International super-rich target California real estate

Thu Jun 14, 2012 8:16am EDT
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By Sinead Cruise

LONDON (Reuters) - The super-rich investors responsible for London's prime real estate bubble are adding California to their wish lists, lured by bargains offering crisis-defying returns as an overdue churn in the United States property market finally gets under way.

Wealthy European and Asian investors who have dominated the market for addresses in London's most fashionable neighborhoods are frequently outbidding locals for assets in the Golden State, U.S. real estate brokers report - and banks, long shackled by the volume of distressed property on their books, are in the mood to cut deals.

"It is now London and Los Angeles, not Shanghai or Moscow, that interests the cash-rich international investor," said Simon Lyons, managing director of global property group Enstar Capital, who is making regular trips to the U.S. in search of bargains.

As uncertainty stifles global financial markets, real estate with strong rental prospects in key cities across the United States is again becoming an asset of choice for the yield-hungry international investor.

Data released this week by the National Association of Realtors showed that international sales reached $82.4 billion in the year to March 31, up from $66.4 billion in 2011.

The Chinese are now the second-largest foreign buyers of U.S. homes (behind Canadians), accounting for 11 percent of sales in the year to March 2012, up from 9 percent in the previous year. Cash purchases accounted for 62 percent of international sales and the average price paid by international buyers was $400,000, against the overall U.S. average of $212,000.

As the U.S. jobs market expands, there are signs that the worst may be over for the property market that spawned the sub-prime mortgage maelstrom and the world's deepest banking crisis since the Great Depression.

To capitalize on increasing confidence, Los Angeles-based asset manager TCW has unveiled plans to raise up to $250 million for a fund enabling wealthy investors to buy foreclosed homes from government agencies and lenders.   Continued...

Downtown Los Angeles, California is seen July 16, 2011. REUTERS/Eric Thayer