L.A. Growth and Yield Trends
Opportunity awaits for foreign nationals willing to invest in the recovering US property market.
After declining between 2007 and 2012 due to the Global Financial Crisis (GFC), property prices in the USA are now in the early stages of a new growth cycle, with excellent prospects for future capital growth and generous rental yields.
Foreign nationals living and working in the US are able to invest in property without restrictions and can take advantage of the recovering market with many cities across the nation offering good value.
In particular, California’s Los Angeles is seen as being ‘in a sweet spot in its real estate cycle’ and according to a recent report is one of the top choices in the world for buying property this year.
For the second year in a row, the L.A. area ranked No. 1 in North America in a survey of global real estate investors.
From Long Beach to Valencia, Santa Monica to Pasadena, Los Angeles comprises around 15 independent property markets and dozens of unique neighbourhoods, each of them offering interesting housing options.
The US has had a strong recovery post the GFC with growth starting to show early signs of slowing down.
Overall growth for Los Angeles is sitting around 3.5% to 5%, with the year-on-year average sitting around 7%.
Over the past year, the average price per square foot in Los Angeles rose to $568, up from $523.
The rental market is strong and growing. There is a major shortage of property in Los Angeles with the population increasing and the city slow to approve new developments and more housing. This is pushing up rental yields in the market as you can see in the chart below. Investors are experiencing gross rental yields of 5.8% to 7%. In Sydney, CoreLogic figures put the average yields at 2.8% for houses and 3.7% for apartments.
With Los Angeles being a high tourism area, we are seeing investors capitalise on Airbnb properties, which is allowing them to achieve a gross rental yield in excess of 10%.
Why do you need the help of a buyer’s agent?
There are multiple ways for foreign investors to acquire and hold property investments. Similar to Australia, there are some challenges in obtaining debt finance and you also need to be aware that foreign nationals are charged a slightly higher rate for finance.
Leading Australian buyer’s agency Cohen Handler has established a panel of lenders licensed to do business in the United States who work with foreign national investors to ensure a fair deal. It is important to discuss and understand US tax liabilities, which include annual or monthly property tax and a transfer tax (similar to stamp duty).
In addition, all worldwide income must be declared as extra income to the Australian Taxation Office (ATO). This includes rental income from your overseas property and any capital gains you make if you were to sell your investment property.
Special rules apply to claim a foreign income tax offset on an Australian tax return and it can be quite complex so you will need to seek professional advice when investing overseas.
As the US property market works on a price per square foot, Cohen Handler is committed to working with investors to remodel and renovate assets to increase the total square foot value of an investment property. This takes advantage of the unit pricing model creating instant capital growth.
Cohen Handler is a trusted and award-winning Australian buyer’s agency with networks established and expanding across the world.
Our professional and caring buyer’s agents will work on your behalf and help you secure the best property for your needs saving you time and money.
We have access to an extensive industry network of pre- and off-market properties throughout Los Angeles and will efficiently find you the right property at the right price.