Home sales are hurting. Even with lower mortgages rates and a sales pick-up in July, purchases of homes are still down significantly compared with 2018.
But while analysts typically blame high prices and growing worries about a possible recession, another factor is also playing a prominentrole: Foreign buyers, particularly theChinese, have pulled back sharply from the U.S. real estate market.
Foreign investorspurchased $77.9 billion in residential property in the 12 months ending in March, down36% from the previous 12-month period,the National Association of Realtors said in a recent report.
China, meanwhile, topped all other countries for the seventh consecutive year, with $13.4 billion in home purchases, but that was down a whopping 56% from the prior year, NAR said. About half thosesales were all cash, down from 58% a year earlier.The next largestinternational buyers–Canada, India and the United Kingdom –also had big drops,but they represent smaller shares of the market.
“The magnitude of (China's) decline is quite striking, implying less confidence in owning a property in the U.S.,” says Lawrence Yun, chief economist of NAR.
All told, existing U.S. home sales are down about 3% so far this year from the same period in 2018 despite a 2.5% increase in July from the prior month, NAR figures show.
A big reason Chinese investors are retreatingfrom the American housing market is that Beijinghas placed tight limits on how much capital can leave the country in the wake of a devaluation in the yuan a few years ago.
“In China, each family member has been restricted to $50,000 or less,” says Steven Ho, senior loan officer at Quontic, a New YorkCity-based bank. That makes it tougher for Chinese investors to elbow out American buyers with all-cash offers. “A few years before, these restrictions were not so stringent.”
The government toughened capital controls last year as the Chinese economy weakened, Ho says.
Also, China's slowing economy itself has dampened the confidence and purchasing appetite of Chinese buyers, Yun says. The Trump administration's trade war with China, he says, has further chilled investment in U.S. housing.
Meanwhile, more Chinese homeownershave been selling their American houses and condosbecause they can’t pay the maintenance costs with their money trappedin China, says Jeff Lu, vice president of Fidelity National Title Insurance Company.
California feeling the effects
California is the epicenter of Chinese residential investment in the U.S., with34% of purchases in the state.Other significant hubs are New York, New Jersey, Florida and Texas.
In Irvine, population 280,000, “there are 65,000 houses... and 21,000 of them are owned by Chinese.” Lu of Fidelity National says.
“It’s normal for Chinese buyers to raise the price aggressively," says Phil Lee, a broker at Keller Williamsin Irvine. "For example, a $1.2 million house, they pay $1.22 million, all in cash.”
In recent years, Chinese investors made about half of all home purchasesin the city, but that share has fallen to about 36% in 2019, Lu says.
The pullback is depressing prices. In the first half of the year, the median home sale price in Irvinefellto $820,000 from $834,000,according to Zillow.
“It’s good news for local Americans who are looking to buy a home – larger supply and less competitors,” Lu added.
Many of the wealthy leave market
The drop-off in Chinese investors has especially affected the upper end of the market.After decades of economic growth, China has created a class of nouveau riche, many of whom want to buy U.S. homes as a solid investment or as a home for their children who attend American colleges.
“The wealthy Chinese see the U.S. as a safe harbor to park their money, and also an ideal place for their children’s education,” says Lin Pan, the founder of Lin Pan Realty Group, a Chinese real estate brokerage in Long Island, New York.
“The first batch of Chinese who came into the American housing market wereentertainment stars, and then high-level Chinese officials and their families, businessmen and middle-class families,” says Chole Ren,an independent real estate broker in New York City.
“They specifically fly over here to view the houses,” says Xiang Jill Ji, a broker withDouglas Elliman Real Estate in New York.
“The condos in midtown Manhattan used to be one of their favorite choices because they’re brand new, with thebest view and positive valued-added space,” Ji said. But at a recent open house, few Chinese shoppers showed up, she says.
More turn to mortgages
With China's limits on cash that can leave the country, Chinese buyers are now searching for lower-priced homes and using mortgages more often. The share of their home purchases that rely on mortgages has risen to 46% in the 12 months ending in March, from 37% the prior year, according to NAR. And more of the buyers are middle-class.
The Chinese buyers are also downsizing. Ji has a Chinese client who wanted to buy a two-bedroom condo in Manhattan earlier this year but is now looking fora one-bedroom or studio.
At the same time, brokers are seeing a growing number of homebuyers from Hong Kongdue to the political crisis in the city,New York brokers Pan and Ji say.
“Hong Kong buyers could be the next source of growth,” Pan says.
Many Chinese and Hong Kong nationals may find this an intriguing option because of the relatively cheaper housing prices in the United States (compared to metro areas of other western countries) and the availability of coastal area properties in many country locations.
Chinese investors are among the top foreign purchasers of residential real estate, along with Canadians, according to the National Association of Realtors. Other states have had concerns over foreign ownership of land and have made efforts to regulate it.
Chinese buyers comprise one of the largest groups of foreign buyers of residential property in the United States. Historically, between 20,000 and 40,000 residential properties were bought by Chinese nationals, but in 2022, both the sales volume and percentage of all foreign-bought properties declined.
Highlights: Foreign Investment US Real Estate Statistics
From April 2020 to March 2021, investors from outside the United States bought 107,000 properties worth $54.4 billion in the United States. Foreign-born individuals make up 14.25 percent of the population in the country's 50 largest metros, on average.
Canadian investors lead this pack, by a long shot, with nearly 9.4 million acres of U.S. land — more acreage than 44 of the top 50 foreign landowners combined, according to the report. (These people own the most land in America.)
A key benefit of cross-listing, and undoubtedly a major driver of the cross-listing premium, is the reduced cost of financing available to cross-listed firms. Companies pay less to raise money, whether by selling stock (equity) or debt.
How have Chinese and Canadian investments developed over time? The share of Chinese investors in the U.S. real estate market remained somewhat constant until 2018 when it hovered at around 15 percent, before dropping to 11 percent in 2019 and then six percent in 2021.
In play now in China, where around 70% of household wealth is in property, this phenomenon is weighing on the post-pandemic recovery of household consumption, which Chinese policymakers have vowed to make a more prominent driver of economic growth.
Current State. According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies own about one fourth of all single-family homes. Last year, investor purchases accounted for 22% of American homes sold.
According to the U.S. Department of Agriculture's (USDA) latest report on foreign ownership of American land, from 2021, 146 Chinese investors held 383,935 acres—nearly double the 193,700 acres that comprise New York City.
The answer is yes, foreigners are allowed to purchase property in China! The essential requirement is that you have studied or worked in China for at least one year on a residence permit. Foreigners are allowed to only own one residential property for dwelling purposes.
There are two major methods for foreigners to inherit the estate located in China, namely notarization and litigation. In the event that there is no dispute between successors over the estate, you may bring relevant documents for succession notarization at a Chinese notary public.
Canadian buyers made up the largest share of major foreign buyers of property in the United States in 2022 by country. In that year, Mexican buyers were the second largest group of foreign buyers, making up eight percent of foreign buyers.
Top Home Ownership Statistics In America: 65.8% of Americans own a home as of 2022. Some 74 million Americans, or about 27%, live in a condo or HOA property.
As seen in Table 2, when sorted by total land value, the top 10 countries for foreign investors are Canada, the Netherlands, Germany, Italy, the United Kingdom, Portugal, France, Japan, Sweden, and China.
The largest country in the world is Russia with a total area of 17,098,242 Km² (6,601,665 mi²) and a land area of 16,376,870 Km² (6,323,142 mi²), equivalent to 11% of the total world's landmass of 148,940,000 Km² (57,510,000 square miles). See also: Most Populous Countries.
Companies import goods from China in part because their lower cost allows higher retail markups. That means more of what consumers spend goes to those companies and, indirectly, their workers. Imported goods and services constitute a smaller share of the U.S. consumer market than you might think.
Five Chinese companies listed on the New York Stock Exchange said they intend to delist their American depositary shares. The firms include China Life Insurance, PetroChina, China Petroleum & Chemical, Aluminum Corp.of China and Sinopec Shanghai Petrochemical.
Soybeans. Soybeans accounted for nearly one-half of U.S. agricultural exports to China at a record $16.4 billion, surpassing the previous year's record by more than $2.2 billion. China is the world's largest soybean importer, accounting for nearly 60 percent of global trade and half of U.S. soybean export value.
Another way that Chinese home buyers are able to afford their down payments is via the country's Housing Provident Fund. This fund began when the country started privatizing urban housing as way to help residents afford to buy their homes.
Chinese buyers spent the most on U.S. properties, dropping $6.1 billion in total. They were followed by Canadians, who collectively paid $5.5 billion. Buyers from India followed at $3.6 billion. Then came Mexican buyers, at $2.9 billion, and Brazilians, at $1.6 billion.
The United States is the richest country in the world with the highest GDP, as of 2021. China is the second richest country in the world with a $17.734 trillion GDP.
How much is rich in China? Millionaires are defined as individuals with personal wealth of over 10 million yuan, and super-rich are defined as individuals with personal wealth of 100 million yuan or above. One yuan equals approximately 0.16 U.S. dollars and 0.14 euros (as of April 2022).
In this line, data acquired by Finbold indicates that as of April 12, China's national debt amounted to $14.34 trillion, ranking second globally. This value reflects a year-on-year (YoY) increase of $3.81 trillion, or 36.18%, compared to the $10.53 trillion recorded in 2022.
If the company has borrowed money to purchase the house, it can build equity over time, essentially increasing the percentage of the home it owns outright and can then borrow against later on.
“90% of all millionaires become so through owning real estate.” This famous quote from Andrew Carnegie, one of the wealthiest entrepreneurs of all time, is just as relevant today as it was more than a century ago. Some of the most successful entrepreneurs in the world have built their wealth through real estate.
Many factors have influenced this unusual market, of course. But one that affects the housing shortage in particular is institutional real estate investment. Institutional investors purchased 13.2 percent of all properties sold in 2021, according to a 2022 report by the National Association of Realtors (NAR).
China Investment Corporation (CIC) has forked out $1.03 billion to purchase a 45 percent stake in a building in New York’s iconic Rockefeller Center, a deal which makes the Chinese sovereign wealth fund one of the biggest buyers of Manhattan real estate in 2016.
Columbia University is the largest owner in New York City by the number of locations and manages over 5000 apartments across 150 residential buildings.
The Chinese believe a home should be a balanced environment where the position of doors, windows and furnishings help the good energy to flow through unencumbered. Light and airy homes with little clutter appeal to most people so Feng Shui practices are often just good common sense.
“Owning” might not be the right term, as in China, property is simply leased for the duration of 70 years. After this time, the lease is usually renewed. However, the Ministry of Housing and Construction can theoretically nullify your lease at any time if your property is needed for development.
If the heirs are to inherit an estate from the decedent, the estate should be used to pay the decedent's taxes and debts before it's partitioned. If the entire estate cannot cover the taxes and debts, they shall be paid to the extent of the estate. And the heirs are not responsible for the remaining taxes and debts.
Can you inherit debt in China? In general, heirs in China are not responsible for the debts of the deceased. However, there are some exceptions to this rule. If the deceased had outstanding debts, the creditors may attempt to collect those debts from the estate of the deceased.
California is the epicenter of Chinese residential investment in the U.S., with 34% of purchases in the state. Other significant hubs are New York, New Jersey, Florida and Texas. In Irvine, population 280,000, “there are 65,000 houses... and 21,000 of them are owned by Chinese.” Lu of Fidelity National says.
The US is a renter-friendly country with a high demand for rental properties. Therefore, you can easily find tenants for your investment property in the USA and generate good rental income. Rental yield is defined as the gross annual rental income as a percentage of the property purchase price.
Chinese investors have been lining up to buy properties in Canada, the US, New Zealand, Thailand, and Australia, majorly because these five countries have been hot markets for them.
According to the U.S. Department of Agriculture's (USDA) latest report on foreign ownership of American land, from 2021, 146 Chinese investors held 383,935 acres—nearly double the 193,700 acres that comprise New York City.
A few countries provided the majority of the $5 trillion in cumulative direct investment in the United States by the end of 2021. Japan was the single largest overseas investor, constituting nearly 15 percent of total cumulative foreign direct investment holdings.
The main investing countries in the U.S. are Japan, Germany, Canada, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. In 2021, California received the most investment, followed by Massachusetts and New York (BEA).
Chinese buyers bought $6.1 billion in existing homes in 2022, up 30% from the prior period even as the number of homes purchased by Chinese buyers dropped. That's because the average Chinese purchase price jumped from $710,000 to just over $1 million in the same period, by far the biggest average budget of any country.
Evergrande Group owns 565 million square meters (6,080 million square feet) of development land and real estate projects in 22 cities, including Guangzhou, Tianjin, Shenyang, Wuhan, Kunming, Chengdu, Chongqing, Nanjing, Zhengzhou, Luoyang, Changsha, Nanning, Xian, Taiyuan and Guiyang in Mainland China.
Introduction: My name is Saturnina Altenwerth DVM, I am a witty, perfect, combative, beautiful, determined, fancy, determined person who loves writing and wants to share my knowledge and understanding with you.
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