China’s Love Affair with American Real Estate

February 24,2015 | By Robert Moses

When it comes to investing in real estate, Chinese buyers have found that property in America is a good investment. In fact, records indicate that wealthy Chinese buyers have been on a buying spree of sorts, snapping up properties in states such as New York and California. The purchase of American real estate by Chinese buyers has been largely driven by increased access to credit, a favorable exchange rate, and a desire among Chinese buyers to take advantage of more secure investments.

The National Realtors Association (NAR) reportedthat Chinese buyers spent approximately $22 billion on U.S. real estate over the course of the last year. While that number might sound surprising, it also represents a resounding 72 percent increase over what Chinese buyers spent on housing in the United States the previous year. While Canadian buyers actually comprised the lion’s share of transactions at almost 20 percent, Chinese buyers actually purchased properties that are more expensive. The median sales price for properties bought by Chinese investors was more than $500,000. By comparison, the average amount spent on a property by Canadian buyers was just about $213,000.

Based on the latest statistics, Chinese buyers appear to prefer cities in the United States, such as New York City. Buyers from other countries tend to exhibit a preference for vacation properties that are less urban. Although Chinese buyers obviously have an interest in properties in New York, they also tend to favor the West Coast, including San Jose, Palo Alto, Orange County, and Los Angeles. The Seattle area is also favored by Chinese investors.

 

What Is Driving Chinese Interest in US Real Estate

 A number of factors have helped to drive the interest of Chinese buyers in purchasing American real estate. One of the primary factors driving such interest is the desire of Chinese buyers to secure a safe investment. Overall, American real estate is viewed by Chinese buyers as a solid investment.

The fact that Chinese buyers are now wealthier than ever is also helping drive their purchases. As China’s economic growth has exploded in the last few years, the Chinese middle class has grown. That, combined with the fact that they have increased access to credit, has made it possible for buyers from China to plow more money into foreign investments, namely in the United States.

A strong yuan is also benefitting Chinese investors. The depreciation of the U.S. dollar against the yuan may not have been good news for American investors, but it has certainly been beneficial for the Chinese by giving them increased buying power.

Adding to the interest of Chinese investors in American real estate is the housing bubble they are facing in China. While the Chinese housing market made strong gains over the past few years, it now seems to be cooling. Add in the fact that China has begun to implement more and more regulatory limitations on real estate purchases, and it is easy to see why the Chinese are so eager to purchase real estate overseas.