Chinese Real Estate Investors Continue to Withdraw from the U.S.

Back in August we observed how Chinese real estate investors were becoming increasingly difficult to find, at least on the buying side. Six months later the Chinese are still continuing their exit of the U.S. real estate market.

Net commercial real estate purchases continue dwindling

Not too long ago, Chinese buyers were the biggest investors in U.S. commercial real estate. With about $19.8 billion in net purchases in 2016 China held the #1 ranking for foreign investors buying property in United States. Two years later, that ranking has dropped to #4, dwindling to the lowest level since 2012.

According to Real Capital Analytics, net purchase volume by the Chinese was just $6.4 billion, nearly tying with Germany’s fifth-place ranking of $6.2 billion. Last year Canadian investors topped the charts with $44 billion in net purchases, followed by France and Singapore.

Five years ago, China was on a massive buying spree in the U.S. Tens of billions were invested in trophy properties such as the Waldorf Astoria in New York, a skyscraper development in Chicago worth nearly $1 billion, and an ultra-high-end residential project in Beverly Hills. Now, thanks in part to soaring property values in the U.S., Chinese investors have quickly turned into opportunistic sellers.

Chinese are selling their U.S. homes, too

The single-family housing market in the U.S. is also seeing a dearth of Chinese buyers. The most recent report by the National Association of Realtors shows that home purchases by the Chinese have also been decreasing with an annual decline of about 4%.

The U.S. has become a much less attractive market to the Chinese for second-homes due to rising home prices, a strengthening U.S. dollar vs. the Chinese yuan, and an economic slowdown in China that’s leaving less speculative money available to spend on second or third homes overseas.

Tighter capital controls reduce U.S. real estate exposure

The Chinese government has begun tightening the control on capital outflows that it loosened several years ago. Last year the country reported a growth rate of just 6.6%, its lowest economic expansion since 1990 and a lower slowdown than even Beijing anticipated. Until the Chinese economy stabilizes, analysts expect China’s tighter currency control policy to continue.

It’s important to note that the Chinese haven’t completely disappeared from the U.S. real estate market. They’re simply focusing on lower profile, but still profitable, real estate investments and joint ventures. Warehouses, distribution centers, and multi-family apartment property continue to offer the less glamorous but steady annual returns that the Chinese and other astute real estate investors look for.

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