Summary.
Chinese real estate investment in the United States is a topic with increasing coverage in American media. Some politicians, pundits, and journalists consider this type of investment to be a threat to American homeowners and national security.
This intelligence report looks at the Chinese sector of the US foreign real estate market and how it affects both homeowners and the nation’s security.
Key Judgement 1. It is likely that Chinese citizens will increase spending on foreign real estate over the next 12 months
- The Chinese property market is currently on the verge of catastrophe. [source] Although real estate makes up roughly 25% of China’s GDP, a continuous increase in loan defaults from developers and paused construction due to lack of funding and materials has led to widespread mortgage protests from frustrated homebuyers. [source]
- China faces hardline COVID lockdowns and a government-led suppression of private business that has resulted in increased capital flight. [source] [source]
- Because of the volatility in the Chinese domestic market and subsequent capital flight, it is likely concerned citizens will divert funds into foreign assets. [source]
- Foreign real estate is a way for Chinese citizens to invest in assets, or gain private or commercial property in the face of increasing inability to do so domestically. [source]
Key Judgement 2. It is likely that Chinese investors will increase residential property purchases in the United States over the next 12 months
- The US housing market is in a cooldown phase due to increased federal interest rates. Moreover, the increased interest rates coupled with price-growth deceleration and stagnant property inventories. [source][source]
- Chinese buyers are among the top five countries that invested the most in US real estate throughout 2022. [source]
- Because of current US market conditions, Chinese buyers using cash have an advantage over American buyers who cannot use cash and want to avoid high-interest rates. [source]
- Chinese owners have sold over $20 billion in commercial real estate over the past few years. [source] Despite this trend, the current situation in the Chinese real estate market will likely lead Chinese investors to hold foreign assets.
Key Judgement 3. There is a realistic probability an increase in Chinese residential real estate investment in the United States will have negative ramifications for US homebuyers over the next 12 months
- Chinese real estate investment in the United States has a historically negative impact on US home affordability, although that effect is regional. [source]
- In 2022, 31% of Chinese real estate investors purchased a home in the state of California. Furthermore, the majority of residential real estate sales in other state markets comprise drastically smaller quantities. [source]
- Because of the projected increase in Chinese real estate investment over the next 12 months, the demographical statistics of Chinese buyers in state markets will likely change. However, the extent of that change is difficult to accurately gauge.
Intelligence cut-off date: 25th of September 2022
