Cross-Border Property Transactions in 2016 INTERNATIONAL INVESTMENTS INDICATE MAJOR INVESTOR GROUPS’ INTERESTS ABROAD.
tions: foreign nationals spent $149 billion in 2016. Even so, these purchases constituted only 11 percent of commercial property transactions, and even less for residential property. The United Kingdom came in second with $86.1 billion. Unlike in the U.S., for- eign investments comprise about 57 percent of the total commer- cial real estate market in the U.K. In Germany, where cross-border purchases totaled just $25.8 billion, foreign transactions constituted only 40 percent of the commercial segment in 2016. France, Canada, Spain, Italy, South Korea, Australia, and Singapore also made our list of top markets [see graphic]. Foreign investors in commercial property were most active in markets like Ireland (72 percent of all transactions), the Czech Republic (70 percent), the Netherlands (62 percent), Italy (62 percent), Spain (60 percent), and the U.K. Citizens of Asian and Persian Gulf countries are particu- larly active international investors, with Chinese investors spending about $33 billion abroad in 2016 and Singapore and Hong Kong investors spending about $12 billion and $8.4 billion, respectively. South Korean investors spent about $7 billion and Japanese investors spent about $3 billion. Chinese investors tended to invest in office and hotel proper- ties, while Singapore investors preferred a more balanced combi- nation of office, hotel, industrial, retail, residential and mixed-use properties. The top destination markets for Chinese investment were the U.S., Hong Kong, Malaysia, Australia and the U.K. [see sidebar]. Persian Gulf buyers, on the other hand, preferred London, New York City, and Singapore when investing across borders. In 2016, a Cluttons and Yougov survey of 127 investors from Bahrain, Qatar, Kuwait, the UAE, Oman, and Saudi Arabia found that these three metro areas were their markets of choice. Respondents to that sur- vey claimed that they were ready to invest an average $1 million in foreign property. More than half (54 percent) preferred residential properties, while about one in five (22 percent) targeted commer- cial ones and 23 percent preferred mixed-use properties. In that same survey, investors indicated that more than half (55 percent) of their portfolios consisted of foreign property. Although British investors do not always live in the U.K., Brit- ish nationals are extremely active when it comes to cross-border investing. According to Rightmove, British nationals constitute the largest group of foreign buyers in Spain, Italy and France and the fifth-largest in the U.S. British investors in the U.S. market have a taste for suburban, detached, single-family homes in states like Florida and California, where the average budget for investment properties was just over $680,000 last year. American outbound investment volume often dwarfs MAJOR INVESTMENT PLAYERS AROUND THE GLOBE
investment from most other countries: U.S. investors have raised their stakes in real estate outside the U.S. substantially since 2009, when they invested $10.3 billion “cross borders,” to 2014, when they invested about $60 billion internationally. According to the National Association of Realtors® (NAR), Americans have shown increased interest in purchasing over- seas properties, with Mexico being by far the most popular investment destination of interest. Finally, according to the Central Bank of Russia, in 2013 and 2014, Russian citizens annually invested around $2 billion in foreign property. In 2015, investments shrank to about $960 million, and the final tally for 2016 may fall below $800 million. In fact, the total volume for the first three months of 2016 came to $199 million, the lowest total for that time frame since 2009. Russian investors’ over- seas transactions fell by more than 50 percent, although commercial property purchases increased by 20 percent during the same time period. Furthermore, Russians now seem to prefer budget homes, income properties with high yields and commercial properties. According to Yandex Wordstat, between January and November 2016, Russian citizens mostly searched for Spanish, Cypriot, Italian, American and German properties. • Thomas Espy (left) & Sergey Kosarin are data analysts for Tranio. com, an international real estate broker with a network of 700 partners worldwide and a catalogue of more than 110,000 listings in 65 countries. in major metropolitan areas, especially on the coasts. In Australia, the Chinese buy property mostly in Sydney and Melbourne: the main attraction is the com- paratively low median price of homes and apartments, as well as the relatively high gross rental yields. In the UK, investors from China usually search for prime assets in London’s central districts, where they invested $3.75 billion. The UK market’s 4.5 percent capitalization rate is a key pull for Chinese buyers. CHINESE INTERNATIONAL INVESTMENT TRENDS T he Chinese are the largest group of foreign investors in the US, with the States welcoming $14.3 billion from China. Chinese investors look to secure their savings in valuable, high-yield assets, making the US the first-choice candidate. Chinese buyers tend to purchase American homes worth around $900,000: individual residential in- vestors often seek out second homes and income properties
by Thomas Espy & Sergey Kosarin
ast year witnessed considerable cross-border investment in several property markets, with investors aiming to diversify their portfolios and protect their wealth from risks at home. Tranio experts analyzed cross-border transactions around the world in 2016 and examined the preferences of major investor groups. In review, 2016 turned out to be impressively robust from an international investment standpoint. Major developments, such as China’s emergence as a major investment source and impressive
rebounding in several U.S. residential markets, may be a harbinger for coming trends in global cross-border investment flows. Based on the major markets examined by Tranio’s analysts, in 2016 the total volume of cross-border real estate trans- actions came to $426.8 billion; cross-border investments in commercial properties amounted to $188.4 billion, and resi- dential properties accrued a total of $238.4 billion. The U.S. market was the largest by volume of cross-border transac-
TOP REAL ESTATE MARKETS BY FOREIGN TRANSACTION VOLUME IN 2016, BILLION USD Source: Tranio.com calculations*
RESIDENTIAL REAL ESTATE
COMMERCIAL REAL ESTATE
*Calculations are based on data from Knight Frank, Cushman & Wakefield, Savills, Colliers, CBRE, Real Capital Analytics and national statistical offices.
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