Chinese investors take on U.S. real estate, surpass Canadians as top foreign home purchasers.
It might not provide much comfort to Canadians worried about increased Chinese investment in the housing market, but a new report paints it as a global phenomenon and not just a domestic issue.
The report from the Asia Society, a non-profit group based in New York, says that in 2015 Chinese direct foreign investment into the United States was US$22.2 billion, part of US$118 billion that flowed out of the country that year.
The report says Chinese direct investment was negligible in the U.S. until 2010 but has then grown dramatically. Unlike Canada, where the country is still grappling to understand the Chinese penetration in the residential market, it is more easily tracked stateside.
In 2010, Chinese purchases of residential property in the U.S. were valued at US$11.2 billion, but had climbed to US$28.6 billion by 2015, a 20 per cent annual rate. Over the previous six years, Chinese nationals have purchased US$93 billion of residential property.
“Chinese buyers paid substantially more, on average, per home than other international buyers because of their concentration in prime neighbourhoods in California and New York,” the report found.
Last year, China finally became the No. 1 foreign investor in residential real estate in the U.S., outpacing Canada which, because of its proximity and snowbird-owned vacation properties, has always held the number one spot.
“China is a relative newcomer to the U.S. real estate market, joining a long list of global investors that have been active in the market for decades,” said the report, which noted Canada has long been at the top of the list. “Each group of investors has been attracted by a similar set of qualities — the growth potential of the economy and the fact the U.S. real estate market is the largest and most transparent in the world.”
The report says Chinese investment stateside is now entering into other real estate. China is the largest holder of mortgage-backed securities issued by U.S. government enterprises, but the latest strength is being shown in the commercial market which has grown from virtually nothing in 2010.
Just six years ago, Chinese commercial investment was US$585 million but had grown to US$8.5 billion by 2015 and the country is now the third largest foreign commercial investor in the U.S. after Canada and Singapore.
Chinese investors also continue to be active in Canada’s commercial market and last week a company backed by Hong Kong capital paid $2.1 billion to buy InnVest Real Estate Trust, one of the most dominant hotel players in the country. CBRE Hotels estimates about eight to nine per cent of the $2.3 billion in hotel purchases in 2015 were backed by Asian investors.
One of the biggest commercial splashes of the year happened in February when Anbang Insurance Group Co. Ltd., a Beijing-based company with a reported US$114 billion in assets, bought what amounts to a 66 per cent stake in Bentall Towers I, II, III and IV — a sprawling commercial 1.5-million-square-foot office complex, with some retail, in the heart of Vancouver.
“Policymakers, business leaders and the general public in the United States still do not have a comprehensive understanding of the patterns and implications of Chinese investment in the United States,” the U.S. report said.