As I’ve noted in prior posts, foreign interest in U.S. real estate has been exceptionally positive for the housing market. While post-recession interest from foreign entities has focused near exclusively on boutique property listings, major finance entities have nevertheless been particularly keen on America’s urban property. Norway’s Sovereign Wealth Fund invested $600 million in commercial property throughout Boston, New York, and Washington, DC, largely out of anticipation of their exceptional value growth potential. Considering that trinity of East Coast cities are nationally recognized as job hubs, it’s likely that Norway’s Sovereign Wealth Fund was staking claim on areas whose job growth outlook would run in tandem with property demand.
However, it seems that transnational interest in American property is beginning to extend beyond that found along the Eastern Seaboard. According to new reporting from Bloomberg, Houston Texas is also beginning to attract speculation from foreign investing bodies. In this case, interest in Houston’s property was also spurred by regional economic outlook, as the Texan city’s status as a major hub of the energy industry bodes well for both its prosperity and job growth. One of the other factors that have attracted wide interest in Houston real estate is that despite local prosperity, property values in the area remain low compared to other major American metros.
As the Bloomberg report notes, this has led to foreign entities acquiring a net total of $2.83 billion in Houston office property over the past three years. Much of the interest has come from buyers in Canada and Israel, and remains particularly appealing to foreign investing entities largely because Houston remains a cosmopolitan city despite its inland distance from historic port areas. Houston has maintained an exceptionally strong metropolitan economy since the recession, with the city producing a 3.8% jump in gross domestic product last year, which was followed by local unemployment falling to an exceptional low of 6% in 2012 from 7.2% the year prior. Ultimately, it seems that the persistent strength of the American oil and energy sector has sustained Houston through what has been an otherwise bleak five years for the economy as a whole.
Taking the continued affordability of Houston real estate and the stability of its local economy, domestic real estate investors would also seem well advised to consider the region’s property as a wise investment choice. As I’d noted in a post for the BiggerPockets news blog, activity in the housing market may actively encourage job growth. However, an inverse corollary of this is even more telling- health in the job market is a definitive sign of sustainability, if not growth potential, in local real estate markets. With the earlier mentioned roster of New York, Boston, and the Capital Beltway all representing healthy job markets, it’s little surprise that Houston’s success as a job hub has brought equally promising returns for its housing market as well.
As a major takeaway, it seems that the best way to forecast growth in the housing market is to take note of regional employment and growth trends. While regions that have elevated commercial real estate values are unlikely to see substantive growth in property values, areas that have promising growth figures but uninflated real estate evaluations would likely be the best choices for growth investment. Interested investors would seem well advised to scope the past year’s growth and job creation metrics throughout the country’s major metros to see if any cities display trends similar to those found in Houston.