Chinese investors becoming major players in US real estate sector
According to new research, Chinese nationals have become major players in the US real estate investment sector, accounting for the largest proportion of foreign purchases of US property.
On the hunt for safe offshore assets, Chinese buyers have injected billions into the US real estate market, with a major surge of purchases across both the residential and commercial property spheres in 2015. This high level of purchases took the five year investment total for Chinese buyers to more than $110 billion, figures from the Asia Society and Rosen Consulting Group's report, 'Breaking Ground: Chinese Investment in US Real Estate,' confirmed.
As a result of this investment flowing into the real estate sphere, the US real estate sector has been able to recover from the ill health it suffered in the few years prior to the global financial crisis of 2008, the ripples from which were still being felt across the US housing market until recently.
Property prices in other developed countries have also been boosted as a result of this surge in interest in the US from Chinese buyers, the research found, with Australia and the UK pinpointed as two that had benefited.
The research also suggested that the investment levels from the Chinese look set to continue to grow over the coming years, despite the slowdown that is linked to Beijing’s clampdown on capital outflows. Indeed, the suggested investment level into the US real estate sector is likely to double to $218 billion, the study said.
The researchers said: "What makes China different and noteworthy is the combination of the high volume of investment (and) the breadth of its participation across all real estate categories”, including a “somewhat unique entry into residential purchases".
The figures named in the research are also well below the actual amount that has flowed into the sector from China, the researchers added, as the numbers, which are based on public and real estate industry data, exclude purchases made by so-called front companies and trusts that have not identified the sources of the capital.
Between the years of 2010 and 2015, more than $17 billion was ploughed into US commercial real estate by Chinese investors, thanks in part to the lack of limitations about what is allowed to be purchased by international buyers in the US. Over the last few years, Chinese buyers have overtaken Canadians as the biggest foreign purchasers of US residential real estate.
Chinese buyers were most focused on major cities including New York, Los Angeles, San Francisco and Seattle, while Chicago, Miami and Las Vegas property also proved very popular.
As to why the Chinese are snapping up so much US real estate, it has been suggested that their motivations lie in the investment potential of the properties for rental and resale, or the use of the properties for second home. Others plan to move to the US on EB-5 investor visas, so will live in the property themselves.
The study noted: "This familiarity of utilising real estate as an investment or wealth preservation tool is more prevalent in China and reflects the broader comfort of purchasing second homes in the United States by Chinese individuals and families."
Since 2015, Chinese buyers have also been looking to move their money outside of China due to concern over the falling yuan. As a result of this desire, the report suggests that there will be many more commercial real estate purchases made in the US by major Chinese companies in the years to come, as the firms seeks dollar assets.