Chinese investors are continuing to plow money into the US commercial real estate market. Reports indicate that Chinese investors have combined to spend $9.3 billion in property in 2016 alone.
Last year, Chinese investors spent a mere $6bn on US property purchases. In contrast, the $9.3bn spent so far in 2016, is spread out over a six month period as opposed to a full 12 month year. In 2015, investors bought 71 properties in the US.
Although the financial numbers are up in 2016, Chinese buyers have bought fewer properties to date. This year, Chinese investors have bought up 47 major properties, including China Life’s purchase of a 42-storey skyscraper in Manhattan back in May. China Life paid $1.65bn for the building as China’s desire for trophy real estate purchases in the US continues to grow.
Chinese nationals are the largest group of foreign investors in the US property market. Chinese investment in US property is one of the reasons for recovery following the financial collapse of 2008.
According to a recent study from the Asia Society and Rosen Consulting Group, China is unique for its high volume of investment.
“What makes China different and noteworthy is the combination of the high volume of investment and the breadth of its participation across all real estate categories.”
Prior to China taking over as the US’s top foreign investor, Canada had been atop the list. However, Chinese investors more than double the Canadian’s investment in US properties currently.
In a recent Wall Street Journal article, the financial paper noted the eagerness of Chinese businesses to buy into the US market.
“But buyers from Asia, the Middle East and other parts of the world often are more motivated than domestic U.S. investors. Many are eager to diversify. Others are concerned about risk in their own countries.”
What are the reasons for Chinese investment in the US?
Chinese investors have been inspired to search for overseas deals as their own economy at home remains unstable.
“They’re parking more capital in safe locations in the West,” Jim Costello, senior vice president at deal tracker Real Capital Analytics, told the Wall Street Journal in a recent interview.
Putting money into US properties looks, from a Chinese investment perspective, like a safe place to put money.
Although Chinese investors have preferred to buy on the coasts of the US, it is expected that buyers will move inward as property prices increase in major east and west coast markets.
Within the interior of the US, property prices are far more modest, giving investors more bang for their buck. If the trend of Chinese property investments continues in the US, expect them to become more diversified in location.
While Chinese investors continue to pour money into the commercial side of things, Chinese nationals are continuing to buy up residential homes. With the ability to live in the home or rent it out, China’s American Dream is coming true in the property market.