International Real Estate Report

  • U.S. Ripple Effect
  • U.S. CEOs Predict Increased FDI in U.S. Business for Coming Year
  • Reaching the Latino Market
  • Phoenix Seeks Market-to-Market Business Development with Dubai
  • Eastern Europe Sees Economic Gap Within its Borders
  • Canadian Buyers Look South
  • From the Classroom to Your Real Estate Business
  • What the Best Visa for Foreign Investors?


FOREIGN INVESTMENT

U.S. Ripple Effect
As the U.S. begins moving out from under the housing crunch, other world markets are just beginning to feel the "overseas aftershock" of the global financial system, according to the Sept. 4 Business Week online magazine. What do bad home loans in Alpharetta, Ga. have to do with office buildings in London or Tokyo? "Plenty," says Business Week. Global lenders, wary of further credit problems are denying credit to many builders and/or instituting tougher terms on commercial property loans. This, in turn, impacts employment markets, which impact rents and causes developers to rethink plans. The whole global commercial property market has slowed with the value of commercial real estate transactions worldwide at only $306 billion for the first six months of 2008--about half the amount for the same period in 2007, according to Real Capital Analytics. But it's not just the U.S. subprime mortgage situation at play. An overall softer economy and weak consumer confidence has hurt smaller developers--particularly those is markets that heated up quickly, including those servicing U.S. outsourcing (think IT); a U.S. sector that is slowing along the overall economy. In spite of all this, Business Week notes that opportunities exist, especially for those with cash. Sovereign wealth funds (SWF), which are state-owned entities that manage savings for investment purposes, are key players in commercial real estate and are flush with cash. According to an article in the April Real Estate Forum, SWF have grown from about $500 billion to more than $3 trillion since the 1990s, with projections of tripling that amount by 2012. Go to pg. 10 to read the full article.


U.S. CEOs Predict Increased FDI in U.S. Business for Coming Year
In a national survey of 250 U.S. CEOs by Grant Thornton LLP, 76% of respondents anticipate that foreign companies will invest more in U.S. businesses over the next year. Two out of five respondents think that the money will come from the Asia/Pacific Rim region, while one out of three think the money will come from the Middle East. At the other end of the spectrum, almost half (46%) of the respondents anticipate the U.S. companies will invest less in foreign businesses over the next year; and the majority of the respondents (61%) believe that U.S. companies will invest the most in the Asia/Pacific Rim region. Half of the respondents believe that the biggest benefit of foreign businesses investing in U.S. businesses is that it will help stimulate the U.S. economy. Areas that most concerned respondents about foreign business investments in the U.S. were: loss of managerial control (45%); dollar or currency volatility (44%); political risks (39%); and compliance with U.S. accounting practices (36%).


CULTURALLY CORRECT

Reaching the Latino Market
Up to 2.2 million homes could be purchased by 2010 by Latino buyers, according to a 2004 study by the Tomas Rivera Policy Institute. While this data was well before the recent mortgage crunch, there's little question that this ethnic group is a prime target for REALTORS®...if you can reach them. While NAR's research shows that 84% of all homebuyers use the Internet to search for homes, NAR doesn't break this out by ethnicity. The Pew Hispanic Center reports that fewer Latinos are online (56%) compared with whites (71%) and blacks (60%), and are more likely to seek out information in print. The figure drops further (down to one-third) when looking at Latinos who speak only Spanish. REALTORS® targeting this important market should go beyond the Internet to promote their services and provide key information in Spanish. The National Association of Hispanic Real Estate Professionals (NAHREP) offers online training to help professionals become "trusted advisors" in the Hispanic homebuying community. Both Fannie Mae and Freddie Mac offer mortgage documents in Spanish to assist lenders and other industry partners in serving the Latino population. NAR also offers a number of resources, directly or indirectly, at Realtor.org.


Phoenix Seeks Market-to-Market Business Development with Dubai
Phoenix, America's 5th largest city, is looking to Dubai to help secure the city's place in the global arena. City leaders want to partner with one of the world's fastest-growing urban areas to attract investment, research, transportation opportunities and more, including new real-estate developments, according to the Arizona Republic. Phoenix's newly created Phoenix Global Trade Initiative aims to explore global economic-development opportunities with Dubai as its first target. The two markets are both relatively new economies, which helps make inroads that would be harder with established cities such as Toyko and London, which have deep relationships with long-established U.S. markets such as New York and Los Angeles. Phoenix plans to send a business delegation to Dubai this month. A Dubai delegation would visit Phoenix in October. An economic-development agreement could be complete by November. More than 200 foreign-owned companies operate in Arizona, representing $10 million of investment into the state. NAR seeks to support such international market-to-market initiatives by providing resources that U.S. groups can tap into to identify foreign market industry resources. NAR also provides state-by-state international activity reports.


GLOBAL MARKETS

Eastern Europe Sees Economic Gap Within its Borders
As Europe overall begins to see an economic slowdown, many of the emerging markets of Eastern Europe have been the bright spots for the Continent. Now, however, a clear separation exists between the northern Baltic states of Latvia, Estonia and Lithuania where housing prices have plummeted, compared to soaring rates in some of their southern neighbors, according to real estate firm Knight Frank, which released its Global House Price Index in early September. Latvia was the worst performing country on the index, with property prices falling by 24.1% (7.3% more than the U.S. drop of 16.8% for the period) during the second quarter 2008. In Estonia, prices fell by 16%, and in Lithuania by 9.9%. In contrast, for the same period, Bulgaria was the world's fastest growing property market at an annual rate of 32.2%. Slovakia followed close behind with 31.3% growth, and Russia with 26.5%. These countries were far ahead of the other 43 nations on the Global Index, which in total rose by 4.8% during the quarter, from 6.1% in the previous quarter, suggesting that housing markets worldwide are slowing. Why the problem in the Baltics? Some suggest that the markets were overheating after joining the euro zone and the fall was predictable. The full report is not yet available online, but watch the Knight Frank news page for updates. A snapshot of the report's findings are reported at www.homeoverseas.co.uk.


Canadian Buyers Look South
U.S. REALTORS® have long looked south for foreign buyers and investors as many Latin American countries looked to put their money into an economically stable U.S. market. More recently, it has been our neighbors to the north that have been buying up U.S. properties, drawn by the buying power of the newly strong Canadian dollar combined with depressed U.S. home prices. The largest proportion of foreign buyers of U.S. homes from May 2007 to May 2008 (23.6%) were Canadian, double the percentage of a year earlier, according to NAR's "Profile of International Homebuying Activity" report. Canadians also represent the largest number of visitors into the U.S. according to the U.S. Dept. of Commerce, with nearly 18 million visiting the U.S. in 2007, an 11% growth over 2006. Various sources cite that 90% of Canadians live within 100 miles of the U.S. border, making this a relatively easy market to reach and also to serve given similarities in real estate practices (including client referrals) and a common language aside from French-speaking Quebec. Read the Wall Street Journal online coverage of this Canadian homebuying trend, including consumer tips on how to attract Canadian buyers, which U.S. REALTORS® can consider for their own marketing purposes.

 
BUSINESS RESOURCES

From the Classroom to Your Real Estate Business
What can you do right away to develop international real estate business? How do you get started in international real estate if you can't afford to travel to other countries? What is the value of earning the CIPS designation if your market is local? How can you transfer what you've learned in the classroom to daily business? NAR recently posed these questions to some members of the CIPS Network and they responded with insider tips and practical advice that can be easily and quickly implemented. Advice is shared through stories—voices of experience—from beginners to veterans in NAR International's new "International Best Practices Case Studies." A great resource for REALTORS® to use in planning their own international business strategy and also for International Local Councils and firm sales meeting manager for topical discussions with brokers and agents. Download the 36 page case studies booklet (1.16 MB) from Realtor.org/International.


What the Best Visa for Foreign Investors?
REALTORS® working with non-U.S.clients and customers who require visas to enter the U.S. know this is a significant issue for potential buyers and investors of U.S. properties. The U.S. Department of Commerce also recognizes the importance of the availability of visas for U.S. business and seeks to find the right balance between security and commerce. The Dept. of Commerce also acknowledges the importance of the timely availability of visas as it relates to jobs created from foreign direct investment (FDI). This FDI dimension of business travel and mobility emerged in connection with President Bush's 2007 Open Economies Statement, which noted the fundamental importance of international investment to the U.S. economy. This issue, along with an overview of visa categories relevant to foreign investment, is discussed the 16-page publication "Visas and Foreign Direct Investment: Supporting U.S. Competitiveness by Facilitating International Travel." This is a handy reference for REALTORS® working with foreign buyers who require visas.

Report compiled by NAR International Operations, narglobe@realtors.org.

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