China is Scooping Up Cheap U.S. Real Estate

Posted by - Wednesday, June 13th, 2012

For the past five years, Canadian investment in U.S. real estate has skyrocketed. Out of all foreign property sales in the U.S., Canadians purchased 24% this past year...

But another group of foreign buyers is growing—and fast. Chinese buyers purchased 11% of all foreign real estate sales in the U.S. between March 2011 and March 2012.

And a new report by the National Association of Realtors showed that these Chinese purchases have grown by 23% between this 12 month period and last.

Foreign purchases in general grew, too. In the March 2010 to March 2011 period, foreign buyers spent $66.4 billion in the U.S. In the following 12-month period, this number grew to $82.5 billion.

Though foreigners only make up about 9% of all real estate buyers in the United States, this spending growth is significant.

From the Financial Times:

“International Chinese buyers are seen as a very desirable market by real estate agents at the moment,” said Jed Smith, managing director at the NAR. “The strongest growth is coming from China and the rise of Chinese buyers has made up for declines in sales from buyers from the UK and Mexico.”

In fact, back in 2007 buyers from the UK and Mexico made up the highest percentages of foreign buyers. At that time their respective 12% and 13% surpassed Canada's 11% and China's meager 5%.

But now, Chinese citizens, many of them very wealthy, are looking to move to the United States or maybe purchase a summer home. Either way, it's cheaper than the cost of a home in China.

And since the U.S. dollar is weak and U.S. property is affordable in comparison, it seems to be the perfect place to invest.

In the past four years, the number of foreigners purchasing properties over $1 million in price has grown. Just last year, 5% of buyers made purchases in that price range, while this year it doubled to 10%.

On top of that, the U.S. Citizenship and Immigration Services (USCIS) started the Immigrant Investor Program, or EB-5, in 1990. If a foreigner invests in what the USCIS calls a “new commercial enterprise” to create 10 or more jobs, the investor will be awarded a green card. The minimum investment for a high unemployment or rural area is $500,000, while the general minimum is $1 million.

And this, too, has shown that these Chinese buyers have money.

In 2010, 772 Chinese investors applied for the EB-5 program. In just the first quarter of 2012, this jumped to 1,675 applications, compared to 2,408 applications for all of 2011.

As this interest in green cards from Chinese citizens continues to grow, we can be sure that the interest in real estate will continue to grow as well, particularly in the upper end of the real estate market.


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