Wednesday, July 23, 2014

Massive influx of Chinese investors revolutionizes US housing market

The Chinese are coming and would like to buy your house "; with this provocative title The Washington Post published a column about the phenomenon that occurs in today's real estate market USA and everyone is talking about, because it promises to profoundly change the map of homeowners in the country. After the outbreak of the subprime mortgage crisis in 2007, the gradual recovery of the American real estate market comes with the surprise of discovering a new member in the investment community, possessing a high purchasing power and the potential for significant growth in the coming years.

According to the annual report of the National Association of Realtors (National Association of Realtors, NAR), between March 2013 and March 2014 ethnic Chinese investors bought houses in different parts of the country by value of u $ s 22,000 million. This makes the non-resident foreign group that has spent these last 12 months, ahead of other nationalities historically brick buyers in USA as Canadians (u $ s 13.800 million) and Mexicans (u $ s 4,500 million).

Preferred by Chinese investors cities are on the West Coast, especially in California: Los Angeles, San Francisco and Irvine (south of Los Angeles), because there are already many years large Asian communities. But there have also been shopping in Las Vegas, New York and Washington, especially in the most sought after neighborhoods.

According to the report, March 2013 to March 2014 grew by 35% the volume of investments in real estate by foreign non-residents, reaching a total of $ s 92,000 million (equivalent to 7% of the total amount of operations throughout the country). "We live in an international market; even though all properties are local, that does not mean buyers are also properties, "said Steve Brown, president of the NAR. The organism has been reported in recent years on this process of internationalization of real estate .. For more USA which still embraces a minority share of the total (below 10%), growth remains strong and sustained.

In the case of the massive influx of Chinese investors, no phenomenon of this magnitude in such a short time imagined, although it did note that, before the subprime bubble burst, there was a growing buyers of that origin. But the financial crisis affecting the American economy from 2008 onwards, together with the consolidation of emerging countries in the same period (with China at the head and about to overtake the United States as the world's economic power), allowed the emergence of this new investor group.

In fact, this year is expected to travel abroad 100 million Chinese tourists, equivalent to the entire population of Mexico. So you do not have to wonder that this increased spending is also reflected in the housing market. "What we see is only the beginning of a tsunami," said Lawrence Yun, chief economist for the NAR and one of the report's authors.

While Canadians continue as leaders of statistics in amount of acquired properties (and not on the total amount disbursed), soon the Chinese will also rise in this item, the report said. The participation of Chinese buyers rose from 5% to 16% of the total between 2007 and 2014, and also is a group that aims to more expensive homes, with an average value of $ 590,000 s, more than a hundred thousand dollars what they pay half British investors, the second biggest spender in American bricks, and more than double the average purchase of a Mexican.

Specialists explain this shopping spree for low prices that still exist in the housing market, below the peak of 2007, before the bubble burst. But also because the dollar is depreciating and that creates more purchasing power among foreigners. Also, if you are looking to invest in assets denominated in dollars, today may be safer bricks Treasuries, against the possibility that the Federal Reserve will raise interest rates in the short term.

For the Chinese, buying a home on American soil also becomes a strategic issue. If the vast majority (76%) of these investors made ​​the payment in cash because he could not access a mortgage loan for non-residency, own property they can help you get the visa, if the children end up studying at a local university . By investing in the United States, many Chinese manage to hide some of their wealth in the eyes of the government and thus avoid the risk of seizure might suffer in their own country. Moreover, in China there is a bubble in real estate that drives many to protect their wealth by transferring it from abroad.

Meanwhile, U.S. property are rubbing their hands at the arrival of these powerful investors. In recent years, more than nine million Chinese millionaires moved abroad (his favorite destination is USA) and up to 64% of the wealthy who still reside in China intends to leave. The NAR report describes the case of a woman from Hong Kong who paid u $ s 6.5 million in 2013 for a two bedroom apartment in the tallest tower in New York, the One57, so your daughter can go to Harvard study. The odd thing is that the girl just turned two years.

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