Have you ever wondered why the cost of real estate in New York is so astronomical? There are many factors not the least of which is the huge population. There are so many people in the Big Apple that buying property has become a competition that consistently drives up prices. There is however another less obvious reason that also affects the cost of housing in the big city and that is the presence of foreign buyers, namely investors from China.
In the past the majority of foreign buyers were lead by Canada followed by China (including Hong Kong and Taiwan), Mexico, India, and the United Kingdom but that has changed recently. Last year foreign buyers spent a total of $92.2 billion in the U.S. real estate market and $22 billion of that represented Chinese buyers. This makes China the fastest growing source of foreign purchasers. So why the sudden change?
First of all the U.S. is considered to be a relatively safe investment in comparison to many other countries whose economies are less predictable and the price of real estate can change dramatically in a short period of time. Secondly housing prices in China are much higher in comparison to income than in the U.S. and many Chinese simply can’t afford to buy in their own country. Often it is a case of buy here or continue renting for the rest of their lives and many persons invest here in hopes of selling someday for a profit.
There is also a large segment of buyers that move to the U.S for better employment opportunities and wish to take advantage of what is considered to be very affordable housing in comparison to their native land. New York is not the only area that is of interest to the Chinese buyers. Many prefer already established Chinese communities to live in including Irvine, CA as well as the Los Angeles’ San Gabriel Valley and select areas of Washington. The average purchase price is $590,826 and many are paid for in cash. Almost 60% of all foreign purchases are cash deals as compared to approximately only one-third of all domestic clients.
As you might imagine not everyone is happy at the prospect of selling property to foreign investors. Some people feel that it is OK provided that the buyers are living and working here in America. Others feel that it is a very bad idea that will come back to haunt us in years to come. Regardless of your personal opinion it is a trend that shows no signs of stopping any time soon.