The Chinese stock market toil may directly affect the U.S. housing market. Chinese money has been poured into all types of markets across the U.S., from New York luxury penthouses to Malibu beachfront villas. But, will China’s recent turmoil result in an increase or decrease in cash investment in the U.S.?
“China is investing into U.S. real estate with a long-term view — for diversification and safety in times of uncertainty,” said John Burns, a real estate consulting expert. “A 30 percent stock correction, after a 150 percent skyrocket will not change Chinese sentiment. Of course, if the economy were going negative, their banking system was imploding, or the government restricted foreign investment, that would be a cause for concern.”
China has become the largest foreign source of capital into the U.S. RE market, pouring $28.6 billion into properties last year, more than double the investment of Canada (the second highest foreign investor), according to the National Association of Realtors. Oftentimes, Chinese investors want top schools for their children, better health care, fresh air and a safe place for their money during economic uncertainty.
"Now with the (Chinese) market taking a dive, investors are looking now more than ever to the U.S. for economic and political stability and opportunity,” said Alan Lips, a partner with Gerson Preston Robinson, a Miami-based accounting firm that helps to structure foreign real estate deals.
They’re also looking for a path to U.S. citizenship. The EB-5 immigration program, created by Congress in 1990, was designed to stimulate the U.S. economy through jobs and investments of international investors.
While the opportunity may be more inviting, the ability for Chinese buyers to invest in U.S. real estate is clearly under pressure.
“There is concern the loss of wealth from China’s market selloff will bring their investment of U.S. commercial and residential real estate to a halt. This would affect the residential market, and weaken demand for commercial properties, especially in coastal regions,” said Rick Sharga, EVP of Auction.com, a real estate auction company.
The Waldorf Astoria, purchased by Chinese Insurance Company Anbang for $1.95 Billion in February 2015, is an example of such properties being purchased for a safe investment. (Pictured above.)