Chinese buyers remain enthused about snapping up US homes
Despite political concerns, the United States (US) is continuing to be an attractive investment destination for mainland Chinese and Hong Kong buyers.
As it turns out, predictions that the strong US dollar and concerns over the Trump administration would discourage Chinese investors from looking stateside have been unfounded. In fact, US residential property purchases by Chinese buyers are at an all-time high.
Chinese buyers spent a total of US$31.7 billion (HK$247.9 billion) on US homes between April 2016 and March 2017, according to the National Association of Realtors (NAR) in the US – an increase of more than US$4 billion over the previous year.
They were the largest purchasers by dollar volume and purchased more housing units than any other overseas group for the third consecutive year – a total of 40,572 units compared to 29,195 the year before.
While there is still some uncertainty over how changes to visa applications and more stringent capital controls for Chinese citizens may affect US home purchases over the next few years, many are looking to the long term and staying optimistic.
What makes US property so appealing?
China was the second-biggest investor in US real estate over the last few years after Canada, according to PwC's Emerging Trends in Real Estate 2017: Canada and the United States report. Hong Kong was ranked seventh.
The influx of Canadian buyers can be easily linked to skyrocketing housing prices in Canada, but Chinese interest is more ideological. The growing base of Chinese business in the country has earned the US a reputation as a safe harbor for overseas investment. Some buyers also hope to emigrate to the country with the expectation of improving their career and education prospects.
Which properties are most in demand?
The NAR report revealed that international buyers favored properties in coastal cities, particularly Florida, Texas and California. Combined, these three states accounted for 46 percent of all residential property purchases by foreigners.
Demand was the highest for homes in urbanised environments close to job centers. Most purchases by Chinese buyers were in suburban locations (61 percent), with 31 percent in central city or other urban areas, and only 7 percent in small towns. More than two-thirds of purchases (67 percent) were for detached single-family homes, with 14 percent buying townhouses and 13 percent buying condominiums.
This high demand, coupled with a supply shortage of properties in sought-after coastal locations, has contributed to significant price increases in recent years. San Francisco average house prices have more than doubled since 2009, according to the S&P CoreLogic Case-Shiller Indices, while home prices across the US rose by 5.5 percent in the 12 months up to April 2017.
David Green-Morgan, Global Capital Markets Research Director at JLL, explained: “We do believe that Chinese investors will continue to be major movers of capital into global real estate for many years to come. But a similar increase in 2017 may be challenging given the recent discussion about China monitoring its capital outflows.”