In recent years, home buyers from China have been among the most prolific investors in U.S. luxury real estate. During 2016, the number of Chinese buyers has declined. This has affected Houston luxury real estate to some degree, and has been felt sharply in the New York and California markets. Here is a summary of what’s happening, with points from Bloomberg magazine, and our own insights:
China’s government is protecting the yuan and its foreign exchange reserves. Chinese currency depreciated 4% during 2015. The onshore yuan fell 2.92% against the U.S. dollar this last spring, representing the biggest quarterly drop since 1994. After seeing an economic outflow of $108 billion in December 2015, China established new regulations to control the outflow of cash to other countries, intentionally slowing foreign investment. China has also cracked down on illegal banks and other mechanisms that allowed its populace to funnel fortunes out of the country.
Chinese buyers pay in cash when buying U.S. real estate, and new regulations affect them. As a burgeoning Chinese economy created new millionaires, Chinese investors sought the safe haven of U.S. real estate, making all-cash purchases. During 2015 alone, Chinese buyers spent $28.6 billion in U.S. real estate. Since the regulatory changes took effect, that number has fallen to $27.3 billion. The number of units purchased also fell, from 34,327 units to 29,195 units.
China’s economy is slowing. While the U.S. would envy this kind of “slowdown,” the decline of economic momentum in China signals that it may have finally reached a ceiling. China’s economy expanded by 6.9% during 2015, with 22 of the mainland’s 31 provinces decelerating from a year earlier. This is China’s slowest economic growth in 25 years. The milestone has caused concern for the Chinese government, which seeks to avoid a devaluation of the yuan.
Chinese buyers are adjusting, not retreating.
According to industry analysts, U.S. luxury homes priced between $2 million and $3 million have been among the most affected by the tapering of cash flow from China. As Chinese buyers work to comply with new regulations, they have been spending less per transaction, and buying fewer properties. Yet U.S. luxury real estate remains attractive for Chinese investors, who have inched back, but have not fled the market.
Looking to sell your Houston luxury home? The KW Energy Corridor Team can help you attract buyers from around the block, or around the globe! Contact us today for your complimentary market analysis and personal consultation.
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