With its slowing economic growth, stock market selloff and currency devaluation, China is experiencing a slowdown in terms of investors who are interested in purchasing real estate in the United States. With California being among the hottest markets for Chinese real estate investors, a back off from these investors could result in more available real estate for U.S. investors.
The Chinese Real Estate Binge
For the past five years, Chinese real estate investors have been purchasing properties worth millions of dollars in popular markets such as California, New Jersey and Manhattan. For some development within the Orange County and San Francisco areas, foreign Chinese investors make up about 30 percent of the client base. Price increases within these regions, however, have caused some Chinese investors to stop and reconsider whether or not they want to make a real estate purchase.
To help fuel this demand, U.S. real estate brokerages have routinely held conferences with thousands of attendees in China. U.S. properties are also advertised on Chinese property portals such as Juwai.com. Despite regulations restricting annual overseas investments to about $50,000, Chinese investors have managed to find ways to funnel money through relatives and employees in order to make their purchases.
The Slowing Economy
Due to recent concerns within the Chinese economy, investors are starting to slow down on their investment purchases in the United States. In late November, the country’s benchmark stock index fell by 5.5 percent, representing the biggest slide it has seeing since August. Furthermore, the country’s main stock index, the Shanghai Composite Index, was down by 38 percent when compared to its June peak.
After stocks started to fall, interest among Chinese buyers has also started to stagnate. The slow down could potentially cause some problems within markets where Chinese investors have been purchasing some of the most expensive properties, often times paying with cash. In fact, the average purchase price of existing homes in the United States that were purchased by foreign investors was nearly $500,000, which is almost double the price for all buyers. One-third of the purchases made by Chinese investors within the year ending in March were made in California. Factors attracting Chinese investors include good schools, good value and a good location.
The Future of Investors
While Chinese investors have slowed down with their enthusiasm in terms of purchasing property in the United States, the interest is not likely to fall off altogether. Not only do
many Chinese investors view the United States as a good place to make investments, but they also consider the United States to be a haven for savings. Having a property with an address in the United States also makes it far easier to enroll their children in American colleges and universities.
Overall, Chinese and other foreign investors have reshaped the American real estate market. This is particularly true in Southern California, particularly in the San Gabriel Valley in Los Angeles County and in Irvine in Orange County, where their investments have driven up prices.
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(all data current as of 5/29/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.