Foreign investment in US residential real estate drops 36pc
CHALLENGING conditions in the US housing market, along with tighter currency controls by the Chinese Government, caused a stunning drop in foreign demand for American homes.
The dollar volume of homes purchased by foreign buyers from April 2018 through March 2019 dropped 36 per cent from the previous year, according to the National Association of Realtors.
The decline was due to a drop in the number and average price of purchases. Foreigners bought 183,100 properties with a total value of about $US77.9 billion ($F166.4b), down from 266,800 valued at $121b in the previous period.
They paid a median price of $US280,600 ($F599, 728), which is higher than the median for all existing homebuyers ($US259,600 ($F554, 832)), but it was down from $US290, 400 ($F620, 659) the previous year.
“A confluence of many factors — slower economic growth abroad, tighter capital controls in China, a stronger US dollar and a low inventory of homes for sale — contributed to the pullback of foreign buyers,” said Lawrence Yun, NAR’s chief economist. “However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the US.”
The Chinese were the leading buyers for the seventh consecutive year, purchasing an estimated $US13.4b ($F28.63b) worth of residential property. Yet that was a 56 per cent decline from the previous 12 months and comparatively the biggest percentage drop of all foreign buyers. Chinese economic growth slowed to 6.3 per cent in 2019 compared with 6.9 per cent in 2017, when the previous buyer survey began.
The Chinese government also tightened its grip on the outflow of cash to purchase foreign property.
The Chinese may also be souring on US real estate due to the current political climate. Anecdotally, real estate agents in California have seen a pullback in Chinese buyer demand. Southern California had been particularly popular with Chinese parents hoping to send their children to American colleges.
In the first quarter of this year, Chinese buyer inquiries for US properties on Juwai.com, a Chinese real estate site, were down 27.5 per cent from a year ago. Inquiries have been down in four of the last five quarters.
“We call it the Trump effect. It’s a combination of anti-Chinese political rhetoric, a clampdown on visa processing, and of course tariffs,” Carrie Law, CEO and director of Juwai.com, said in a recent interview.
“The Trump effect is undercutting some of the primary drivers of Chinese demand for US property, including buying homes for students who are studying in the US and the country’s reputation as a safe investment.”