Investing in US property could be a smart alternative to the current Australian market.
Blogger: Matthew Stubbs, Founder, InvestUSA
Since the Global Financial Crisis and the bursting of the sub-prime mortgage bubble, the US property market has become a very profitable opportunity for overseas investors. Prices are low and prospects are good, and compare especially favourably with the Australian market. As such, this is the best time to start investing in US real estate since the 1920s.
While US banks were offering mortgages to anyone, the barriers to home ownership became tiny and millions of people were able to buy property well beyond their means. When this paradigm finally collapsed, suddenly people could no longer afford to own their homes and were forced to sell them. This meant that the supply for property increased and demand fell, resulting in plummeting prices. At the same time, these former owners moved into the rental market and rents increased.
This has left a situation where the market of buying to rent is incredibly lucrative for those with the funds. Several years on from the crash, prices are still suppressed and rental yields are high but there are signs that the market is recovering and the banks are starting to lend money again. This means that in a few years time an investment purchased now could have gained a considerable amount of market value.
Compare this to the Australian market where experts are warning of a bubble. US prices are lower, rental yields are higher and the prospects of appreciation are much stronger. Also consider that, despite the recent economic troubles, the US is one of the world's richest and most stable countries and it is also friendly and accessible to foreign investors. And the favourable exchange rates mean that now is an especially good time to invest. If the rates return to the long term average in a few years' time, any profits you make could be multiplied.
Beware, though, that this buyers' market will not last much longer and if you postpone your investments too long then you will have to compete with more domestic mortgage-financed buyers. Make sure that you are on the right side of the trends and you will find the US real estate market to be a very profitable one indeed.