Will Wealthy Foreign Investors Consume Massive Parcels of US Land?
Land in the United States is plentiful. Even if you grew up in an area that was once filled with farms and now is turning into a mini city, you may not realize how rural your city is compared to the rest of the world.
The main difference for the United States is that it's massive compared to most countries.
A good example of this would be Germany. The entire country spans 137,903 miles squared. California is able to contain the entire country of Germany with still 15% of the land leftover. Texas is so big that it is double the size of all of Germany.
In short, the United States is huge.
And while rustling cities may have sparse land availability, all you need to do is drive 30 – 60 minutes from a major city, and you’re surrounded by land that has not been built up. When foreigners cannot find land in their own country to purchase, they will look elsewhere for land opportunities.
Wealthy foreign investors are already consuming massive amounts of land in the United States. Don’t believe me? Let’s take a look at a few examples that may change your mind on why you need to start investing in land before it gets gobbled up by outside investors.
UBS AgriVest Buys 9,800 Acres
A Swiss company called UBS AgriVest purchased a massive 9,800-acre lot in southwest Wisconsin. The company paid $7,000 an acre with a total price paid of $67.5 million. But this isn’t the only time the company has purchased land in the U.S.
No, instead, they have purchased land in Georgia, Mississippi and land to the West.
Gladstone Land Corp has been buying up land that is known for growing row crops, such as blueberries. The company’s CEO stated that they’re buying as much farmland in the United States as possible – and you’re wondering why produce prices are skyrocketing.
Making matters worse, the company turns around and rents the land to farmers.
The company has made millions off of land buying and renting, and they show no signs of slowing down in the future.
Chinese Buyers Purchasing Land Across the United States
Chinese investors and individuals are buying up land at a record rate in the United States. And many people blame real estate portals for the problem. The interesting fact is that China actually owns many companies that are buying land in the country.
Golden Dragon Price Copper Tube Group, a copper company, is a good example to use. The company purchased a 40-acre lot for $1.5 million. But the company stated that they would transfer the land to a US-based subsidiary in the future.
Another project, or two actually, in California were given to Chinese companies to build: a $620 million luxury condo and a $1.5 billion complex.
Reports from Forbes show that in 2014, Chinese investors increased their buying by 70% in the U.S. to reach $22 billion dollars. And these buyers (75% of them) are paying for all of their purchases in cash. Why? This is a rather difficult to answer.
Only 39% of these buyers will stay in a home on the property and make it their main residence. The majority of the buyers are purchasing homes and condos for children that will be attending college in the U.S. The idea is that they will be able to save money on dorm fees and that the value of their properties and land will appreciate enough to leave them with a hefty profit.
Who is Buying U.S. Land?
You’ll find that foreigners that are purchasing United States land and homes may not be those that you would immediately assume. In fact, the most foreign land investment in the U.S. comes from one of our neighboring countries: Canada.
Canadians are buying land and the U.S. at a record pace. They’re close to the land and can use it for a variety of different investment options.
Other countries that are finding value in U.S. land, include:
- United Kingdom
This data is relevant as of late 2014, and these are the top 5 countries that invest in United States land. India broke into the list, with a 48% growth in investments, in 2014.
Many foreign buyers are not getting the response that they hoped for in the United States. And this is especially true when these buyers purchase property in smaller areas and build large stores or outlets.
But farmland is premium land for these investors. Data from 2013 shows that 25.7 million acres of agricultural land in the U.S. was owned by foreigners.
Land grabs, the purchasing of large lots for resale or to drive up prices, was a concern even a hundred years ago. You’ll find that there was a law limiting foreigners in one state from buying more than 640 acres of land, but this law was repealed by Gov. Scott Walker of Wisconsin. The results had many lots of land sold to wealthy investors and caused a boom in the state. This boom will continue occurring in the state, and many others, unless laws go into effect to stop the sales.
Don’t get me wrong: foreign investors are finding value outside of farmland, too.
Investors are buying homes, small lots and commercial lots. And the result is causing land prices to go up and up. This is great for any land investor, but bad at the same time. While there will be less land available to purchase, foreign investors are driving up the price of land, and they’re also paying cash to land owners for their properties.
If the trend continues, which is likely, we may see that land prices are rising even faster than ever before.
Smart land investors that purchase this land fast enough will find that they’ve made a smart investment.
If you’re wondering if foreign investors are going to consume massive parcels of land, you're years behind. The trend has been going on for years, and foreign investment in U.S. land is continuing to rise yearly.
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