Despite new regulation and a trade war, China is continuing its hold as a key player on the property scene in the U.S., according to recently released research.
In 2017, Chinese investors poured $39.7 billion into real estate in the U.S., Juwai.com reports. The majority—$30.4 billion—was on the residential side, and in California, Florida and New York.
“The United States remains the top country for Chinese property investment,” says Carrie Law, CEO and director of Juwai.com. “Mainland Chinese acquired U.S. real estate worth more than in all the countries we tracked in Asia or in Europe.”
According to Law, the attraction is driven by economy and lifestyle.
“What Chinese homebuyers like about the United States is the educational opportunities, clean food and air, our diversified culture, and our economic and employment opportunities,” Law says. “For a Chinese buyer, purchasing properties in the United States is seldom really about the home itself; it’s about the lifestyle and opportunities they are acquiring by moving there.”
The findings are in line with the National Association of REALTORS® (NAR) 2018 Profile of International Transactions in U.S. Residential Real Estate, which shows that in 2017, China invested the most of any other nation in real estate in the U.S., and also bought the most expensive properties, and the most in terms of units. Accounting for China and other countries, foreign home purchases slid 21 percent, the NAR report shows—attributable to the inventory shortage.
“Inventory shortages continue to drive up prices, and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same, limited supply of homes,” said NAR Chief Economist Lawrence Yun.
Dollars, however, are only part of the story. Even though China closed in on $40 billion invested, the amount dropped off 29.5 percent from the previous year, according to the Juwai.com report. Chinese investment overall paralleled the trend in the U.S, with the country’s global investment at a monetary record, but sluggish. In 2017, the figure increased 18.1 percent to $119.7 billion—but in 2016, the figure grew at a 26.8 percent rate, and in 2015, at 53.8 percent.
“The bigger a number gets, generally the slower it grows,” Law says. “That’s one explanation for the lower growth rate in Chinese international property investment: The same level of growth off a larger starting point will give you a lower rate of growth.”
Two changes curbed growth, as well: capital controls, which were instituted last year; and a general movement toward more practically priced properties, according to the report. The capital controls, which apply to investment in overseas real estate—a bid to diminish “flight,” or outflow, amid currency and economic pressures—were not as restrictive as thought, but contributed somewhat to the slowing. (Chinese investors were mostly unfazed, the report shows.)
As for geopolitical tensions, the jury is out.
“Has the trade war impacted Chinese demand in 2018? It has caused some buyers to hold back, but as time goes on the fear may be evaporating,” says Law. “For example, in August, Chinese buyer inquiries for U.S. residential real estate were at their highest level in the past 12 months.”
For 2018, Juwai forecasts investment to range between $123.3 billion and $129.3 billion—growing 3-8 percent year-over-year.