The world is shrinking, and one area where that’s especially evident is in the growth of international real estate investment. Foreign investment in U.S. properties accounted for $87.3 billion in completed deals in 2015. This is an astonishing figure when you consider that it stood at just $5 billion in 2009.
There has been a 2-way flow of capital, with U.S. investors happy to participate in the global market, encouraged by favorable exchange rates and rent growth in many markets. Foreign real estate is ideal for portfolio diversification, with the potential for capital appreciation as well as the ability to generate rental income in a foreign currency.
Europe and Asia attract the most interest from U.S. investors, but there are markets elsewhere, like in New Zealand and Qatar, that are performing well in the residential sector. Here are some details on 5 hot spots for residential and commercial real estate investment.
The United Arab Emirates are strong on wealth creation and boast positive demographics that support solid returns in Middle East property. The economy in the Gulf region has grown at least 4% for the last 3 years.
The city of Dubai is the hub of real estate activity here. Its status as a global business center makes long-term prospects for commercial properties excellent. The Dubai International Financial Centre (DIFC) is the financial hub for the Middle East, Africa, and South Asia. The district includes, office, retail, and residential space.
There has been some indication that foreign investment in the district will be limited in the future, but meanwhile the Canadian asset manager Brookfield is partnering with Dubai’s sovereign wealth fund Investment Corporation of Dubai (ICD) to build a $1 billion mixed-use development in the DIFC – the first new project there since the recession.
The underlying demand is strong in Singapore, but the general slowing of Asian economies has led to reduced prices in their prime residential market. This presents an opportunity for U.S. investors and their strong dollar.
European markets offer good prospects for both commercial and residential investment. Commercial rent growth has been solid at around 2% annually, and interest rates are low. London’s residential market has seen a 9% rise in prices in the past year, but demand continues to be strong.
Nearby, Dublin is expected to see the strongest rent growth for 2016–2017 with an anticipated rate of 10.7% growth per annum. This will be due to very low vacancy levels coupled with robust demand.
Having come through a very rough patch, Spain’s economy has performed well over the past year. Real estate prices here are still more than 25% below what they were in 2008, but have stabilized. Barcelona and Madrid are the strongest commercial markets here. For residential investment, the strongest market is in the Balearic islands, which are very popular with tourists from across Europe.
There’s been a big upswing in home prices here over just the last year. After barely budging in 2014 (up by .39%), residential prices were up by nearly 9% in 2015. Demand is high and construction is just beginning to respond.