In the United States, cities all along the west coast are seeing inflated real estate prices due to foreign investors looking to park their fortunes into the safe U.S. economy. Is this affecting the Phoenix market and if not, is there a chance that Phoenix could be affected in the future? Here we offer our insight into how foreign real estate investors may (or may not) be impacting Phoenix real estate prices.
Foreign real estate investors in the U.S.
With companies hesitant to make any big moves before the conclusion of the contentious presidential election at the end of 2016, the commercial real estate market saw a dip in both office space sales and new leasing activity. But while domestic companies decided to lay low, foreign real estate investors saw an opportunity to cash in on what (although Americans may not have thought so) is a relatively stable economy when compared to the rest of the world. This is especially true of Chinese real estate investors who were looking to diversify their holdings and hedge their bets against a slowing economy and depreciation in their own country. In fact, the volume of Chinese real estate deals in the United States reached a record high of $19.2 billion, constituting the largest share of foreign real estate investments in our country. Other countries strongly represented in foreign real estate transactions include other Asian countries, Middle Eastern countries, and Canada.
Foreign real estate investments in Phoenix
The government of Singapore currently owns the Arizona Biltmore Hotel — a Phoenix Point of Pride — and in response to climate conditions in their home country, Saudi Arabians have taken to farming hay in Arizona as well. However, Chinese foreign real estate investors have tended and continue to flock to gateway cities in New York and California. As they become more familiar with the larger landscape and as the Phoenix real estate market continues to improve in response to a booming economy, those investments may begin trickling in at a faster pace.
And so, while Phoenix should anticipate growing interest from foreign real estate investors from places like Asia and the Middle East, the more immediate effects of foreign real estate investors on the Phoenix real estate market can be felt from Canada.
Foreign real estate investors from places like Canada and Europe tend to invest in residential vacation real estate and prefer warmer weather. While Florida takes the majority of those investments, Arizona is a growing competitor for those foreign dollars. In spite of the fact that the exchange rate currently sitting at $1.35 Canadian equalling $1 USD, Phoenix real estate continues to attract foreign real estate investors because of our beautiful weather and recreational opportunities. The relative ease of getting here and expansions in key industries are further driving that growth.
And in addition to commercial real estate and vacation homes, renters are also exceptionally represented in the Phoenix real estate market, due to a number of factors, meaning that purchasing rental properties to generate passive income is another popular strategy of foreign real estate investors. This is especially true given the readiness of availability and affordability of rental property management services — being a landlord from across a national border is no sweat.
So what does all of this mean for Phoenix real estate prices?
The truth is, probably not much for now. Canadians have been moving to Arizona and investing in both commercial and residential property for decades. In fact, since the 1960s and 1970s, Phoenix has been a venerable destination for “business elite” Canadians and retirees alike. You are probably very familiar with some Canadian owned Phoenix businesses, even if you did not realize they are Canadian. In fact, those businesses are already estimated to be responsible for approximately 137,000 jobs in the state of Arizona. It is not like we are having a sudden, severe influx of foreign real estate investors.
That being said, as their businesses and the rest of Arizona’s economy — particularly in the Phoenix-metro area — continue to flourish, Phoenix real estate prices will go up as a simple matter of supply and demand. As we attract new, better-paid workers to fill incoming job openings, housing prices will continue to increase.
If you are thinking about investing in Phoenix real estate, the sooner the better. Contact one of our representatives today to discuss the goals for your real estate investment. Whether you are strictly looking to create passive income through rental property or you are ready to find your dream house, we have the right real estate professional to anticipate all of your needs, help you find the perfect property and to negotiate a winning deal. But to maximize your return, you need to act quickly.