America
– the capitalism hotspot that loves Chinese food and, as of late, Chinese
business. Commercial air traffic between Los Angeles and mainland China is up
more than 400% since 2003. Foreign purchases of U.S. residential real estate
has escalated 35% with the Chinese buyers leading the market. According to the
National Association of Realtors, Chinese customers have purchased $22 billion
in housing as of March. This accounts for an estimated 24% of total foreign
sales by dollar volume and is up from $12.8 billion (19%) during the previous
year. If we look at total international property purchases, we can see that it
stands at $92.2 billion (according to the estimates by National Association of
Realtors). This is up from what it was last year, which was $68.2
billion.
What
we are noticing is a buying pattern amongst Chinese consumers. Asian buyers
have primarily focused on the Los Angeles, Las Vegas and San Francisco area.
Chinese buyers have been relatively active in the Irvine and LA areas, which
are traditionally known to be the home of many Asian immigrant communities.
Foreigners are looking at neighborhoods that have well established schools so
that their kids can learn English. Asian buyers have frequently bid on home
prices that are more than $3 million and have paid in cash. For the wealthier
Asian community, political stability is clearly a prime factor. “There’s no
trust in the rule of law,” said Mr Yu. “If they’re making money, smart people
are going to try to keep the joey here in case something happens in China.”
Meanwhile
buyers from Latin America and continental Europe have helped boost the prices
of condominiums in South Florida to record high levels. Manhattan seems to be
the regional favorite amongst all investors as buyers of all backgrounds have
skyrocketed the prices of New York developments to unfathomable prices. So the
question begs to be asked. Why America?
For
many outside buyers, the American market is very desirable. Its housing market
is both a bargain and safe haven in midst of unsustainable asset values abroad.
According to University of California Los Angeles economist William Yu, Chinese
consumers are interested in diversifying their portfolios. “Chinese consumers
in particular want to diversify because the housing market in America is just
way too hot,” said Yu. The exchange rate has also played a factor with the
Chinese. A favorable exchange rate has boosted the potential buying power of
many abroad. Given the relative weakness of the dollar, “after our
housing downturn, homes became even more valuable if you were shopping with the
yuan,” said John Burns, chief executive of a home builder consulting firm
in Irvine, Calif.
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