Ever since gargantuan investor Warren Buffett said last year he would buy a couple of hundred thousand single-family homes if he could, the housing market has attracted renewed interest from both individual and institutional investors keen to buy property in the USA.
Buffett said he stopped short of doing just that because he couldn't figure out a way to manage the portfolio, but that hasn't stopped other investing giants.
Blackstone has waded into the US housing market and emerged rapidly as the leading institutional buyer deploying some $2.5 billion on 16,000 US investment properties.
“The market is moving much faster than anybody thought possible,” Blackstone's global head of real estate Jonathan Gray said in a recent article from Bloomberg. “Housing is much stronger than people anticipated.”
The company has been buying US property in Atlanta, Chicago, Las Vegas, Phoenix, Northern and Southern California; Miami, Orlando and Tampa, Florida and various other cities, according to the article.
And it's far from the only giant investment house that has been active with Colony Capital and other major players competing in buying property in the USA. The market is even the subject of analysts notes from JP Morgan and others these days.
So what does this mean for individual foreign investors buying property in the USA? Are there still opportunities out there?
Of course, but we think it means you need to be more careful about where you invest. Markets such as Phoenix and Atlanta may be approaching a situation where much of the capital upside is gone already and the yields have dropped to a level (sometimes under 10 per cent in Atlanta's case and perhaps less in Phoenix) where it might not be worth it for some investors. On the plus side though, having so much institutional interest there means if you do find a good deal (although it's getting harder) there's a high likelihood you can sell it for a profit a little bit down the track.
Other US property investors looking for future capital growth - and easier pickings at the cheap end of the market - are focused on Orlando and other parts of Florida. Our sources there tell us funds are buying too, but it's nowhere near the level of competition from institutional investors that there is in Atlanta.
Aside from Florida, the high value markets of Detroit, Kansas City, Indianapolis, Memphis, Las Vegas and others still offer opportunities for those able to find, analyse and execute good deals.
So don't let the big boys scare you off, grab a copy of Buying Property in the USA: A Foreign Investor's Guide and grab your stake of this exciting and buoyant real estate market. Chapter Four of the book takes readers through the real estate markets most popular among foreign investors.
The fourth in our series of podcasts also discusses the characteristics of some of these markets, although in slightly less detail than can be found in the book.