WASHINGTON, D.C., While international property investors continue their global diversification with a strong eye toward Asia, the US property market remains at the top of their confidence level according to the results of the 16th Annual AFIRE Foreign Investment Survey. The Annual Foreign Investment Survey tracks the buying preferences of the members of the Association of Foreign Investors in Real Estate (AFIRE) who collectively own approximately $700 billion of real estate globally and $230 billion in the US. Here are the excerpts from the survey (courtesy: AFIRE.)

Top Cities

Although they are perennially seen as the top US cities by foreign investors, this year, New York City and Washington, DC, were named foreign investors’ top global cities. New York City leaped ahead by a substantial margin to be named the top global city, followed by Washington, DC, and London in a tie for second place. Last year, New

York was ranked second globally and Washington was ranked fourth. Paris fell from second to fourth rank. For the first time ever, five of the top 10 cities were in Asian markets, with Singapore showing a particularly strong improvement of 19 points. Shanghai, Singapore and Tokyo ranked fifth, sixth and seventh respectively.

Among US cities, New York maintained its number one position, followed by Washington, DC, Los Angeles, San Francisco and Seattle. Former “hot spot,” San Diego, which was the fifth-ranked city in 2005, continued its slide down the list into fifteenth place, while former “hot-spot-turned-troubled-spot,” Las Vegas, climbed from sixteenth place in the 2006 survey, to eighth place this year.

Top Countries

With 56% of the votes, the US again emerged as the most stable and secure country for real estate investment. No other country has ever come close to this number one position. The second-ranking country has historically been the UK, but this year Germany, with 10.5% of the votes, took that honor; Australia and the UK, with nearly 9% of the votes, tied for third place.

In the category of the best country for capital appreciation, Asian countries again made a strong showing. Although the US was named the top ranking country, China and India placed a strong second and third. Compared to 2006, China had the biggest improvement in investor’s perceptions, moving seven percentage points, while India slipped by almost two points. New to the top five countries for capital appreciation are Russia and Mexico, tied in fourth place; in recent years, both countries have been inching up the ranks of the top 10 countries in terms of capital appreciation.

The percentage of AFIRE member’s portfolios in Asia continues to gradually increase. For the past three years, Asia (including Australia) represented approximately 7% of their portfolios. In 2007, this percentage increased to 13%. On average, members plan to increase their global acquisitions by more than 20% next year. The portion

allocated for the US is approximately 50% of the total, as it was in last year’s survey.

Difficulty in Investing

In the 2004 survey, 60% of the respondents said investing in US property was considered “very difficult.” In the current survey, only 20% said it was “very difficult”. Granted, investing in the US is still difficult, and a majority of  investors responded that it was “somewhat difficult,” but for the first time in three years, a measurable number of investors declared investing in US real estate to be “somewhat easy.”

Investment Strategies

A common theme in the media, certainly in the US, is that the depreciated dollar has encouraged spending in the US by foreigners. While this may be the case for consumer goods, as the swarm of Europeans and Brits in New York City seems to indicate, it does not appear to be the case for real estate investors. Eighty-five percent of survey respondents said that the falling dollar had “no effect” on their investment strategy toward the US.

Survey respondents indicated that partnerships and joint ventures were the predominant means of placing new capital into the US. Almost one quarter of the members indicated they were investing in value-added developments, and for the first time, a measurable number of respondents said they were pursuing “distressed assets.”

Investing Countries

According to the AFIRE survey and supported with additional information from Real Capital Analytics, foreign investors from Australia, Germany and the Middle East dominated the market for foreign investment in the US. Aided by significant transactions in retail by Centro Properties, acquisitions by Australian firms in the US in 2007 more than doubled the previous year’s amount. Two of the five largest mall owners in the US are now Australian REITs. German acquisitions increased by 40% in 2007 and Middle Eastern acquisitions increased by 20%.

In summary, the United States continues to maintain its allure for foreign real estate investors despite the attractive yields and impressive economic growth of Asian markets.

The AFIRE survey was conducted during the fourth quarter of 2007, after the much-publicized credit crunch and sub-prime mortgage fiasco had unfolded, further illustrating that the resilience and stability of the US market continues to entice the seasoned international investor.