Chinese investment in the US could see an increase in 2015 after new visa rules for Chinese tourists, students, and businessmen went into effect late last year. The changes are likely to add an estimated $85 billion to the American economy, impacting many sectors, including the US real estate market.
Analysts believe the longer-duration visas for Chinese students will drive up the number of students coming to the US, creating a trickle-down effect for the real estate market, especially for residential properties. This is because Chinese parents are more willing to invest in housing than they are to rent for their children going to schools in the US. In fact, residential property accounts for the vast majority of Chinese real estate investment. From March of 2013-2014, 56% of purchases by Chinese buyers were intended as residential rental properties and or vacation homes, while 39% were intended as permanent residences. The other 5% of purchases were for commercial properties. Despite the small percentage, commercial property investment could increase as well. This is due in large part to the relaxed outbound investment rules by the Chinese Ministry of Commerce, as well as the visa changes.
California and New York will likely see increased growth, as both states already receive large amounts of foreign real estate capital. In New York City, eight billion dollars is spent each year on residences in the city alone, some of which comes from wealthy foreign investors. NYC remains the number one destination for Chinese buying US real estate, having spent $6.7 billion on property in the city between 2008 and 2014. California, meanwhile, was second during that same period, which saw $1.6 billion in real estate investments. Philadelphia, Detroit, and Houston are other top destinations for Chinese buyers.
China remains behind Canada in terms of number of international sales, though it is the fastest growing source of buyers in the world, accounting for some 16% of total transactions in the period ending in March, which is up from 9% since 2007. In terms of total dollars spent, Chinese investors pay the most, in large part because of higher average prices of properties purchased. From March 2013-2014, they invested roughly $22 billion, approximately a quarter of international sales, and a number that is expected to grow further in 2015.
Nate Schlabach is a Research Intern at the East-West Center in Washington and a graduate student at the Center for Justice and Peacebuilding at Eastern Mennonite University.