NORTH AMERICA – Foreign investors would increase their investment in US real estate if there were relief from the FIRPTA tax burden, according to the 2014 annual survey of the members of the Association of Foreign Investors in Real Estate (AFIRE).
Of the respondents, 35% said the impact on their investments would be ‘positive’, and 41% projected a ‘major’ impact.
James Fetgatter, chief executive at AFIRE, said: “That our members had strong feelings was not surprising, but the strength of their feelings was a little surprising.
“This confirmed our belief that eliminating FIRPTA would increase investment in US real estate. Investors are looking for yield. FIRPTA is a yield killer on an after-tax basis.”
AFIRE asked this question on its survey in conjunction with the Real Estate Roundtable – both organisations have been lobbying for a repeal of FIRPTA (the Foreign Investment in Real Property Tax Act of 1980).
AFIRE members are taking a bolder view of the investment universe, according to survey responses.
Two-thirds of respondents said they supported increased investment beyond the gateway markets.
“If they had relief from FIRTPA,” said Fetgatter, “they would go to the markets that need their capital more.”
The US in general remains the country providing the best opportunity for capital appreciation, according to AFIRE members, with a 26% margin over second-ranked Spain.
Just over two-thirds of respondents indicated, however, that they would have modest to major net increases in their European portfolios this year.
Notably, Spain has risen dramatically through the ranks, having been in fifth place last year in terms of capital appreciation potential.
For the first time, Madrid ranked among the top 10 global cities for investment.
And London was named investors’ top global city, beating New York City for first place.
The UK, unranked last year, placed third in terms of its potential for capital appreciation, followed by China, Australia and Mexico tied for fifth place.
In terms of emerging markets, Latin America is coming into its own with AFIRE members.
While China was in first place (rising from the second spot last year), the other four places were all taken by Latin American countries: Brazil, Mexico, Colombia, and Peru.
Mexico also ranked fifth for its potential for capital appreciation.
In fact, 44% of respondents project a modest increase in their Latin American investments, and 16% project a major increase.
While AFIRE investors are positive about the US in general, one city is falling out of favour.
“What is surprising is the continued drop in the assessment of Washington DC,” said Fetgatter.
It ranked in ninth place among global cities for real estate investment, trailing New York, San Francisco, Houston and Los Angeles among US cities, as well as top-ranked London, Tokyo, Madrid, Munich and Paris.
AFIRE has nearly 200 members representing 21 countries and an estimated $2trn (€1.5trn) or more in real estate assets under management globally.
The survey, the 22nd in an annual series, was conducted in the fourth quarter of 2013.