Chinese Money Becomes Major Force in Global Real Estate Market

Chinese investors are flooding the US and global markets despite the current economic tumult in China, according to reports for The Wall Street Journal. Even though the currency devaluation and stock market crash has put a damper on Chinese buying power overseas, the economic downturn in China has prompted individual Chinese investors to look outside their country for investments.

In London, Chinese investors are buying high-end apartments in wealthy areas and skyscrapers in the financial district. In Australia, a Chinese sovereign wealth fund bought nine office towers, one of the largest real estate deals in the country’s history. In Vancouver, Canada Chinese investors are paying up to $1 million for modest bungalows.

For the first time, Chinese families represent the largest group of overseas home buyers in the United States. The Chinese have been buying up luxury condos and homes along the coast of California and in New York City. Investors are now looking to purchase real estate in the middle of the country where prices are more modest and have room to increase in value. This new tidal wave of Chinese money in both residential and commercial real estate is changing the traditional dynamics of how real estate is bought and sold.

Chinese purchases represent a small percentage of overall US real estate sales but have a large impact on more expensive properties. Chinese investors buy 1 in 14 homes sold for more than a $1 million. An estimated $590 billion moved out of China in the 12 months through June, according to Fitch Ratings. Chinese investment in commercial real estate has increased by 49 percent last year.

Trends Leading to Chinese Real Estate Investments

There are several big trends that have led to influx of Chinese investment in the United States and other global markets:

• The Chinese government has kept its country awash with cash to stimulate the economy, allowing for a lot of extra money for investments abroad.
• The Chinese government has loosened restrictions to make it easier for investors to move large amounts of money out of the country.
• The government is changing the rules to allow corporations to invest abroad, leading to a surge in commercial purchases. Insurance companies may now invest 15 percent of their assets overseas.
• The Chinese are looking to invest money in countries where there is less chance of arbitrary confiscation of assets by the government and local political stability. They also hope to obscure the true extent of their wealth.
• Investments in the United States provide a two-year pathway to a green card. Chinese investors have been aggressive about using a federal visa program called EB-5 that allows overseas buyers to put $500,000 to $1 million into projects that create at least 10 jobs. 86 percent of the EB-5 visas have been given to Chinese citizens.

We at Caldwell Commercial aim to remain abreast of global and local economic and real estate trends. To learn about our properties and services, email us at info@caldwellcommercial.com.