Recent reports of Chinese investors increasingly buying
international real estate -- particularly in the U.S., could be a
bearish sign for the recovery of the residential and commercial
real estate markets in the People's Republic.
[caption id="attachment_60191" align="alignright" width="300"
caption="Chinese are buying international real estate, but what
about domestic construction?"]
Growth is declining in China and there is talk of another
stimulus, but the
China Development Bank is in negotiations with
Florida-based Lennar Corp to invest $1.7 billion
to advance two projects in San Francisco.
) wants to build 20,000 new homes, a sports arena, and a shopping
center at a former naval base. It needs money to do so. The Great
Recession ruined the American real estate market, both residential
and commercial. California was hit hard.
In addition to investment from entities controlled by Beijing,
many individual Chinese are buying homes in the United States.
According to a recent article in
"Buyers from mainland China and Hong Kong are
snapping up luxury homes
, often paying cash, in major U.S. cities such as New York, Los
Angeles and San Francisco. They're coming by the dozens to buy
foreclosed properties in downtrodden cities in Florida and Nevada.
Chinese buyers are even starting to snap up pricey commercial
buildings and hotels in Manhattan."
Chinese interest in U.S. real estate rose during the housing
meltdown, with plunging property prices making the U.S. a magnet
for global buyers. Today, interest is growing as a strong renminbi
-- up more than 8% since mid-2010 -- gives the Chinese greater
purchasing power. The mainland's restrictions on property purchases
also encourages them to look overseas.
With U.S. single-family home prices a third lower since 2006,
the U.S. compares favorably with other top markets such as the
United Kingdom, Australia, and Canada.
'For China, the world is an emerging opportunity,' says Andrew
Taylor, founder of Juwai.com, a real estate site based in Hong Kong
that was launched in 2011 to match Chinese buyers with U.S. real
estate. "We're talking about a huge chunk of people with cash and
the desire to invest overseas."
An increasing number of Chinese feel that returns will be higher
for international real estate than in the People's Republic. There
reports of recovery in the Chinese real estate
, but the economic principle of revealed preference manifested by
purchases of international real estate says it is not.
Real estate at home is much easier to manage than that thousands
of miles away. Investing in international real estate shows the
smart money does not anticipate much profit in China.
"Great Leap Forward Investments" makes its pitch to Chinese
investors in international real estate.