The housing market continues to sizzle in many cities across the US, but it’s not just domestic buyers that are fueling the fire.
Foreign real estate investment continues to be a major player in US real estate, and is expected to pick up the pace throughout the remainder of 2016.
Chinese investors, in particular, have their sights set on the US. Many wealthy Chinese investors have been dealing with obstacles stemming from the economic crisis in China, and have been looking outside of their borders to plant their capital.
Between April 2014 to March 2015, Chinese buyers invested $28.6 billion in the US, and the investments continue to rise. A study conducted by the Asia Society and Rosen Consulting Group found that over a 5-year period ending last year, Chinese investments in commercial and residential real estate reached the $110 billion mark. That number is expected to double to $218 billion by 2020.
According to the Association of Foreign Investors in Real Estate (AFIRE), the top 5 US cities attracting foreign investment include:
- New York City, NY
- San Francisco, CA
- Houston, TX
- Los Angeles, CA
- Washington, D.C.
The median home price in these cities is more expensive compared to the national average, which means Chinese buyers are paying well over the average US home price. In 2015, Chinese buyers spent an average of $832,000 per home, compared to the average of $499,600 among all foreign home purchases.
The influx of Chinese capital in US housing markets played a key role in the rapid appreciation of home prices in many centers, particularly in Silicon Valley. Overall, California has been a major target for Chinese investors who are known to participate in all-cash transactions.
Texas is also highly favored by Chinese buyers because of its healthy employment and educational opportunities. Thirty-one percent of international sales in Texas over the past year came from Chinese buyers.
What’s Behind Chinese Investment in US Real Estate?
The reasons for foreign investment from Chinese buyers are varied. Many, of course, are buying for investment purposes, with the intention of renting out or flipping properties. Wealthy Chinese investors are experienced in tapping into real estate as a means of developing wealth and hedging their capital against temperamental conditions on home soil.
Some Chinese buyers are buying second homes, while others are buying as a means to move to the US on EB-5 investor visa. In addition to seeking out a safe haven for their capital, Chinese buyers also want to live and work in the US, and even educate their kids here.
Recently, there has also been a desire among Chinese investors to obtain US dollar assets while concerns over whether or not the yuan will continue to fall against the US dollar continue. Compared to other nations that are experiencing an economic stagnation, the US offers a safer investment channel.
With a combination of an improvement in the overall US economy and low interest rates, foreign real estate investment continues to flock to the US.