Direct foreign investment in the United States residential real estate market is on the rise, considering the Chinese made up US$28.6 billion of the total US$118 invested into the US market in the year 2015. To put this number into perspective, it is important to consider that in just 2010, the Chinese accounted for only US$11.2 billion of residential purchases – there has been an increase by over 20 per cent throughout the last five years. During these years, the Chinese have contributed a spending of US$93 billion with respect to residential property purchased in the states. This heavy increase of residential purchases by the Chinese has allowed them to outpace Canada in becoming the number one foreign investor of residential real estate in the U.S.

The Chinese have carved out a special interest in the US residential market because they not only regard the U.S. real estate market as the best place to purchase real estate, but also because they have a strong underlying belief in the growth potential of the US economy. The affordability nature of U.S. properties is another reason for the large increase in residential investments – even though China’s currency has weakened relative to the U.S. dollar, it is still pretty strong, considering U.S. properties remain quite affordable for the average Chinese investor. This is especially true when you consider the costly price of residential property in China – relatively speaking, U.S. real estate is very inexpensive for Chinese investors compared to properties in Asia.

Aside from the affordability nature of U.S. properties, the fast growing Chinese economy has created many wealthy individuals, resulting in an increased number of individuals with money to invest. As the domestic Chinese economy has slowed down, evident by the drop in value of the Yuan, investors have attempted to get their money out of China and into foreign nations. With that said, Chinese buyers have come to regard the U.S. residential real estate market as a very wise investment decision – this isn’t surprising since real estate is one of the primary mechanisms used by Chinese investors to preserve and grow wealth.

In terms of optimal locations, the Chinese have shown consistent and extreme interest in prime neighborhoods in the most expensive markets. The top four cities of interest to Chinese nations remain New York, Los Angeles, San Francisco, and Seattle. In addition to these red hot markets, residential property in Chicago, Miami, and Las Vegas has also become very popular with Chinese investors.

In the past year, 35 per cent of Chinese investors bought homes in California, 8 per cent sought out Washington, and 7 per cent set ground in New York. The properties in particular that captured the attention of Chinese nationals remain high end, modern, luxury properties in the most expensive parts of the city. Considering the fact that the Chinese seek out the most expensive markets – it’s not surprising to find that the average price of a home for Chinese investors was $831,800 in 2015, whereas it was only $499,600 for all other foreign investors. Therefore, it is quite clear and apparent that the Chinese have not only surpassed every other country with respect to total dollar amount spent on U.S. homes, but they have also carved themselves into a serious contender for the most extravagant and expensive properties in most major cities in the United States.

Source: Asia Society, a not-for-profit group

By: Amtej Dosanjh