RCA in the News

Obama Passes FIRPTA (Foreign Investment in Real Property Tax Act) Reforms

Bloomberg Business / December 18th, 2015

Bloomberg Business reports: As part of the $1.1 trillion spending measure that Congress passed to avoid a government shutdown, President Obama has signed into law major reforms to the 1980 Foreign Investment in Real Property Tax Act (FIRPTA). The tax modification could lead to an increase in foreign investment in the U.S. real estate market.

The provision treats foreign pension funds as the same as their U.S. counterparts for real estate investments. Over the last 35 years, foreign investors have purchased minority stakes in joint ventures to bypass the tax. The new law also permits foreign pension funds to buy as much as 10 percent of a U.S. publicly traded real estate investment trust, up from 5 percent previously.

Foreign capital in the U.S. real estate market has surged since the global financial crisis. Lured by relative yields and the perceived safety of assets, the rise in cross-border demand has helped drive property prices to record highs.

According to Real Capital Analytics (RCA), a commercial real estate data and analytics firm, cross-border investment in the U.S. real estate market has totaled about $78.4 billion this year, or 16% of the total $483 billion invested in the U.S. property market. Foreign pension funds accounted for about $7.5 billion of the $78.4 billion invested by cross-border buyers. In comparison, cross-border investment was only $4.7 billion in 2009, according to RCA.

View the full article in Bloomberg Business: Obama Passes FIRPTA (Foreign Investment in Real Property Tax Act) Reforms