A Tidal Wave of Chinese Cash Is Hitting the U.S. Real Estate Market

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A Tidal Wave of Chinese Cash Is Hitting the U.S. Real Estate Market

In the year that ended in March 2015, Chinese buyers spent $28.6 billion on American homes. That’s more than twice the amount from 2013, according to the National Association of Realtors.1 For the first time, China ranked first among foreign countries with overseas homebuyers in the United States, with 28 percent of all foreign purchases.

Increasingly, Chinese buyers are targeting the high end of the U.S. real estate market. They account for one of every fourteen homes sold for more than $1 million. On average, they pay $831,800 for a home, which is more than three times as much as the average of $255,600 that Americans spend.

Chinese buyers are also rushing into the overseas commercial real estate market, with their purchases increasing by 49 percent last year, according to one estimate. According to the commercial real estate services firm CBRE, Chinese outbound capital flows into global commercial real estate markets have exceeded $10 billion in a year for the first time ever.

Among the higher-profile acquisitions recently are the Waldorf Astoria hotel and the General Motors Building. Meanwhile, according to International Business Times, China’s state-run China Life Insurance Company is investing more than $1 billion in warehouses across the U.S.2

What’s driving the U.S. real estate investment boom among Chinese buyers?

As we reported in previous issues, China’s housing market recently went through a bubble followed by a painful crash. Then early in 2015, its stock market skyrocketed, fueled by unrealistic valuations of Internet companies and boosted by unsophisticated investors, many of whom are illiterate.

As we predicted, the Shanghai Composite market crashed by 40 percent last summer, destroying trillions of dollars in market value. Now Chinese investors are turning to the one haven they consider safe for their money: the U.S., with its relatively stable economy, transparent government, and secure political system.

Some Chinese investors are buying homes and renting them out, hoping they can use the houses as income property.

Other Chinese buyers are trying to move their money to the U...

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