Following the stock market crash in 2008 and the subsequent collapse of real estate, the US property market looked bleak. In some parts of the US, property prices fell by up to 40% almost overnight, leaving homeowners in difficult financial situations. However, fast forward almost a decade and the real estate market has continued to climb, and has now reached a strong point in its recovery with US home prices continuing to rise.
This growth is also good news for the country’s economy as real estate construction is increasingly contributing to the country’s GDP – in 2016, it outperformed the pre-crash boom of 2006, as real estate construction accounted for 6% of US GDP.
While positive with regards to the economy, this growth has led to speculation about the US real estate bubble, with some fearing that it is unsustainable. However, lenders are increasingly demanding larger down payments, minimising the risk. But this speculation appears to have done little to put off investors.
For many years, the US has continually been ranked amongst the best places to invest in real estate worldwide and in 2017, the US property market is only getting stronger. With prices rising and demand increasing – as soaring NYC neighborhood’s prices prove – both with American and international buyers are continuing to invest. But exactly what are the reasons behind this?
US Real Estate Offers Safety
Growing prices and demand offer investors means that US real estate currently offers a relatively safe investment. The market has recovered well after the crash has once again become internationally renowned as to offer secure real estate investments.
An Increasingly Strong Rental Market and High ROI
Rentals in US cities are continuing to soar, with Manhattan rental prices growing faster than sales at the end of 2016, for example. As such, investors often see a high yield on their US real estate portfolio, with properties providing a good return on investment.
Tax Breaks for Real Estate Investors
One of the biggest advantages of investing in US real estate, compared to overseas, is the tax benefits. The benefits here are threefold: investors do not have to pay self-employment tax on any rental income; investors pay lower rates of tax on long-term property investments; and the US government offers real estate investors tax breaks for any maintenance work, as well as property taxes and legal fees.
US Versus International Markets
The benefits of investing in US real estate become more apparent when looking at international markets. UK real estate, for example, is facing a period of instability following the Brexit vote.
After voting to leave the EU, the UK has started the long divorce process, something which could take several years. But exactly what do this have to do with US real estate?
Brexit has led the UK into a period of uncertainty, one that may hit the country’s real estate. As such, experts have predicted that Brexit may see investors leaving the UK and choosing to buy property in safer economies overseas – particularly the US.
Similarly, to the UK, many other European countries are also going through a period of change. Following the Brexit news, the likes of France and Denmark called for their own referendum, which if successful, could see further economic and real estate uncertainty.
As such, domestic and commercial property prices may drop across these affected European countries, while the US is set for continued growth in both prices and demand. As such, this may lead investors to sell their property and look to the US for a larger return on their investment. Currently, both politically and economically, the US remains a safe haven for real estate investors.
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