The future of global real estate: Where to put your hard earned money

For many South East Asians, cash is still king. Photo: Ken Lund/Flickr

MANILA, September 16, 2013 – Many developed and developing countries are making promising contributions to the world of international real estate. Such an important upturn in international real estate investing currently takes place between China and the United States. The Chinese have become the second-largest foreign buyers of U.S. homes, not far behind the Canadians according to the National Association of Realtors.

Consumers from China and Hong Kong also spent $1.71 billion on commercial property in the U.S. in 2011. Currently, it appears that the Chinese investors are attracted to commercial projects, residential properties, and shopping centers to name a few.

According to Zhang Zu Wei of China Daily, “It’s no news that Chinese real estate developers and property buyers are flooding into the US - something that’s currently, to many Chinese, a better investment than gold - and it’s bringing more than just cash into the market.”

The growing interest by the Chinese in US real estate is also creating new business opportunities. Shenzhen World Union Properties Consultancy Co. Ltd., a Chinese-listed company that offers real estate consulting services, sees the real estate appetite of the Chinese for U.S. land as a trend that may continue for a long time.

Teaming up with local American realtors to serve the growing needs of Chinese investors is one approach that may prove to be productive. A recent article in China Daily notes that the National Association of Realtors affirmed that the Chinese are huge participants in acquiring residential properties in the U.S.

The Chinese also ranked third in terms of land purchases in California, after the Mexicans and the Filipinos, the website Realtor.org noted. Sally Forster Jones, who works as an agent with Coldwell Banker International in Los Angeles, believes that the increasing level of international real estate purchases in LA is indeed an ongoing trend.


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Mary Alice Hines, author of “Investing in International Real Estate,” identified two types of passive investments international real estate investors are making. One type involves investing in securities based on international real estate collateral; the other investing in international real estate service firms and offices.

The general term “real estate” also embraces real property development, sales and leasing relations across domestic borders. And indeed, the sub-category of international real estate could be regarded as one of the most dynamic branches of this business area. It is best broken down into two categories: international commercial real estate and international residential real estate.

The majority of international real estate transactions will come about between corporations and may encompass or be a result of authorized urban planning, engineering, financing, and construction work. Persuading foreign investors into real estate development projects may be a priority for snowballing national revenue and an excellent strategy for finding new capital to build or improve infrastructure and services.

The growth in international investment practices makes it feasible for investors to look beyond their own locales for above average performing investments. A major portion of international residential real estate transactions occur through individual purchases of lots or built units. Currently, most of these individual investments are for condominiums located in Asia, such as those existing or being built in the Philippines.


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Experts say that acquiring such property does not merely depend on location but also on reputation. These acquisitions account for the bulk of what is sometimes referred to as the second home market. As such, international investors may find that renting in South East Asia could be one excellent way of researching this type of investment before an actual purchase.

The actual acquisition of a property, of course, always depends on the terms laid down between the realtor and the potential client. Renting in a desired locale for a time will enable an investor to research property acquisition laws and customs in a new market, better enabling him to evaluate each deal.

In one article posted through investopedia.com, experts have duly noted how the tiger economies of Southeast Asian countries such as Hong Kong, Singapore, South Korea, Taiwan and China, and even the rising market economies of Thailand, Malaysia, Vietnam, Indonesia, India and Pakistan have all seen rapid growth in recent years. China remains the most promising country, currently, followed by India, although real estate inflation has become an issue in both countries.

Kenneth Rapoza who contributes to forbes.com and covers Brazil, India and China wrote recently that the decision whether to jump onto the international real estate bandwagon depends on the individual. He finds the situation in China, for instance, to be most interesting. 

As compared to the housing market in the U.S., real estate investing the Asian tiger can be considerably different. Compared to the zero-money down, liar-loan scenarios common in the U.S. prior to the popping of the housing bubble, most buyers in China do not have mortgage issues. One simple reason: the Chinese indeed have an inclination to purchasing homes in cold cash.

In the case of cash purposes, of course, there are never any foreclosure issues to worry about. Most importantly, there is no staying late at night worrying that the next day might be the owner’s last in their dream house.

Chinese and Southeast Asian buyers of American real estate often make their investments on a cash basis as well. Perhaps such purchases will help head off a real estate bubble of the future by putting many housing units in the strong hands of cash buyers likely able to weather the next storm.

 

 


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Jona Jone

Jona Miranda Jone brings her expertise to the Communities page as a financial writer who is also an expert on mortgages and other transactions concerning property ownership.  Jona now lives in the Philippines, where she works as a freelance writer.

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