Capping a five-year real-estate binge, Chinese nationals came out as the top group of foreign buyers of U.S. homes for the year that ended in March, scooping up everything from $500,000 condos in New Jersey to $3 million vacation homes in California to $13 million Manhattan condos. But now, these foreign investors are hesitating and pulling back.
Scared off by China’s stock-market selloff, slowing economic growth, currency devaluation and tightened restrictions on capital outflows, Chinese buyers are rethinking their foreign investments. “We are ready to embrace a winter for Chinese buyers in the next one year, two years,” said Daniel Chang, a New York City-based broker at Sotheby’s International Realty. Christina Shaw, a Realtor with Re/Max Fine Homes in Newport Beach, Calif., said one client who gave her a budget of $10 million to buy two houses in the area was now looking to reduce his budget by about one-third.
Many foreign buyers are deciding against buying real estate abroad because many cities are too pricey. That may be the case in the cities where Chinese buyers are looking, such as the highly sought after locations like Southern California, New York and Miami.
So are Chinese buyers retracting their money back to China? Not quite. While the Chinese buying spree began on the coasts in the US, it is now moving inland to the middle of the country. Foreign buyers are moving away from the markets where prices have been pushed up to markets where prices are more modest and have room to run.
Thirty-five miles northwest of Dallas, a luxury development is about to go up, soon to be a gated subdivision of 99 mini-mansions designed for buyers from mainland China. The homes here in Corinth will feature two master suites, one for the buyers and the other for aging parents. A concierge service will help new arrivals from overseas order Internet service and pay electric bills. Chauffeurs will assist homeowners until they learn to navigate the loops of Texas freeways. The developer, Zhang Long, a Beijing businessman, is banking on the flood of foreign money to persist despite the current tumult in China. While a currency devaluation and stock market crash have hindered the country’s buying power overseas, the resulting uncertainty is making many Chinese individuals and companies eager to invest anywhere except their home country. “When Chairman Zhang saw the strength of the Texan economy, he decided it was time that the Asian community should be presented an opportunity to invest in the American Dream,” marketing materials for the development read.
This year, Chinese families represented the largest group of overseas home buyers in the United States, for the first time. Big spenders on new homes are helping prop up local economies in the Midwest. But in dense areas like San Francisco and Manhattan, they are also affecting the affordability and availability of housing, as demand outpaces supply and bidding wars ensue.
Do you think foreign money moving to the middle of the country is a good thing for the US housing economy? Or will it spread the affordability issue? Let us know your thoughts.