It’s a yearly ritual to find out where international investors will put their money. And, the latest AFIRE survey shows that 95% plan to maintain or increase their investments in the U.S., but investor “caution” is also rising.
The survey by the Association of Foreign Investors in Real Estate shows that foreign investors remain bullish on U.S. real estate. Despite all the uncertainty about interest rates and policy changes out of Washington, AFIRE says investors feel the U.S. far outranks other countries when it come to investing stability and security.
60% of survey respondents say the U.S. is the most stable and secure. Germany Canada, Australia, and the United Kingdom also ranked in the top five but with much smaller percentages.
They say the specific qualities they like about the U.S. include an economy that’s sustainable and growing, a high degree of transparency, and a fair judicial system. They say that in general, U.S. investments are more secure overall.
But even with that strong vote of confidence, one third of the people in the survey say they feel more pessimistic about the U.S. than they did last year. Only 6% say they feel more optimistic. Another 60% say their opinion hasn’t changed.
AFIRE says that last year the survey showed 8% felt more optimistic, another 8% felt more pessimistic, and 85% said their opinion about the U.S. hasn’t changed. So there was a big jump in the percentage of people feeling more pessimistic — from 8% last year to 33% this year.
AFIRE CEO James A. Fetgatter addressed that concern saying: “As uncertainty rises with a new government in Washington and interest rates that have risen dramatically, it is no surprise that investors have signaled a note of caution.”
As for the cities attracting the most international buyers, New York hit the top of the list for a seventh year in a row. The Big Apple also ranks #1 among global markets for a third year in a row.
Los Angeles maintained its position in 2nd place among top U.S. cities. Boston and Seattle moved into the 3rd and 4th position. They were previously tied in 5th place. And San Francisco moved from the 3rd position to the 5th
International investors are also showing strong interest in smaller markets with steady job growth and plenty of millennials. The cities that came out on the list as include Nashville, Portland, Charlotte, San Antonio, Madison, and Pittsburgh.
New York also sits at the top of the list for global cities. Berlin moved up into second while London slipped into third — apparently due to Brexit fears. Los Angeles and San Francisco are fourth and fifth.
According to the survey — it appears there will be a slight shift in focus on the kinds of properties that investors will choose. Last year, industrial and multi-family properties were tied for the top spot. This year, industrial properties are first, multi-families are second, office space moved up into third position and retail slid to fourth. Hotels remain in the fifth position.
A few surprises in the AFIRE survey: Berlin was among the top five global hot spots for a second year in a row. Apparently investors feel that Germany also offers stable and secure investment opportunities.
Washington, D.C. also dropped off the top five U.S. cities list for the very first time. AFIRE Chairwoman Catherine Pfeiffenberger says that result is misleading. She says: “Washington, D.C. is a global gateway city with good leasing activity and a growing economy bolstered by a young workforce.” She feels it will continue to attract international investors. I’m not so sure.
When it comes to countries providing the best opportunity for capital appreciation, 47% named the United States. Brazil, Germany, the United Kingdom, and Australia were all in the top 5 but with a much smaller percentage.
As for emerging markets, their favorites were China, Mexico, Brazil, India, and Chile.
AFIRE has a membership of top institutional investors worldwide. The association claims they have an estimated $2 trillion under management in global assets.
To learn more about the best U.S. markets for both cash flow and appreciation read this article: The Best Places to Buy Rental Property in the Year 2017