January 31, 2018 11:42 pm
For years, New York City was the go-to spot for foreign real estate investors. However, as of 2017, Los Angeles had as much investment as the Big Apple, ending its seven-year streak. Let’s see why this happened and what it means to residents on the Westside.
Why Los Angeles?
During the 2017 annual survey of the Association of Foreign Investors in Real Estate (AFIRE), Los Angeles tied with New York City, moving the West Coast into contention with what used to be the powerhouse on the East Coast. Three years ago, LA was in fifth position. In 2016, LA was in second place. This year, LA closed the gap.
The top five cities were:
- Los Angeles
- New York City
- Seattle
- Washington, DC
- San Francisco
AFIRE suggests that one reason Los Angeles was attractive to real estate investors was both warehouse and industrial properties. As online shopping continues to grow, foreign capital is constantly looking for industrial and logistics properties. In addition to industrial properties, foreign investors are also looking for office, retail, and multifamily homes.
LA Ranks Globally As Well
In general, the entire United States ranked well according to AFIRE. They state that the US is the most:
- Stable
- Secure
- Likely to achieve capital appreciation
Despite this rating, London pushed NYC out of the top spot and became the top global city, going from #3 to #1. The top five global cities are:
- London
- New York City
- Berlin – showing that investors are no longer as worried about Brexit
- Los Angeles
- Frankfurt – jumping up from 13th place in 2016
New York Is Falling – LA is Not
New York City appears to be headed in the wrong direction. Real Capital Analytics tracks active commercial markets around the world. Of these thirty, only Paris, Denver, and NYC had substantial transaction volume drops. In NYC, the volume in the first half of 2017 dropped by 40%.
On the other hand, Los Angeles remained steady. Like London, LA’s transaction volume was close to that of 2016.
What Foreign Real Estate Investors Mean For the Westside
Some people assume that foreign real estate investment leads to higher real estate prices that price locals out of the market. Others worry that foreign investors don’t contribute to the local economies. However, this is not true.
The influx of foreign capital in the LA area will drive new construction and increase the economy in the area. Without foreign investment, many of the larger commercial building projects would not be happening in the area. Additionally, foreign real estate investors tend to look at only the ultra-high-end builds, not affecting the prices of average homes and properties.
As new ventures come into the area, the Westside will see increased business and financial opportunities. This will lead to a stronger economy, thus increasing the price of single-family homes in the area.
If you’d like more information about foreign investors in the area or how they will affect your own home buying or selling experience, give me a call. I’d be happy to talk with you.
Categorised in: Blog, Housing Market