's instability in a society or in the world, investors tend to rotate towards the non-trading asset,” he said. “They rotate to real estate as opposed to the trading asset.”
China, which had a shaky summer, is taking an increased interest in U.S. real estate. About 8% of all foreign commercial property purchases have come from that country in the past 12 months, based on data compiled by Real Capital Analytics and PwC. China’s acquisitions are 5% of the total investments in the last 5 years. Yet China's total purchases in the past decade still don't make it one of the America’s top five buyers.
Instead, Canada remains the largest foreign investor in U.S. Our neighbor to the north is responsible for 31% of all overseas commercial property investments since 2010, representing 3.92% of Canada’s GDP while China’s American property investment is just 0.14% of its economy.
U.S. real estate could see more foreign investment ahead
12