Home » News » Chinese investors are still looking for US real estate

Although Beijing is currently making all attempts to control its capital outflows, buyers in China are largely willing to invest in US real estate market. And this is expected to continue over the next decade as well. Chinese investment has already surpassed the $300 billion mark and this level continues to escalate. An estimation of around $10 billion has been made, out of which $4.37 billion (approximately) was spent on commercial properties last year (2015).

The figures have been released by Semi-Annual Update Report 2016 of KPMG’s China Inbound Investing in US Real Estate. As highlighted there, the 6 most active markets of US real estates are in Washington DC, Los Angeles, Dallas, New York, San Francisco and Chicago.

The US is now their favourite destination.

Seattle – the no 1 choice: 

However, presently Seattle has become the no. 1 real estate market for Chinese investors. What has escalated this trend is new taxation in Vancouver, B.C. on foreign buyers. Also, the place’s clean air and easy accessibility to water are two other attracting features. In the last 7 months, more enquiries about Seattle came from homebuyers of mainland-China.

According to Phil Marra, leader of US Real Estate Funds, KPMG LLP, “As Chinese investors are looking forward to expanding global operations, the US market proves to be a very attractive one. It is a wonderful opportunity for diversifying their portfolios adding US assets and establishing strong information exchanges with the developers of the United States.”

Report from KPMG also states that the US real estate market would possibly reach a record-setting growth in the coming two years. The expectation is based on low-interest rates globally, strong domestic economy and of course, increased demand amongst both foreign and US investors.

Facts and data:

Data on reports say, buyers from China bought around $93 billion residential properties between 2010 – 2015. During this same time-frame, around $208 billion mortgage-backed securities and $17 billion commercial property were also bought by them. Despite the fact that China has only 10% share of FDI allowed in the US, investors from this country rank as one of the tops in all sectors of real estate.

Looking ahead to 2025, the report from Asia Society and Rosen Consulting Group states that figure of Chinese owners acquiring commercial properties in the US would possibly hit a $20 billion mark. Residential property buying would hit $50 billion.

Currently, when all other foreign buyers are purchasing properties with an average price of $499,600, Chinese people have bought around $831,800 of average home price in 2015. In the count of the total dollar amount that has been spent on US real estate, China tops the chart with about $22.3 billion (2015). In 2014, the value was $18.1 billion – this shows a clear increment in real estate market. As per NAR’s report on last year, China bought more than 33,000 houses, becoming the biggest international buyer of the States’ real estate.

Another reason pointed out for this trend is that Chinese people have a tendency of making purchases in expensive real estate markets. Around 71% of home buyers from China bought properties with cash between 2013-2015, reported NAR.

Starwood Hotels’ investment: An example

The recent high-profile case of China’s investors putting their money in US real estate market is Anbang Insurance Group led consortium’s tender. They proposed $14 billion acquisition of the Starwood Hotels. However, while they later withdrew this offer referring to market considerations, they certainly agreed on buying Strategic Hotels & Resorts for $6.5 billion.

Investment in US office space:

The expanding growth in job opportunities, improved wage gains and overall growth in the US economy are giving positive outlooks for the commercial office space. The rise in demand boosted prices of US commercial area by 32% per square foot in 2015. This trend is likely to continue through 2016.

Presently, the strongest Chinese buyers of US real estate are financial investors, real estate developers, and business groups.

While there is a prediction of Chinese economy becoming uncertain, this situation can encourage foreign investment because capital flows out of the country before its currency value falls.

There is no indication of this buying spree to slow down in the near future. In fact, this is a high-yielding opportunity in an environment of low-interest rate. According to the Asia Society’s report, $1.6 trillion of Chinese insurance industry is likely to make investments in more real estate projects in the US.