Chinese emerge as enthusiastic buyers of property in the US

Image The volume of property sold to overseas buyers in the United States has declined slightly but Chinese people are buying more real estate, exceeding the amount of other top international buyers.

Research from the National Association of Realtors suggest that waning economic growth in many countries and higher home prices along with a strengthening US dollar was responsible for the slight overall fall.

However, the data, covering sales to overseas buyers between April 2015 and March 2016, reveals a significant fall in buying from non-resident foreigners. Sales to overseas buyers amounted to $102.6 billion of residential property, a 1.3% decline from the $103.9 billion of property purchased in the previous year’s survey.

Overall, a total of 214,885 residential properties were bought by foreign buyers, up 2.8%, and properties were typically valued higher at $277,380 compared to the median price of all US existing home sales at $223,058.

Lawrence Yun, NAR chief economist, said the figures highlight the tremendous appeal US real estate still has on many foreign nationals despite the price of property becoming less affordable.

‘Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,’ he explained.

‘While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009,’ he pointed out.

He also pointed out that overall foreigners, especially those from China, continue to see the US real estate as a solid investment opportunity and the country as an attractive place to visit and live.

According to the survey, sales to non-resident foreign buyers pulled back by approximately $10 billion to the lowest dollar volume since 2013 when it was $35 billion. The decline was largely caused by the decrease in the share of non-resident foreign buyers to foreign residential buyers to 41%, down from the almost even split between the two in previous years.

‘Both the increase in US home prices, up 6% in March 2016 compared to one year ago, and the depreciating value of foreign currencies against the US dollar made buying property a lot pricier last year,’ said Yun.

The research shows that at least eight countries, including China and Canada, saw double digit percent increases in the median sales price of a US existing home when measured in their country’s currency, led by Venezuela at 45% and Brazil at 24%.

For the fourth year in a row, buyers from China exceeded all countries by dollar volume of sales at $27.3 billion, which was a slight decrease from last year’s survey at $28.6 billion, but over triple the total dollar volume of sales from Canadian buyers who were ranked second at $8.9 billion.

Indeed, Chinese buyers purchased the most housing units for the second consecutive year at 29,195 but this was down from 34,327 in 2015, and also typically bought the most expensive homes at a median price of $542,084.

‘Although China’s currency modestly weakened versus the US dollar in the past year, it’s much stronger than it was five to 10 years ago, thereby making US properties still appear reasonably affordable over a longer time span,’ Yun explained.

In addition to the slightly diminished sales activity from Chinese buyers, the total number of sales and the sales dollar volume from buyers from Canada, India at $6.1 billion and Mexico at $4.8 billion, also retracted from their levels a year ago. Only buyers from the United Kingdom, after a decrease in the 2015 survey, saw an uptick in total sales and dollar volume at $5.5 billion.

‘Sales activity from UK buyers could very well subside over the next year depending on how severe the economic fallout is from Britain’s decision to leave the European Union. However, with economic instability and political turmoil outside of the US likely to persist, the world view of American real estate as a safe investment should keep demand firm even as pressures from a stronger dollar continue to weigh down on affordability,’ Yun added.

Some 22% all foreign buyers purchased property in Florida, 15% in California, 10% in Texas, and 4% in both Arizona and New York. Latin Americans, Europeans and Canadians, who tend to buy in warm climates for vacation purposes, mostly sought properties in Florida and Arizona. California and New York drew the most Asian buyers, while Texas mostly saw sales activity from Latin American, Caribbean and Asian buyers.

The median purchase price over the survey period was $277,380 compared to the 2015 survey when it was $284,900 and this was probably due to fewer non-resident foreign buyers. Overall, foreign buyers most commonly purchased a home priced between $250,001 and $500,000, while 10% paid over $1 million or more.

Exactly half of all international transactions were all-cash purchases, which was slightly down from a year ago when it was 55% but still roughly double the overall share of existing sales. All-cash purchases were more common by non-resident foreign buyers at 73% and those from Canada, China and the UK.

A majority of foreign buyers over the past year purchased a single family home, and nearly half bought in a suburban area. Two thirds or more of buyers from each China, India, Mexico and the UK purchased detached single family homes, while Canadian buyers were the most likely to buy a multi-family home.

Some 31% if estate agents said they worked with international clients, down from 34% a year ago but up from the 27% recorded two years ago. Some 17% had one to two foreign clients and 5% had six or more.

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BDC 305 Jun 2023