Chinese Investors Pump $110 Billion into U.S. Real Estate
China’s economy is undoubtedly in a state of turmoil. First quarter GDP was 6.7% -- the weakest since 2009. The banking system is highly over-leveraged. Many corporations are deep in debt. Industrial output rose just 6% year over year in April, as compared to 6.8% growth in March. Retail sales grew less than expected, too, as the economic growth outlook softens.
As a result of continued poor economic growth, Chinese investors have been pushing into higher yielding opportunities abroad, especially in real estate.
In fact, according to a new report from the Asia Society and Rosen Consulting Group, Chinese investors have become the largest foreign buyers of US property after pouring billions into the market in search of safer offshore assets.
After a substantial surge in residential and commercial real estate from Chinese investors in 2015, the five-year investment total has ballooned to $110 billion. “The sheer size of that total has helped the real estate market recover from the crash that began in 2006 and precipitated the 2008 economic crisis,” notes the report. And, despite a recent clampdown on capital outflows, that $110 billion figure is expected to double this decade.
Between 2010 and 2015, Chinese investors bought more than $17 billion of US commercial real estate, with half of that spent in 2015 alone. Another $93 billion was spent on U.S. homes across some of the most expensive markets, including New York, Los Angeles, Seattle, and San Francisco.
Better yet, the buying spree isn’t expected to slow. Long-term economic drivers are expected to remain quite strong, as wealthy investors seek high-yielding opportunities in a low-interest rate environment, and as a $1.6 trillion Chinese insurance industry seeks to invest in even more real estate projects – as noted by Asia Society.
There may be fears that commercial real estate is slowing. But I still don’t subscribe to it.