A new wave of foreign investors is scooping up real estate in the United States. Cash-rich Chinese are buying trophy commercial properties and an increasing number of homes.
“You have this massive growing middle class, wealthy class in China that are basically looking for a place to park capital,” said Dan Fasulo, Managing Director, Real Capital Analytics.
A recent billion dollar deal is the latest sign of how foreign investors are fueling a recovery in the US commercial real estate market. Chinese real estate tycoon Zhang Xin joined with the Safra family from Brazil to buy a 40 percent stake in this New York trophy property, the General Motors building.
“The Chinese are investing around the world, especially in the gateway global cities,” said Fasulo. “But at some point it’s the math. As far as the inventory of commercial property to invest in, the US is about half of the investable universe of properties. “
The burgeoning class of Chinese millionaires and even billionaires is looking for better investments and US real estate offers stability, higher yields and protection against inflation.
Real Capital Analytics says equity investments from China, Singapore and South Korea topped $5 billion this year, a record high. China’s government’s also in on the action. It is diversifying some of the $1 trillion in U.S. Treasuries it owns into U.S. properties.
“They choose the companies they want and they push them out,” said Taylor Whitman, Director of Business Development Asia. “They say we’ll give you cheap lending, cheap financing in China and we want you to go out and acquire assets overseas.”
On the residential side the Chinese are the second largest group of foreign buyers in the U.S. behind Canadians. NAR says the Chinese clinched 12 percent of the deals last year worth $8.2 billion.
Many buy homes in the U.S. when they send their children here for college. Other buyers have fled Hong Kong and Singapore scared off by measures meant to cool their investments.
“With those markets closing up, and making it harder for Chinese nationals to go there to buy apartments, they are going to look elsewhere, and the US is a good alternative,” said Whitman.
The Chinese have discovered U.S. real estate in a big way, a trend that may pay off for both countries.