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Why Is It Smart To Invest Money in The US Real Estate Market?

China will be middle-income by 2030; a larger and richer group of future investors ready to diversify the US real estate market.

By Richard Du June 21, 2017
Credit: Augusto Navarro

The enthusiasm for US real estate continues to surge, and international buyers are going for both luxury and less pricey properties. This is not a new scenario, nevertheless, this practice is becoming more and more prominent and profitable for global investors.

The current approach is not just about wealthy people buying fancy houses or companies taking over commercial real estate deals. It is also about a vibrant foreign middle class, led by China, who happens to find great value in the American culture, opportunities and the financial system. Let’s not forget that foreign investors buy in America for different reasons. Some buy a home with the intention of it being their primary residence. Others use the property as a second home (vacation), an investment, or as a source to diversify their assets.

Related: An Ultimate Destination For The Most Comprehensive Real Estate Data, Agorafy Prepares To Launch Nationwide

Why is it smart to buy in America? The incentives are countless and they are beneficial for business people as well as families. The United States is always on the quest for the next big global company. Financially speaking, the US also represents a great opportunity for families and companies to invest and thrive. It is about the opportunities to be economically successful and have a quality of life.

The US encourages people to come invest. Why? The country is preparing to unveil an ambitious infrastructure plan under the current government. The educational system continues to be a major factor for foreign families and investors who want to live in the country. And of course, hospitals and doctors are the best in the world.

For Jack Ma, founder of Alibaba, the US represents a prodigious country and an international force for helping improve globalization. As he mentions, “It is about inclusive globalization.” Ma looks at globalization like this: in the past 30 years, globalization has been controlled by 60,000 companies. Furthermore, 100 years ago, globalization was in the hands of several kingdoms and emperors. In the next 30 years, the US, together with other strong economies, can support 6 million businesses and 20 million small businesses.

Related: Global Real Estate Is Booming With Great Housing Deals Abroad

Historically, people from other countries have always been interested in buying US real estate. Prosperous Europeans have been investing in US real estate since the mid-19th century. The oil boom in OPEC countries led to significant commercial and residential real estate investments during the 1970s. In the 1980s, the economic boom in Japan, with billions of dollars of surplus cash, also made its entrance into US real estate market and infrastructure deals.

It was not until the 1990s when large scale investment in real estate began to intensify. The National Association of Realtors estimates that “Foreign investment in US real estate moved up from $2.763 trillion in 1992 to $8.144 trillion in 2001.” This is a 200% increase within a decade. In 2016, residents of Canada, China, and Mexico bought the most US real estate assets, with China increasingly leading the way.

China is by far one the most active players investing its capital in US real estate. Its middle class will grow in the years to come. According to McKinsey & Company, China had an urban population of 730 million people in 2015. So even if that figure doesn’t change (and it will only grow), by 2022 over 550 million people in China will be considered middle class. That would make China’s middle class big enough, on its own, to be the third-most populous country in the world.

Related: Are Urban Growth And Innovation The Future Catalysts Of Global Real Estate?

In addition, Chinese households have very little debt. Their household debt-to-GDP ratio of 40 percent is less than half the American household debt-to-GDP ratio, and is much lower than those of other developed countries. Perhaps 15 to 20 years ago, buying properties in the US was very expensive for the Chinese middle class, but now the opportunities to invest and live in the US has become more reachable.

It is a fact that China’s middle class is larger and richer. Thus, Chinese purchasers continued to outperform the rest. Last year, Chinese buyers also bought the most expensive homes at a median price of $542,084. “Although China’s currency modestly weakened versus the U.S. dollar in the past year, it’s much stronger than it was five to 10 years ago, thereby making U.S. properties still appear reasonably affordable over a longer time span,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR).

The future looks very positive for foreign investors. The US continues to be one of the most attractive countries for them. In the near future, an up and coming vibrant Chinese middle class will be a key player in the US real estate market.

Richard Du

ABOUT THE AUTHOR Richard Du

ABOUT THE AUTHOR Richard Du

Richard Du, founder and CEO of Agorafy, was born in Vietnam and raised in the United States. As a child, he worked to support his family until he had the chance to immigrate to the America. Here, he began his career as an agent at Helmsley Spear, which he eventually parlayed into a lucrative real estate business. More than a decade later, Mr. Du is at the helm of Agorafy.

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