HOW INTERNATIONAL HOME BUYERS WILL IMPACT LUXURY REAL ESTATE IN 2016

HOW INTERNATIONAL HOME

BUYERS WILL IMPACT LUXURY

REAL ESTATE IN 2016

JANUARY 4, 2016

There are many factors at work this year. How will global trends affect the American property market over the next 11 months? They say that all real estate is local, but macro fundamentals and trends can also have a notable impact on real estate markets. So what’s happening now? What does it mean for property prices, and luxury home buyers, sellers, and investors?

The Stock Market

On January 21st, 2016 oil prices fell to their lowest in 12 years. Analysts expect oil could go

lower, and for longer than previously expected. Notable investors including Bill Gross and

Sam Zell have long been predicting a US recession in 2016, but there are some bulls.

Analysts have been proclaiming that the market is at least 60% overvalued for years.

History suggests rather than just correcting itself markets normally overcorrect, before

recovering. On the bright side, this already appears to be fueling significant portfolio

restructuring; with billions in capital seeking investments offering more safety and yield.

Further sell-offs in the stock market could amplify this trend, and investment in real

estate as the year progresses.

China, and Beyond…

The plunging stock market and frothiness in tech are largely being blamed on China.

However, it isn’t only the Chinese economy which may be in trouble in 2016. Brazil,

Venezuela, and Canada are all facing major economic challenges. As Italian designers and

other European fashion houses find growing success in collaborating with US property

developers, and their initial projects reach completion, more European cash could flow into

American real estate. Over 60% of foreign investors surveyed say they plan to increase their

holdings of US property in 2016. Data from Real Capital Analytics shows almost $90 billion

in foreign investment in US real estate in 2015. With big new tax breaks for foreign pension

funds, these figures could be significantly higher for the next 12 months.

The Presidential Election

RIS Media, the Wall St. Journal, and ABC News all have different opinions on how election

years impact the real estate market. Some analysts don’t believe presidential elections

have any impact on housing. Others point to data showing a distinct difference in the

economic performance following a presidential election depending on who wins. After

November, when the nation knows what to expect for the next four years there may be a

great lift in values, and profit for those that were brave enough to act early.

New Federal Regulations Targeting Luxury Home Buyers

In January 2016 new Federal regulations began to be piloted in New York City and Miami

targeting luxury home buyers. In an effort to tackle tax evasion and money laundering new

rules demand the identities of those buying high-end properties to be reported by title

companies. This may not be an issue for most, but it could temporarily create a small dip

in real estate statistics if there is a substantial number of criminal organizations

purchasing property in these markets. At the same time, this creates a great opportunity

for others to secure great deals.

Conclusion

There are a number of significant factors influencing the US property market in 2016. The

stock market, struggling foreign economies, new rules, and regulations, may all play a role.

Uncertainty around some of these factors could cause some to miss out on the best

opportunities while providing better more negotiating power, and equity gains for those

that snap up deals in the first half of the year.

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