Buckle up, real estate agents! The year 2016 is going to be a good year in the industry. The US real estate is forecasted to attract more foreign investors in the months ahead due to a recent increase in the Federal Reserve's rates.
The Federal Reserve made a move that is in contrast to much of the industrialized world's easy money policy. They decided to tighten up slightly during the start of a rate hike cycle which falls on Wednesdays. The said divergence in monetary policy is anticipated to be a potential source of volatility in 2016. However, Pricewaterhouse Coopers partner Mitch Roschelle pointed out that this decision could benefit hard assets which include US real estate.
Roschelle explained, "Whenever there's instability in a society or in the world, investors tend to rotate towards the non-trading asset. They rotate to real estate as opposed to the trading asset."
China, in particular, has been noted to take an increased interest in US real estate. Despite having a shaky summer, Chinese investors have put it in a lot of investment in US properties. Based on data compiled by Real Capital Analytics and PwC, about 8 percent of all foreign commerical purchases in the past 12 months came from China.
Canada also remains as the largest foreign investor in US. The country's neighbor to the north accounts for 31 percent of all oversease commercial property investments since 2010. This rate represents 3.92 percent of Canada's GDP while China's US property investment is just 0.14 percent of its economy.
"Investors in US real estate tend to be our trading partners," Roschelle said. Year-to-date, Canada is responsible for 15.5 percent total trade in the US, making it the second-largest trading partner behind China's share of 15.8 percent, according to data obtained by the US Census Bureau.
Aside from the Federal Reserve's increased rates, the strengthening of the US economy is also one of the major reasons why many foreign investors will pour their money into the US real estate.