The Bubble From Chinese Investments In Us Real Estate
If youre a follower of real estate investments expert Jason Hartman, youve probably already met Harry Dent.
Dent, an investments as well as demographics expert himself, is the author of The Sale of a Lifetime: How the Great Bubble Burst of 2017-2019 Can Make You Rich. He recently appeared for the sixth time as a guest on Hartmans Creating Wealth podcast show, and together the two men discussed how certain financial bubblesobjects that get bigger and bigger till they eventually burstare causing chaos in certain markets.
They particularly talk about how Chinese investors buying up real estate in the United States is creating a bubble in certain, higher-end, cyclical real estate markets, such as San Francisco and Vancouver, British Columbia, and how that buying flurry will contribute to the great bubble burst of which Dent predicts in the years ahead.
And Hartman doesnt limit his dissing of foreign investors to the Chinese. Having recently returned from a summer trip to Europe, he also rails against what he calls the European mindset of conservation and scarcity and says hes relieved be back home in the United States.
Heres how Hartmans and Dents discussion on the issues of Chinese investments in US real estate could affect you as an investor, because of certain rising bubbles:
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Chinese Investors Targeting Profitable Cities For American Real Estate Investments
Figures included in the report say Chinese investors acquired at least $17.1 billion of existing commercial property between 2010 and 2015, representing an annual growth rate of 70%. Half of that investment came in 2015 alone. For example, Chinese investors bought NYCs famous Waldorf Astoria hotel, and also struck a $6.5 billion deal for Strategic Hotels & Resorts earlier this year. The size of their total investments has generally been good for the United States real estate economy, helping the market to recover from the crash that began in 2006.
The Chinese are also choosing to invest heavily in residential real estate, with $93 billion being spent on homes between 2010 and 2015. In the last 12 months recorded , home purchases totaled $28.5 billion. Many of these investors bring their children over to the United States to get their education while they manage their properties and work.
Many wealthy Chinese choose to do this is because of a program called EB-5, an immigrant investor program. Basically, they can invest their capital into US projects, making it faster for them to obtain their green cards. Since Congress created the program in 1990, it has resulted in $11 billion of investment from the Chinese .
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Chinese Buyers Purchased More Expensive Homes
Chinese buyers purchased residential properties that were more expensive than properties purchased by other foreign buyers, however this is connected to the areas in the U.S. where they choose to buy. Even though they tend to buy properties in places that are more expensive, between 2017 and 2018, we see that the average purchase price decreased as buyers tend to search for affordable properties, as we can see on the graphic below.
According to NARS report, more than half Chinese, fifty-eight percent , made an all-cash purchase. A majority of Chinese buyers purchased property in a suburban areas, and almost half of the purchases were for primary residential use. Note that Chinese nationals prefer the American education style for their children.
Chinese Investors Take On Us Real Estate Surpass Canadians As Top Foreign Home Purchasers
It might not provide much comfort to Canadians worried about increased Chinese investment in the housing market, but a new report paints it as a global phenomenon
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China Owned More Us Commercial Real Estate Than Other Foreign Countries Pre
China stands out as the largest foreign investor in U.S. commercial real estate. In 2018, Chinese investors accounted for 21 percent of foreign U.S. commercial property buyers. Canada came in at a distant second with 7 percent. Mexico, Germany, Italy, Israel, United Kingdom, Venezuela, and Vietnam all tied for third place at 5 percent.Interestingly, the increased percentage of Chinese purchases went against the general trend of American CREs foreign ownership. In 2016, foreign investors spent $7.9 trillion on U.S. commercial real estate. In 2017, the amount fell to $6.7 billion. It declined even further in 2018 to $4.8 billion.Since the beginning of 2019, as the COVID-19 pandemic adversely affected economies worldwide, China has spent less money on U.S. real estate. Even during such an uncertain time, the sudden shift in strategy has taken many CRE investors by surprise.
China Inbound Investing In Us Real Estate
This semi-annual report provides an update on the US real estate market and Chinese investment into the sector
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KPMG in China
Chinese investors have long looked towards US real estate as a core investment, as evidenced by the inflow of Chinese capital into the US real estate market in recent years.
This semi-annual update provides an overview of the US real estate market, with an in-depth look at commercial, residential and hospitality real estate for the New York, Los Angeles, San Francisco, Washington, DC, Chicago, and Dallas markets from Q4 2015 to Q1 2016.
The report also examines the forms of investment in US real estate, tax implications and valuation modelling norms.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.
For more detail about the structure of the KPMG global organisation please visit .
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Breaking Ground: Chinese Investment In Us Real Estate San Francisco
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For more information on Breaking Ground: Chinese Investment in U.S. Real Estate, please visit AsiaSociety.org/ChinaRealEstate.
Chinese Investment In Us Real Estate Tops $300 Billion: Study
3 Min Read
NEW YORK – Chinese investment in the U.S. real estate market has surpassed $300 billion and is growing despite Chinas economic weakness and increased currency controls, the authors of a new report said on Monday.
Between 2010 and 2015 Chinese buyers bought $93 billion in residential real estate, nearly $208 billion of mortgage-backed securities, and roughly $17 billion of commercial real estate, including office towers and hotels, according to the report by the Rosen Consulting Group and the Asia Society.
Despite those eye-popping numbers, foreign direct investment from China still only makes up 10 percent of all foreign direct investment put into the United States.
However, the report is significant as the first independent study to prove Chinese investors rank among the top in every real estate sector. It also shows Chinese investors have stamina and can withstand short-term market events, said Arthur Margon, a co-author of the report and a partner at Rosen Consulting Group, which specializes in real estate.
There are strong signals that there will be continued, maybe even increasing appetite, said Margon, during an event at New Yorks Asia Society.
How long the good times will last depends on both the U.S. and Chinese economies. Rosens team projects the United States will move out of its economic recovery and into a minor slowdown within 18 to 24 months, during which time Chinas slowdown may worsen.
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The Data On Foreign Buyers Is Weak And Likely Underplays Their Influence
Back in 2006, about 10 percent of California single-family homes were purchased in all-cash transactions, according to the real estate data firm ATTOM Data Solutions. A decade later, its nearly 25 percent. That means a quarter of Californias extremely tight housing inventory is unlikely to go to households like the Rothenbergsmoderate-income families who need a mortgage to buy a home.
While all-cash buyers are often treated as a rough proxy for international buyersthe California Association of Realtors estimates they are more than twice as likely to pay in cash as domestic buyersin reality they are more varied. Some are rich enough to not need to finance a first home, or simply prefer California real estate to the stock market. Private investment firms snapped up a ton of cheap homes during the foreclosure crisisat one point more than one in three California homes was being purchased with all-cash. And increasingly older people, or their children, are liquidating assets to make all-cash offers.
But experts came to see foreign buyers as a bigger force in the market, and a contributor to the rise in single-family rentals California has seen the past 10 years.
So what percentage of Californias housing stock is owned by foreign investors?
Lets start with this major caveat: Foreign buyer real estate data is not good. California sales deeds dont require a buyer or seller to disclose citizenship or residency status. So analysts rely on rough proxies for foreign ownership.
Sales Results In 2019 Are Expected To Be Similar To The 2018 Levels
The trade dispute between the U.S. and China is hot. Washington and Beijing imposed higher tariffs on imports and the negotiations between the two countries seems that is just getting started.
Buying property in the U.S. is becoming more expensive for Chinese buyers. On the other hand, in China there is a discussion about creating stricter rules to control the capital, especially when it comes to taking money out of the country to buy a property in America.
Even though the political uncertainty, sales results in 2019 are expected to be similar to 2018.
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Foreign Real Estate Investors Are Coming To Buy Up American Homes
Updated: by Financial Samurai
Although COVID has been bad for many of us in so many ways, the pandemic did one good thing. The pandemic helped protect American homebuyers from a resurgence in foreign real estate investors. In a big way, the pandemic has throttled the demand from foreign real estate investors to buy American homes.
Before the pandemic hit, 2020 was shaping up to be another solid year. There were growing talks that capital restrictions out of China would ease. Foreigners wanted U.S. assets, and they wanted them bad, partially thanks to a tremendous current account surplus.
Currently, mainland Chinese residents can convert up to US$50,000 per year on foreign currencies for travel, overseas study or work, but not for buying overseas property, securities or life insurance policies.
But before 2018, Chinese foreign buyers were buying United States property in droves. It was easier for citizens to pull resources to buy U.S. property. Then, the Chinese government started cracking down.
Once lockdowns and travel restrictions were in place in the United States and many foreign countries, it became very difficult for foreigners to transact. As a result, COVID gave U.S. buyers the opportunity to buy up our own real estate with less competition.
With the start of the Ukrainian Russian war, the demand by foreigners to buy American real estate has now increased even further. International capital is looking for a safe haven.
Chinese Firms Selling More Us Commercial Real Estate Before And During The Pandemic
Anyone convinced that China has been using commercial property as a way to grow its influence around the world has a much harder time making that argument successfully in 2021. Even before the pandemic disrupted the global economy, China started selling properties as financial returns fell. The Wall Street Journal reports that Chinese investors sold off billions more in U.S. commercial property last year than they bought.Other foreign investors followed the trend. Still, the Chinese were the largest sellers of retail centers, hotels, and office towers. In 2020, Chinese firms sold $20 billion more U.S. commercial real estate than they bought in 2019.The reason behind these sales seems fairly obvious when one looks at the ROI Chinese investors were receiving. In 2010, Chinese companies saw a 20% gain in property prices. As the economy recovered from the Great Recession, CRE prices surged and made a lot of money for investors. In 2019, CRE prices increased a mere 2.5%. During the last quarter of 2019, prices only went up 1.1%.Its easy to see why foreign investors would want to pull out of the market and take their profits home.
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Dont Act Like A European Hartman Tells His Investors
Before the recent podcast with Dent, Hartman had just ended what he called the European summer of love, a trip that took him to such countries as Latvia, Poland and Finland. Hartman actually was born in Europe and travels there often, but I have a real love-hate relationship with my birthplace, the continent of Europe, he says.
Citing high unemployment rates and economic disasters in Spain, Portugal, Greece and Italy, and France where people dont want to work more than 32 hours a week, most Europeans carry this over-entitled socialist, liberal attitude, Hartman has observed.
The European mindset is one of scarcity and conservation, while the American mindset is one of abundance, he says.
You, as an American investor, should follow the latter route, Hartman says.
Europeans constantly bash Americans, because we dont have socialized health care, and Im like, Really, is that your whole thing? Is that your whole lifes thing, free health care? At least in the United States and there are a lot of losers in the United States, weve all watched Jerry Springer many of the people I know, they want to do something great with their life.
And there, the European mindset is like, Well, I got to have free health care and I have to have my big, long vacation every year, and am I going to make 2,000 Euros a month? Its just this getting-by mindset.
Increase Foreign Demand For Us Real Estate Due To Geopolitical Unrest
Finally, due to the unfortunate war in Ukraine by the Russians, there will likely be more investors from Russia and Eastern Europe looking to move money out of their country. The Russian stock market and Ruble has already collapsed. Therefore, other citizens of countries without smooth-working democracies may also want to move their capital out.
The obvious destination is buying U.S. assets like real estate. The war reminds the world about the importance of stable governments. In fact, right now is shaping up to be an ideal environment for real estate investors. Inflation is high, mortgage rates are low, and investors increasingly want to own stable assets.
Foreign real estate investors are coming, whether you like it or not. Instead of suffering, position yourself for the impending tsunami of capital.
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Chinese Investment In Us Real Estate Is Going Strong
The skyline of downtown Manhattan is seen in this aerial photograph over New York City, September… 13, 2016.
As Chinas property market experiences yet another real estate bubble that authorities are attempting to control with new restrictions on home buying, citizens are continuing to look abroad for stable investment in U.S. property markets.
According to an Asia Society Special Report, Chinese investment in residential property amounted to $93 billion between 2010 and 2015, while that in commercial property rang in at $17.1 billion over the same period. Despite the implementation of capital controls this year designed to restrict capital flight, through pressuring insurers to reduce overseas investment and asking banks in Shanghai and Shenzhen to limit dollar buying, Chinese demand for U.S. property remains strong. As of August 2016, the U.S. has already drawn $13 billion in real estate investment commitments from China.
Chinese individual investors in residential properties seek a second home and an investment outlet, and have diversified, to some extent, out from major cities such as New York and Los Angeles to smaller cities in central states, including Detroit and Memphis. Still, coastal regions are the popular home purchase destinations for Chinese nationals.
Correction: Chinese investment in residential property amounted to $93 billion between 2010 and 2015, not $9.3 billion.
Chinese Real Estate Investment In The Us
| FEATURE | FINANCE & INVESTMENT
Financier Worldwide Magazine
The US real estate market has long been an attractive destination for both domestic and overseas investors, the perception being that the industry helps facilitate financial success. In a recent survey by Better Homes and Gardens Real Estate, 96 percent of US real estate investors believed their decision to enter the market had generated significant financial rewards in recent years.
The attractiveness of the sector has been complimented by the relative stability it affords investors, offering the kind of concrete, saleable and income-producing assets which investors often hope to find in todays global market. To underline this stability there is, in many circles, a belief that the wider US real estate market is set for a period of unprecedented growth. Over the next two years, the industry is expected to see record growth due to the strength of the US economy, low interest rates worldwide, and increasing demand from both US and global investors seeking yield, according to KPMG.
Furthermore, the appeal of US real estate has been boosted by a number of other external factors, including global volatility, the ongoing and complex process of Brexit and the economic changes gripping China.
China
A recent surge took Chinese investment in US real estate over the last five years past the $110bn mark.
Split interests
Doing the deal
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