Some claim that the slowdown in China’s outbound real estate investment is due to to the current US-China trade tensions. However, the slowdown of Chinese investment in real estate in the US and the recent disposals of American commercial property by Chinese companies are not due to geopolitical issues but they are due to a combination of Chinese domestic issues.
According to the United States’ National Association of Realtors, Chinese buyers accounted for 14 % of all international residential real estate transactions in the US and 20 per cent of the total commercial real estate purchases in 2017. A decade ago, Chinese buyers accounted only for a small percentage. Over the years, Chinese have invested billions in American commercial and residential real estate. However, over the last 2 years, the Chinese government has tightened the capital controls so money cannot easily leave China anymore. Some of the large Chinese companies also faces a lot of debt and were forced to sell their overseas assets to free up capital.
Despite the issues mentioned above, we should recognize the fact that demand for quality real estate in major cities in the US remain a top destination for Chinese investors. Cities such as New York, Los Angeles, San Francisco, Seattle and many others continue to see interest of Chinese buyers.
As such, it is expected that Chinese outbound investment will rebound. The Chinese government has made it clear that it is planning to boost the status of the renminbi, and free conversion of the currency is a critical precursor. Over time, the Chinese government will need to relax their capital controls and as a result, more Chinese funds will become available to be invested in US real estate.
As such, trade tensions are not relevant to the Chinese citizens seeking to buy US real estate. We should expect that Chinese buyers maintain their appetite for overseas real estate assets to protect their wealth.
Lastly, based on a recent article in the South China Morning Post, Asian investors have become the most active net buyers of commercial property, accounting for 20 per cent of assets disposed by global funds in the first half of this year. These investors are currently mostly coming from Hong Kong, South Korea, Singapore and Japan.
As a result, US agents should pay particular attention to Chinese investors and Asian investors overall - more will come to invest in US real estate.
Source: South China Morning Post, August 2018
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