Time to Invest in the US

The Euro reached record exchange rate levels this week, rising as high as 1.5144 EUR against the US dollar: good news for buy-to-let investors seeking more affordable property in the USA with which to tap into a growing demand from many US citizens unable to enter the property ladder. The country is also witnessing a colossal increase in European tourists lured to the USA by the attractive exchange rate.

Tighter credit conditions and negative equity are forcing many US citizens out of the housing market, many of whom are leaving homes behind them that have become too expensive to pay for. Although this is a dramatic situation for many, it poses an incredibly good scenario for anyone wishing to make positive returns through buy-to-let investment property. As access to the property ladder becomes a back-breaking affair, many would-be buyers are opting for rental property instead. "Rent increases will exceed historical averages over the next three to five years," said Orlando-based apartment builder Steve Patterson, CEO of Zom Inc.

‘As credit difficulties make it harder for people with less-than-perfect credit to obtain home loans, demand for rental units will increase’, Patterson said.

Perceptive property investors are already making their way to the “New World”. Recent figures produced by the National Association of Realtors have shown that foreign property purchases in the country are at an all-time high. The British are the main participants in this market, purchasing 12% of homes bought by non-US nationals in 2007, only exceeded by the Mexicans who purchased 13% of properties during this year.

Homes sold to the British rocket in Florida. Here, UK citizens make up 33% of international home buyers, only to be followed by the Germans, Canadians and Venezuelans with 7% each. The main reason for most of these property purchases was  investment with a view to renting out the property or providing a holiday home to both family and friends.

Buy-to-let investors can rest assured in the knowledge that the US, and particularly Florida, attracts tourists for many reasons. Theme parks and beaches aside, the sunny state saw visits from abroad jump about 7% over 2006 according to Nikki Grossman, CEO of the Greater Fort Lauderdale Convention and Visitors Bureau. And the reason? The weakness of the dollar against the euro and British pound. This is reinforced by the fact that 48% of purchases at Sawgrass Mills Mall (just outside Fort Lauderdale) were made with non-US credit cards, states Ms. Grossman. “Brits came to do their Christmas shopping. They bought suitcases, and filled them”, she explains. “To them, it was like a free vacation.”

With the recently approved Open Skies agreement between USA and the EU, prospects for investment property in Florida are only likely to edge upwards. Zoom Airlines is advertising return flights from London Gatwick to Fort Lauderdale in Florida for as little as £299.

So whether it is the sunny Florida or America’s Big Apple that rocks your boat, low US property prices, coupled with healthy rental demand, can generate positive income returns while you wait for the property to largely appreciate in value – something that is set to happen over time, once the credit crunch is over and prices ‘back home’ return to their normal levels.

Please see the charts below:

Source:  The NATIONAL ASSOCIATION OF REALTORS® Profile of International Home Buying Activity in Florida.  Used with permission.  Reprinting or retransmission of this data is prohibited without written permission.