According to the CEO of one of the largest real estate businesses in the United States, which raised capital from investors abroad, there is no need to read the daily news just to determine where there is an issue happening at the moment in all parts of the world. All they have to do is know the predominant nationality of those requesting to meet with them.
He also added that when Mexico voted for a leaf leaning leader, they began to receive emails and phone calls from affluent Mexicans who decided to take their resources out of the said country. After demonstrations, rebellions, and national conflict gripped Chili, usually one of the most established nations in Latin America, they began to get visits, emails, and phone calls from the Chili people. It does not take instability for those to opt to transfer their cash elsewhere in order to secure and safeguard its value. For a very long time, the United States is their preferred destination to transfer their funds.
On the other hand, just a few months ago, there has been a clear and obvious decline in the flow of foreign capital to the United States. This is a reality, which has been pointed to an array of factors, which include the continuing and unending trade conflict with one of the powerful countries in Asia, which is China, and a changing dogmatic and rigid setting in the United States.
Wall Street Journal commented that investors from foreign countries were net sellers of commercial real estate in the U.S. last year for the very first since the year 2012. According to the Real Capital Analytics, cross-border attainments of the commercial real estate in the United Stated drawback below USD50B in the year 2019 to the lowest digit in five years.
Provided the fact that they are in election years, experts believe that today is the best time to re-examine the reasons. The United States has been an attractive place for worldwide capital in the past; reasons a lot of expertise in the real estate market ignore and take for granted are as follows:
Stable and Transparent Legal System
Regardless of the infrequent breakdown and collapse, the legal system weighs well to other nations. The balances, checks as well as transparency in the system give foreigners an insight that there is no bribery and more equality in litigating business contracts and transactions than in various countries in the world. In some nations, regulations can vary and modify on an urge of a political party or a leader that is potentially terrible for foreign direct investment. Traders and investors alike have to trust that the legal system will get hold on to the current laws and treat all and sundry the same.
Economy’s Size and Liquidity
The liquidity and the size of the economy is one of the many assets of the U.S. Like for instance, using our business, a hotel proprietor in Latin America who wants to sell will perhaps need to wait months or even years to find a good buyer and close a deal. On the contrary, in the United States, it is likely to sell a real estate property, whether a hotel or resort, in just a few months. This was made possible due to expert and skilled business brokers, legal experts as well as financial advisors who are always here to assist in handling the transaction. Liquidity level enables people to feel confident and secure investing in a real estate market in the United States compared to other places in the world.
Banking System in the U.S. Is Liquid and Diverse
There are a lot of banking organizations and financing sources which vie for financing. Terms and quotes are given quickly. As a whole, the terms are cheap, with an amply long amortization timetable as well as low rates of interest. Other countries don’t experience this. Like for instance, in Costa Rica, you can just get twelve to fifteen-year amortization against thirty years. The interest rate was approximately 350 basis points higher compared to the rates in the United States.
Information Availability and Transparency
Another thing we ignore in the U.S. is the availability and transparency of information. When our company embarks on due diligence on a real estate, we process as well as consider reams of data on the market, demand drivers, competitive set, and many others, to totally investigate the advantages and disadvantages of a deal as well as make a sound decision. In some countries, the real estate market struggles to show reliable information; research and analysis become a daunting matter, which can be very expensive.
Employment Environment Is Dynamic
Another strong point of the United State’s economy from a traders’ and investor’s viewpoint, albeit somewhat contentious, is the dynamic employment setting. A lot of businesses in the U.S. can downsize their payroll fast to let them become competitive when there is a downturn in the financial aspect. In various countries, firms might have their hands tied with regards to kicking off workers, and the benefits pay might make the dismissals of the workers a huge challenge. The United States has an extremely favorable environment for the making and development of companies, which need a massive workforce. However, reforming immigration regulations is required to let more deserving people join the workforce legally and thus contribute to the success of the economy.
By no means, the U.S. economy is amongst the most stable and dependable. It’s in the best interest to keep it that way, both for the benefit of people in business and to restore foreign investors’ confidence who get prudish at the first indication of risk or instability.
I want to share this advice to all political candidates out there. Let us change the things which are broken or can be enhanced upon, such as environmental laws, the healthcare system as well as immigration rules — without making systemic and drastic modifications which can deter foreign investment. While the U.S. surely is not perfect as there are a lot of areas to improve, the U.S. economic system is the cover of the world.
