Chinese invest $110 billion in US real estate

Chinese buyers spent more than $17 billion on US commercial real estate between 2010 and 2015, and during that same period at least $93 billion— went into US homes, according to a study by the Asia Society and the Rosen Consulting Group.

"More than any foreign investor other than Canada, China stands out for the breadth, depth, and speed of its participation in the US real estate market," according to the report released on Monday, Breaking Ground : Chinese Investment in US Real Estate.

"This wave of investment is coming from diverse sources in China," said Arthur Margon, one of the authors of the report and a partner at Rosen Consulting Group (RGC), an independent real estate economics consulting firm. "But that's really a small piece of the potential investor universe."

Among the highlights of the report: China is the biggest foreign holder of mortgage-backed securities issued by US government-sponsored enterprises such as Fannie Mae and Freddie Mac, with a total of $207.9 billion, an increase from $20 billion in 2000.

"Like US Treasuries, these bonds are important investments for Chinese government finances, because they allow for recirculation of dollars gained by the trade imbalance, and for the US housing market, because they help ensure liquidity and mortgage rate stability," according to the report.

During a discussion about the report at the Manhattan-based Asia Society on Monday, Wendy Cai-Lee, executive vice-president at East West Bancorp Inc, said Chinese buyers are becoming more knowledgeable about the US real estate market.

"Several years ago I had Chinese buyers asking only about the return from a potential deal. Now they ask about safety and diversification reflecting a greater awareness of the US market," she said.

Since 2010, nearly 20,000 Chinese EB-5 investors have generated at least $9.5 billion of capital and may have created or sustained 200,000 jobs, the report said. The program allows a foreign national who invests at least $500,000 in projects that create a minimum of 10 jobs to receive a US visa and, on completion of the project, a green card for permanent residency status. Chinese have been the main recipients of EB-5 visas.

The report said in the short term "capital controls" will likely slow individual purchases of US homes and the growth rate of commercial property acquisitions. But it said direct investment in existing US commercial real estate assets and residential purchases, excluding new development projects, could total at least $218 billion from 2016 through 2020. Beyond 2020, Chinese investment could accelerate further.

The report used information from public records and trade groups with RCG's database, based in part on gathering of data and interviews with industry sources.

Sidebar:

Points from the report

--In the 12 months to March 2015, US home purchases totaled $28.5 billion. California accounted for 35 percent of sales, followed by Washington State with 8 percent and New York at 7 percent.

--Chinese pay a higher price for condos, homes and apartments in the US than other foreign buyers. According to the National Association of Realtors, the average home price for Chinese buyers in 2015 was $831,800, compared to $499,600 for other international buyers.

--Half of the $17.1 billion investment by Chinese in existing office towers, hotels and other commercial buildings came in 2015, representing an annual growth rate of 70 percent.

--In 2015, China ranked third in US commercial real estate acquisition volume, behind Canada ($24.6 billion worth of investment) and Singapore ($14.6 billion).On the residential side, Chinese buyers were No 1, topping Canada's $11.2 billion and India's $7.9 billion.