The United States has always been the top choice for overseas property investment for Chinese nationals. For many, buying a house in the U.S. is not just an investment, but also a necessity. The appeal of the U.S. in terms of environment, resources, and education is well-known. However, after the subprime mortgage crisis in 2008, the U.S. real estate industry experienced a downturn. It has only recently begun to recover, and the growth of the real estate market is gradually stabilizing. Yet, with the impact of policy changes such as studying abroad in the U.S., many potential investors in U.S. real estate are feeling uncertain.
Like most countries, most real estate in the United States comes with permanent ownership. If you purchase a villa, you are buying not only the house but also the land. Therefore, the value of the property will increase as the value of the land appreciates.
There are many types of real estate in the United States, including single-family homes, condominiums with independent ownership, townhouses, and multi-family housing. Investors can choose the appropriate type of property based on their different purposes such as studying, retirement, or investment. The type of property most familiar to Chinese people is the condominium, but the most common type of property in the U.S. is the single-family home, which accounts for about 80% of the residential market in the United States and is also the most worthwhile type of property to invest in.
Additionally, the U.S. real estate market mechanism is relatively well-developed, with a sound legal environment and protected property rights. For example, real estate information in the U.S. is publicly available, including how many times a property has been traded, when it was traded, at what price each time, the annual tax amount, and who the current owner is, etc. This effectively prevents speculative behavior in real estate and protects the rights and interests of both buyers and sellers in property transactions.
As we all know, the U.S. dollar, as the only universally accepted international currency, has always been the most important safe-haven currency and reserve currency globally. Whenever there is increased volatility in the global economy or turmoil in the global financial markets, the safe-haven and value-preserving attributes of the U.S. dollar become evident. Therefore, U.S. dollar assets have always been a relatively high-quality investment choice in overseas asset allocation.
What is the future investment outlook for U.S. real estate?
First, the current economic performance in the U.S. remains strong. The GDP in 2018 was the fastest growth year since 2015, with an increase of 2.9%. Experts predict that GDP growth in 2019 will remain around 2.5%. Additionally, the unemployment rate in the U.S. reached a record low in 2018, with a strong job market adding 2.5 million jobs. This favorable economic situation will also drive the U.S. real estate market into a new upward cycle.
Secondly, by observing the U.S. real estate market over the decades, I have found that U.S. housing prices exhibit cyclical changes. After the downturn from the subprime mortgage crisis in 2008 to 2012, U.S. housing prices are currently in a phase of steady recovery. Moreover, since 2014, the growth rate of new residential construction in the U.S. has been slow, making it difficult to alleviate the current tight inventory situation, which will push housing prices even higher. However, according to predictions from authoritative U.S. real estate websites, housing prices in the U.S. will continue to rise in 2019, but the growth rate will slow to around 3%. It is expected that by 2020, the price increase will be about 5%. This means that compared to the rapid growth of the past five years, the growth rate of U.S. housing prices in 2019 will cool down, and I personally believe this is a suitable time for some investors to enter the market.
In addition to appreciation returns, the rental returns from investing in U.S. real estate are also quite good. The rights of renters in the U.S. are protected by law, and renting does not require various additional expenses. Therefore, nearly 40% of people in the U.S. choose to rent, indicating a very strong rental demand. According to national statistics, since 2000, the average growth rate of the rental population in the U.S. has reached 31%. This suggests that the rental population in the U.S. is relatively stable, leading to stable rental returns. From what I understand, the average annual rental return for U.S. real estate is around 4%, with some popular areas yielding returns as high as 6% to 7%.