Investment flows around the globe: cross-border property transactions in 2016
Last year witnessed impressive levels of foreign investment in several property markets. Investors are increasingly putting funds into overseas real estate to diversify their portfolios and protect their wealth from any risks at home.
Real estate transactions around the world
Based on the major markets studied
* Calculations are based on data from Knight Frank, Cushman & Wakefield, Savills, Colliers, CBRE, Real Capital Analytics and national statistical offices
Our method
The US market was the largest by volume of
The UK came in second with USD 86.1 bln: of this total, USD 33.1 bln went to commercial properties and USD 53 bln went to residential properties. Foreigners comprise some 57% of the commercial real estate market in the UK.
Germany, where
France (USD 25.1 bln), Canada (USD 21.4 bln), Spain (USD 20.2 bln), Italy (USD 16.3 bln), South Korea (USD 13.8 bln), Australia (USD 13.1 bln) and Singapore (USD 11.3 bln) also made our list of top countries by foreign real estate transaction volumes in 2016. Just behind Singapore is the Netherlands at USD 10.5 bln.
Foreign investors in the commercial property segment were relatively active in markets such as Ireland (72% of all transactions), the Czech Republic (70%), the Netherlands (62%), Italy (62%), Spain (60%) and the UK. We found that Singapore (25% of all transactions) and Spain (13%) had the greatest shares of foreign investors in the residential segment. The mean and median ratios of commercial to residential investment from abroad are 1.63 and 0.63, respectively, with the sole outliers being Germany and Australia, where commercial investment greatly outpaced residential investment.
Whence the property investment?
Citizens of Asian and Persian Gulf countries, the UK and the US are among the largest and most important investor groups in the global property market. Russian nationals are also noteworthy players in international property markets.
Asian buyers
Chinese outbound property investments totaled as much as USD 33 bln, falling just 4% short
Chinese investors have traditionally sought out hotel, office and residential properties, but they have recently begun securing assets in industrial zones. Their bulging savings margins need to be secured in large investments which guarantee high yields. The US market is a choice candidate for investment based on such a criterion.
According to the National Association of Realtors, between April 2015 and March 2016 Chinese buyers (including those from Hong Kong and Taiwan) spent USD 27.3 bln on US residential property, comprising 13.7% of all the foreign purchases in the country during the period and 26.7% of all purchases made in the residential segment.
Chinese buyers tend to purchase homes worth around USD 900,000. Individual residential investors often seek out second homes and income properties, often in major metropolitan areas on the coasts; they have recently begun branching out to smaller,
Chinese property investors are also keenly interested in the Canadian market. Chinese investors purchased CAD 1.3 bln in commercial real estate in H1 2016. The markets brimming most with Chinese funds are Toronto and Vancouver, but many other markets – especially those in Quebec and Ontario – are now receiving much greater inflows.
According to the National Bank of Canada, in Vancouver Chinese nationals comprise about a third of all buyers in the country. Thanks in large part to Chinese speculation, prices jumped 24% between 2015 and 2016 to an average of CAD 2 mln for
In Australia, the Chinese buy property mostly in Sydney (53%) and Melbourne, despite taxes (9% in Sydney and 14% in Melbourne) and other investment restraints. Chinese investors, while not the biggest spenders among foreigners, shelled out about AUD 1.06 mln for home purchases on average. In New South Wales, Chinese investors comprised 77% of all foreign buyers.
The main attraction to Australian property for Chinese buyers is the comparatively low median prices of homes and apartments (compare roughly AUD 500,000 in major Australian cities with almost AUD 900,000 in major Chinese cities) and relatively high gross rental yields (compare 4.5% with 1.5%, respectively).
In the United Kingdom, investors from China most often search for prime objects
Persian Gulf buyers
In 2016, Cluttons and Yougov published the results of a survey involving 127 investors from Bahrain, Qatar, Kuwait, the UAE, Oman and Saudi Arabia, according to which London, New York and Singapore were found to be Arab
Four markets – Bengaluru, Mumbai, New Delhi and the state of Kerala – also made the top 10. The reason for this is that the Persian Gulf countries have large Indian communities. For instance, in the UAE Indian nationals account for 30% of the population.
The investors surveyed were ready to invest USD 1 mln on average in foreign property or had already done so. Over half (54%) of them preferred residential properties, while 22% targeted commercial ones and 23% preferred
British buyers
The British are notably active overseas investors who most often acquire property in Europe and the US. According to Rightmove, British nationals constitute the largest group of buyers in Spain, Italy and France, with over half of them acquiring holiday homes and flats in these countries. Budgets for holiday homes reach up to USD 200,000 in Spain, USD 195,000 in Italy and USD 250,000 in France.
The Spanish markets most strikingly popular among UK citizens are Málaga, Alicante, Murcia and Almería. In Italy, the British mainly buy property in Tuscany, Abruzzo, Sicily, Lombardy and Liguria. In France, the regions of choice are
According to the National Association of Realtors, UK citizens make the fifth largest group of foreign buyers in the US after those of China, Canada, Mexico and India. UK nationals in the market have a strong taste for suburban, detached,
American buyers
American outbound investment has tended to dwarf investment from most other countries, moving from USD 10.3 bln in 2009 to about USD 60 bln in 2014.
According to the US National Association of Realtors, Americans have shown increased interest in purchasing overseas properties. They most often look for property in Mexico (13% of survey respondents), and Costa Rica, the Philippines, Colombia and Canada are equally popular among US residents (4% each). As for the European countries, only Spain (3%), Italy (3%) and France (2%) attract US nationals.
The majority (79%) of American investors buy residential property, and among them 53% prefer detached homes. Most investors (87%) are interested in holiday homes or income properties, with as little as 9% of them seeking a new primary residence.
According to AIG Private Client Group, American UHNWIs buy property in Mexico (14%), the Bahamas (13%), England (12%), France and the Caribbean (9% each).
Russian buyers
According to the Central Bank of the Russian Federation, in 2013 and 2014 Russian citizens annually invested just above USD 2 bln in foreign property. In 2015, investments shrank to USD 962 mln, and the final tally for 2016 amounted to USD 870 mln. The volume for Q1 2016, USD 199 mln, was the lowest Q1 total since 2009.
While overall overseas transactions fell by over 50%, commercial property purchases increased by 20%. In addition, Russians now seem to prefer budget residential properties, income properties with high yields and commercial properties to anything else, especially luxurious second homes.
Interestingly, according to Tranio.com data, the budgets of Russian
As demonstrated by Wordstat Yandex statistics, between January and November 2016, Russian citizens searched most for Spanish, Cypriot, Italian, American and German property. Other metrics show that Switzerland and the UK are also popular markets among Russian investors; interest in the Greek, Latvian and Montenegrin markets, however, is on the decline.
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The past year turned out to be rather resilient, in terms of global investment flows, despite the uncertainty brought about by the Brexit referendum, the US elections and
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