Weak Dollar Draws Foreign Property Investors

Weak Dollar Draws Foreign Property Investors

The weak dollar is generating a lot of interest from foreign individuals and companies, interested in investing in the American economy. Particularly in the property sector. “We have had an overwhelming number of Europeans within the last six months asking about the Atlanta real estate market,” said Heather Stanton, an agent at Starate Real Estate Associates in Stockbridge, GA. “With the mortgage industry in the United States becoming so stringent with loaning money, the rental market is really increasing, and thus allowing investors from other countries to buy cheap and lease quickly,” she said.

The British pound increased 34 percent in value against the dollar in the last five years – 10 percent in the past 12 months. The euro has made even bigger gains, rising 47 percent since 2002.

European investors therefore have more purchasing power and are increasingly on the lookout for property bargains on the other side of the Atlantic. On top of the currency rate, the U.S. housing market has been hit hard by the credit crisis, which has made properties even more attractive for Europeans stunned by sky-high house prices in their home countries. In a survey, the National Association of Realtors found that Florida led the nation in foreign home buying, accounting for 26 percent of all international purchasers. California was next at 16 percent, followed by Texas at 10 percent.

The survey found that 34 percent of Realtors in Florida have worked with an international client in the past year. Some 34 percent of the foreign home buyers in Florida were from Latin America and 21 percent were from Britain. About 9 percent came from Canada and 8 percent from Germany. The rest were from Asia, Eastern Europe and other areas.

Steven Toumbas, an equities investor from London, has just purchased a $1.2 million apartment in the luxury Trump Soho development in Manhattan. “I’m buying property at bargain prices in New York City, which I think is the most stable market in the States,” he said.

New York City

It is not only private individuals eyeing the current US housing market – The Dubai government agency that bought into Deutsche Bank earlier this year said it could invest in U.S. banks, property and other sectors after the dust settles on a mortgage crisis, “There are good opportunities and the prices are good, but is this the bottom or is there more downturn to come?” Omar bin Sulaiman, governor of the Dubai International Financial Centre (DIFC), told Reuters on Monday.

Both Merrill Lynch and Citigroup, the largest U.S bank, replaced their chief executives this year after reporting credit market losses of at least $21 billion between them and are likely targets, but when questioned about specifics, Bin Sulaiman refused to be drawn out, “Without mentioning names we have a track record of taking stakes in major banks, with the right partners for management,” he said. Like many private investors, DIFC seem to be waiting to see if the crash has bottomed out yet.

DIFC Investment’s purchases in the United States could include property, telecom, and oil and gas assets, bin Sulaiman said. Defaults on subprime mortgages drove up borrowing costs around the world and prompted banks to shrink from riskier lending, making it more difficult for private equity funds to finance acquisitions.

The collapse of takeover bids, including Qatar’s plan to buy British supermarket chain J. Sainsbury Plc (SBRY.L: Quote, Profile, Research), and a tumble in stock prices this year has made assets cheaper.

“The challenge is how low do we look. There are good assets in the U.S., good opportunities for acquisitions to be identified,” bin Sulaiman said, “The price has to be right and you need to understand the strategy of the organization and if that aligns with our strategy, the decision is easier.”

Bin Sulaiman leads the financial services strategy of Dubai, which created the DIFC, a self-regulating dollar-based investment zone, to capture banking and other business in the world’s biggest oil-exporting region.

Having turned state companies into the world’s eighth largest airline, Emirates, and fourth largest port operator, DP World, Dubai plans on building two of the world’s 10 largest financial institutions by 2015.

“It could be through acquisitions or home-grown,” bin Sulaiman said.

DIFC Investments bought a 2.2 percent in Deutsche Bank this year to become the fifth biggest shareholder of Germany’s largest bank. The purchase was worth about 1.35 billion euros ($1.97 billion) at the time the deal was announced in May. DIFC Investments is looking to invest about $1.8 billion in an unidentified publicly traded financial services company among the 20 acquisition targets it is evaluating, although moves are already underway – state owned Dubai investment firms have made sizeable investments in both Standard Chartered Plc and HSBC Holdings Plc recently.