Investor money chases opportunity all over the globe, into markets that can be characterized as holding appeal on a country-wide basis, while other markets attract capital into specific cities and geographic areas that represent micro-opportunities for investment. Here are five major destinations that are pulling investor interest now, plus several up-and-coming markets worth watching.
This year the Association of Foreign Investors in Real Estate (AFIRE) ranked Turkey in the top three emerging markets for international real estate investment, and fourth in best opportunity for capital appreciation. Turkey also had the greatest year-to-year increase in intent to invest in the coming year.
Turkey has a strong, growing economy. Its per capita income almost tripled between 2000 and 2010. It is the third fastest-growing economy in the G-20 nations, has a young dynamic population, great weather and high quality of life.
Laws governing foreign ownership in Turkey were broadened in 2012 to allow foreigners from most countries to buy land there. Previously, only citizens of countries where Turks were allowed to buy property could do the same in Turkey. International transactions have increased accordingly.
Investment in Turkey spans many sectors. The Urban Land Institute recently ranked Istanbul fourth among top European cities for investment prospects in 2013, citing hotel, office and retail space as highly attractive sectors. Turkish estate agents are marketing at property exhibitions in London, China, Dubai and Russia. Luxury homes in Istanbul and the Turkish Riviera on the Mediterranean Coast are in high demand by Russian and Chinese buyers, as are less expensive second homes by middle class Europeans.
AFIRE named Brazil as the top emerging market in 2013 and the second best global market for capital appreciation, rankings it also earned in 2012. Opportunities for investors span a wide variety of real estate sectors across the country.
Commercial, retail and hotel properties have soared in Sao Paulo, which has become a stepping stone for international companies reaching out to South American markets. Multinational companies have invested in manufacturing to serve the recently-emerging Brazilian middle class. Energy goliaths have set up facilities in the southeast region where huge oil reserves have been discovered. Meanwhile, luxury residences in Rio de Janeiro and Sao Paulo have become more expensive than similar properties in New York. (See the April 2013 issue of Global Perspectives for more on Brazil.)
Though properties in central London are some of the most expensive in the world, overseas buyers continue to invest in them. According to Christie’s International Real Estate, the average price of London homes selling for over US$1million in 2012 was $4,849 per square foot, with a record price of $9,508 per square foot. Christie’s estimates that 40 percent of luxury homes sold in 2012 in central London were purchased by foreign buyers.
London continues to attract international investors who want to diversify their portfolios in a stable legal and economic environment, aided by the depreciation of sterling, ongoing capital appreciation and world-class universities.
New-build property has been especially attractive to overseas buyers, particularly from Asia. Knight Frank reports that almost half of the buyers of new construction were from Singapore, Hong Kong, China and Malaysia.
Turkish investors are other key players. Turkey’s strong economy has avoided Western Europe’s economic woes, and Turks have family and business links to London. Similarly, High Net Worth Indians also have strong ties and look for central London properties. Mayfair, Knightsbridge and Saint John’s Wood are prime London neighborhoods for foreign investment.
4. The Home Counties
The counties forming a ring around London are home to some of the most beautiful and expensive country estates in the world. The “Downton Abbey” super prime market is in high demand from ultra high net worth individuals (UHNWIs) who want luxury digs close to the city but apart from the urban atmosphere. The Home Counties accounted for 82 percent of super prime country sales in the U.K..
Knight Frank reports that in 2012, 55 percent of prime homes worth £5 million or more were sold to overseas buyers, up from 40 percent in 2011 and 2010. Russians and citizens of formerly Soviet states bought 25 percent of these properties, and Europeans from other countries another 10 percent. Knight Frank cites capital safety, tax advantages and the fall of sterling as reasons overseas buyers find these properties attractive. Prices in areas close to London fare better than those over one and a half hours away.
5. United States
Like the U.K., the U.S. is viewed globally as a safe haven for investments. Individual property rights are well codified, the political system is stable and even in recession the economy is one of the most solid in the world. The U.S. is also known for its quality of life, its variety of geographies and climates and its welcoming people.
When the U.S. dollar weakened in the global recession, American property became downright cheap for some foreign investors. Since most expect the market will regain its footing, investors have jumped into the most depressed markets, in some cases becoming a major force.
In the residential market, Canadians are the biggest foreign buyers. They accounted for 24 percent of foreign sales in 2012 and generally seek homes in sunny warm climates. Chinese buyers came in second at 11 percent, primarily purchasing residences near major cities. Mexico, the U.K. and India are also significant players.
U.S. super prime and luxury residential markets have held their prestige but become more affordable for overseas buyers. Prime property in Manhattan has been less than half the price per square foot than comparable property in London. Forty-five percent of luxury homes in Miami went to international buyers in 2012, while in New York, Los Angeles and San Francisco 30 percent or more of buyers hailed from other countries. Top buyers include citizens of China, Russia and Brazil.
Depressed markets for residential income properties have drawn savvy investors. Miami, Phoenix, Detroit and Las Vegas saw significant inflows, especially from Chinese buyers who often bought multiple units and apartment complexes. To see which cities each country’s residential buyers search most often on Realtor.com®, go to realtor.org/articles/where-are-global-buyers-searching-in-the-united-states.
Which markets will attract global investors next? Here are several micro-opportunities and other potential growth markets:
- Phnom Penh, Cambodia – A new Special Economic Zone is attracting investors who are finding Chinese properties and labor too high.
- Sydney, Australia – Chinese are investing in commercial and mixed use developments there.
- Thailand – The hotel industry is drawing investors as tourism booms.
- Costa Rica and Mexico – American retirees will continue to be attracted to these markets for affordable health care and cost-of-living expenses.
- Spain and Portugal – Both countries have announced plans to offer investor visas that allow travel within the Eurozone in exchange for investment in ailing property sectors. Portugal’s “golden visa” has already attracted Chinese interest.
Hotspots for global investment will continue to move between countries over the coming years. Currencies will shift, economies will grow and recede, and unexpected bursts of affluence will emerge in unlikely places. There will always be new opportunities to attract investors’ interest—hotspots that also provide new opportunities for global real estate agents.
Did you know . . .
In central London, 33 percent of international investors buying off-plan (pre-construction) do so for educational reasons? The property is intended as a base for their children attending London’s universities.