China set to dominate foreign homebuyers market

Analysts expect Chinese to overtake Canadians within 5 years

The share of U.S. homes purchased by international buyers is on the rise. As HousingWire reported on Tuesday, international buyers spent nearly $100 billion on properties and investments from April 2013 to March 2014.

The $99.2 billion that international buyers pumped into the market in from April 2013 to March 2014 represents a substantial increase from the previous 2012-2013 level of $68.2 billion, according to the National Association of Realtors.

According to the NAR report, Canada maintained the largest share of purchases, dropping from 23% in 2013 to 19% in 2014; however, China held the lead in dollar volume, purchasing an estimated $22 billion with an average sale cost of $590,826.

China was also the fastest growing source of transactions, now accounting for 16% of all purchases, up 4% from last year. Domestically the Chinese are facing their own property meltdown, one that could help push real estate investors into new markets.

For those so inclined, Forbes provided a slideshow list to the most popular real estate markets by country for Chinese investors.

Of note in that data is the increase of Chinese buyers from 2013 to 2014. Paul Diggle, property economist at Capital Economics, suggests that the increase in Chinese buyers could be a harbinger of things to come.

“This bigger picture hides a rapid rise in purchases by Chinese investors, who may overtake Canadians as the largest group of foreign buyers of US housing within the next five years,” Diggle said.

Diggle expands on the increase in the share of Chinese buyers over the last few years in his U.S. Housing Market Update. “The upshot is that the share of foreign homebuyers who are Chinese increased to 16% in 2014, up from 12% in 2013 and just 5% back in 2009,” Diggle said.

“Put another way, the value of homes bought by Chinese buyers in the US has increased from $1.2 billion to $7.5 billion, or slightly more than 500%, over five years.”

Despite the tremendous growth of Chinese buyers, the share of international buyers still only represent 3.8% of the total property sales in the U.S., according to Diggle.  That’s up from 3.2% in 2013, but it’s below the 4.4% share in 2012 and the high of 4.6% in 2010.

“Looking ahead, tightening monetary policy will support the dollar and ensure overall foreign demand remains a relatively small part of the housing recovery,” Diggle said.

“But that will disguise the growing presence of Chinese buyers, who will outweigh Canadians as the largest source of foreign demand within five years should the trends of the past five years continue,” Diggle added.

“The strength of Chinese demand is another reason to watch closely developments in the Californian housing market, where housing is now no better than fairly valued at the statewide level and starting to look frothy in a number of metros.”

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3d rendering of a row of luxury townhouses along a street

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