Chinese splurging on US real estate
Chinese buyers spent more than $17 billion on US commercial real estate between 2010 and 2015, and during that same period most Chinese real estate investment — 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 report highlights: 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 Asia Society on Monday, Wendy Cai-Lee, executive vicepresident 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 that 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 and 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.
During the talk, Wang referred to a range of items between the two countries, including the upcoming annual China-US Strategic and Economic Dialogue and the preparation for the G20 leaders’ summit in Eastern China’s Hangzhou in September.
Both sides are expected to “stay focused on cooperation, properly manage divergences and maintain the momentum of the healthy and stable development of China-US ties”, Wang said.
The talk between Wang and Kerry came just four days before the inauguration of Tsai Ingwen, chairwoman of Taiwan’s Democratic Progressive Party, as the island’s new leader.
While Tsai has talked about preserving the status quo in cross-Straits relations, she has not yet convinced people that DPP, which has long refused to endorse the 1992 Consensus that Taiwan and the mainland are both parts of one China, will give up pursuing the island’s full independence from the mainland.
Zhu Weidong, deputy head of the Institute of Taiwan Studies at the Chinese Academy of Social Sciences, was quoted by the Xinhua News Agency as saying that negating the consensus would disrupt the status quo of peace and stability promised by the incoming leader.
“Adherence to the consensus is not only a matter of principle, but also a gesture of good will from the mainland, because the principle has been consistent. The mainland has asked no more from the DPP than it did from the Kuomintang (KMT) since 2008,” Zhu said.
Relations have improved dramatically after Ma Ying-jeou, the leader of Kuomintang, assumed leadership of the island in 2008.
Bilateral trade has reached $170 billion each year. And the Chinese mainland has become Taiwan’s largest destination of investment and exports.