the pandemic and we address societal issues, interna- tional investment in U.S. real estate will again increase. Not only is there historical evidence supporting this theory, but the U.S. still has the advantages that make it an attractive destination for capital. WHYU.S. REAL ESTATEWILLREMAIN ATTRACTIVETO INTERNATIONAL INVESTORS Now that we’ve covered how foreign direct investment has increased over the years, and how overseas money flowed in U.S. real estate following the last crash, let’s take a look at some of the advantages the U.S. market offers. International investors should have confidence that long- term investments in real estate here will perform well. Risk diversification America has long been thought of as a safe place to store capital. Even when returns are low, foreign investors have parked their money here. The National Bureau of Economic Research highlights that U.S. real estate, stocks, and other assets are a way for wealthy overseas investors to diversify their portfolio. For those in countries where markets are more volatile, U.S. real estate is a great way to preserve and grow wealth. Developed markets The U.S. financial markets have a long track record of stability. This makes overseas investors confident they can put their money here freely and safely. Research from the University of California-Irvine attests that the strong rule of law here plays a role in attracting FDI. Investors prefer countries that protect contract rights, and U.S. markets do just that. A strong market and workforce As the U.S. International Trade Administration notes, the U.S. market has distinct advantages, such as: • A great climate for innovation
For international investors, despite America’s gloomy economic news, societal issues, and uncertainties around the pandemic, it is important to keep perspective. If his- tory tells us anything, it is that the American economy is highly resilient. Despite the ebbs and flows of the American economy, the total value of assets held by international investors contin- ues to rise. Even from 2008-2009 that value didn’t drop.
If we analyze various real estate sectors during the 2008 Housing Crisis, we also see that international investors come back during the recovery. Take a look at how over- seas investment in commercial real estate declined sharp- ly in 2008, then increased rapidly during the recovery.
• The world’s largest consumer market • A skilled and productive workforce
This is why you see companies like Taiwan Semiconductor Manufacturing Co. investing $12 billion to build a chip facto- ry in Arizona, even in the middle of the pandemic. Solid returns The S&P 500 has achieved an average annual return of 9.8% over the last 90 years. That’s quite a track record. If we examine American real estate, we see great returns as well—without the volatility. For instance, multifamily real
The chart above also reminds us of this: The inter- national investors that got in early during the recovery, when asset prices were at rock bottom, profited the most. As the American economy emerges from the lows of
60 | think realty magazine :: october 2020
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