A recent fiscal package passed by Congress contains a boon for international investors, according to the Wall Street Journal. The legislation eased some of the tax burdens of the Foreign Investment in Real Property Tax Act of 1980, opening the door for expanded global investment in U.S. property.
Specifically, the revisions will allow foreign pension funds to sell U.S. property without paying the U.S. government taxes on the gains. Global investors may also own up to 10% of a publicly- traded U.S. real estate company before facing additional taxes. Only a 5% stake was allowed under the original tax structure.
Industry analysts predict that the changes could help U.S. real estate attract another $30 billion a year in foreign investments, on top of the tens of billions already flowing into American property. According to CBRE, Canada is the largest foreign investor in U.S. real estate, with nearly $10 billion in direct investment during 2014 alone. Much of this money flowed into commercial real estate in the Boston Metro area. New York City and areas of Florida were also popular investment targets.
Other nations investing in the Boston Metro include China, Norway, Switzerland, Japan and Germany. Foreign funds come in an array of institutional investments, including pension funds, life insurance companies, and Real Estate Investment Trusts.
The New England Real Estate Journal reports that 25% of the existing real estate inventory in Boston has changed hands in the past year. Meanwhile, new development is underway with large-scale office, retail, hospitality and residential projects. The improved tax climate for global investment bodes well for commercial real estate values in the Boston Metro.
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