Why China’s Policies May Affect Your Real Estate Investments

Written by Posted On Monday, 21 August 2017 08:36

For the past several years, Chinese investors have been purchasing property in the United States. Their yuan was devalued, land prices were astronomical, and yield spreads were low. But, according to Morgan Stanley, things are changing.
This Year and Next
Recently, the yuan, China’s currency, has been strengthening. China’s economy is finally bouncing back after the August 2015 devaluation of currency. 
Additionally, China is making it tougher to get money out of the country for real estate deals by defunding conglomerates such as Anbang, Fosun, Dalian Wanda, and HNA. The Chinese government is putting their foot down, saying NO to global real estate buying.
Finally, China has a new domestic initiative Belt and Road that needs funding. This initiative is intended to bridge the infrastructure gap and accelerate economic growth, but to do so will take $900 billion annually for the next ten years. This will keep a lot of money on the mainland tied up and unavailable for foreign investments.   Because of these changes, China’s foreign property investments could drop to $1.7 billion this year, which is an 84 percent cut. In 2018, Morgan Stanley predicts another 15% cut, dropping the amount to $1.4 billion.
In the Past
To understand what this means, let’s take a look at what Chinese investors have been up to in the past: • Over the past 24 months, Chinese firms have snapped up $17 billion of US commercial real estate.  • Second largest foreign investor in the US
Of course, they’ve not just been buying in the United States. China is also responsible: • For 25% of London’s commercial property transactions • For approximately 20% of office transactions in Australia • For 80% of residential land sold in Hong Kong
A Look at Seattle
Just to get an idea of how Chinese investments are affecting the market, let’s look at the Seattle area. As of June of 2017, Chinese home buyers are the largest group of foreign home purchases in Washington State. In fact, Seattle received more interest from Chinese home buyers than any other city in the US in 2016,
Comparatively speaking, Chinese investors can sell a small condo in China and buy two single-family homes in Seattle. Typically, Chinese purchases are homes that are luxury homes, typically costing $1.2 million or more. This has sent the prices of homes in the area up by 125% in the past five years. 
What This Means For You
You may be wondering what difference it makes whether Chinese investors are as abundant this year, but it can make a difference to you. Here’s how.
If you own high-end, luxury property, especially commercial property, you may see a dip in the number of buyers vying for the ability to purchase. Additionally, when a large percentage of buyers leave a market, prices tend to go down overall. This means that you will need to make sure your property is in top condition in order to attract the buyers.
For those wanting to purchase these luxury properties, you may find that fewer buyers means you can find a better price. Keep an eye out in areas known to be Chinese investor havens such as: • Seattle • Los Angeles • New York City/Jersey City metro area • San Francisco • Houston • Phoenix/Mesa/Scottsdale • Kansas City • Virginia Beach • Boston • San Antonio • Louisville, Kentucky • Chapel Hill/Durham NC • Chicago
To learn more about different markets and how they are affected by foreign investors, feel free to contact me. I’d love to talk with you about the real estate climate in the US as well as in your immediate investment area.

Rate this item
(1 Vote)
John Trautman

John Trautman has spent his entire adult life in real estate. Purchasing his first property at 23, he learned the process of flipping and real estate holding from the ground up. Real estate continue to be his passion while he spent eight years as an account executive and later a vice President for Washington Mutual in the mortgage division. Holding the position of President’s Council and several years of President’s Club, he learned the lending business from the mortgage office perspective and lender perspective. Throughout his life he has also been a small business owner, commercial real estate holder, property designer, and house flipper.

During the downturn, John followed the deal to Detroit, Michigan, where he invested in single family rentals and multi-family dwellings. Once his returns were realized, he moved quickly to Arizona to invest in another distressed market.

His passion for making a deal and real estate has lead him to create a hands-on real estate investment mentoring club called Real Estate Knowledge Institute


Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.