Will Chinese Investors Pop The US Housing Bubble?
The Shanghai stock exchange (pictured) got destroyed today—yet again—leading to a mass exodus of Chinese capital in pursuit of moderate-risk, high-return US real estate investments. Zillow chief economist Svenja Gudell says the Chinese will be looking for more investment properties in higher-tier neighborhoods (such as New York and Los Angeles) as opposed to single homes. As we reported yesterday, the most recent downturn will likely drive more investor activity to the US. "Lots of my clients have been hit heavily by the equity market," real estate agent and former HSBC VP Daniel Chang says. "But that only makes them more determined to diversify out of China." But as more Chinese buyers flock to financial safety, property prices surge, creating a dilemma for buyers who are looking to recoup stock market losses. Much like their institutional counterparts, Chinese buyers typically go for expensive properties, averaging $832k/transaction (compared to $345k for US home shoppers), contributing to a countrywide housing market boom. Despite the price dilemma, Chinese still see the US as politically, socially and economically stable, a prime location for student housing for their children studying abroad and a place for investments that can’t be scrutinized by China’s new anti-graft laws. Also, with the dawn of the Chinese government-sponsored QDII2 overseas investment program, the Chinese will have newer, easier ways to invest. [TRD]
