Why the Chinese interest in US real estate will not stop anytime soon

2014-09-09
USA

The surge of Chinese investment in American real estate market has been huge recently, but is it going to stay that way for long?

Should real estate agencies, especially those which have so far been catering to their local clients but now want to extend their global footprints from scratch, invest their money, time and energy in preparing a long-term marketing strategy to target Chinese buyers? Is this trend sustainable enough?

The scope of Chinese investment in US property market will sound staggering if real estate professionals take into account the fact that there are nearly 63 million upper-middle class Chinese nationals capable of buying properties around the globe. By 2022, there would be 220 million affluent Chinese with enough credit to make real estate purchases abroad.  

Such affluence was not accumulated by Chinese nationals overnight, nor did they start targeting US real estate market suddenly. Several economic circumstances have laid the foundation for the recent surge in purchase of American properties.

Housing boom in China and then the sudden fall

Chinese real estate market has been witnessing a boom for over the past two decades. While initially it proved to be a great boost for the economy, the constant price rise soon became a cause for concern. It forced the government to introduce several measures, especially since April 2010.

Several of these measures included higher down payments, limits on the number of houses that people can buy and the introduction of a property tax in some cities. These measures finally started yielding results as the housing market cooled, but now a major slump in home prices has been reported across China. Prices fell in 55 of the 70 cities last month from May, the National Bureau of Statistics in China said. This has become a major reason as to why Chinese buyers are heading to the US where the market which remained sluggish over the past couple of years is slowly reviving. The Chinese investors are drawn towards the American property market as it’s stabilizing with lots of scope for further growth.

Stronger yuan, weakening dollar

With booming economy, yuan grew stronger in comparison with dollar over the years, making US assets more appealing to Chinese real estate buyers. The depreciating US dollar increased the buying power of Chinese investors. The recent survey by National Association of Realtors also establishes this fact. Nearly 75 percent of realtors considered the exchange rate an important factor which encourages Chinese buyers to make purchases of American properties.

Affordability of US cities

Despite the cooling housing markets in China, most US cities are still affordable for Chinese buyers when compared to major China cities like Beijing and Shanghai. While the government restrictions have played a major role in driving wealthy Chinese nationals to America, the comparative affordability of the most US cities is another factor attracting them. 

These facts are enough to assure the real estate professionals that Chinese investment in American real estate market is not likely to stop any time soon.  

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