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T he Chinese stock market crash, occurring over the course of June and August, saw its Shanghai Index falter in excess of 40%. That value, for perspective, is about 14 times the GDP of Greece. Chinese investors carrying a material percentage of mutual funds or stocks in their portfolios endured severe losses. Their money was, and continues to be, no longer safe in its home market.
Noted in Bloomberg Business, Survey and Research Center for China Household Finance in Chengdu completed a nationwide survey in 2013 based on asset size and residential property holdings. The result, reported director Gan Li, was that 75.5% of Chinese assets are in real estate.
Today, the U.S. economy is considered by foreign buyers, particularly the Chinese post-housing bubble burst circa 2014, to be a relatively safe place to put their money.
Sofia Song, former head of research at Streeteasy and presently executive vice president at Douglas Elliman elaborated in Brick Underground. “In the long term, what we have seen is that global volatility can lead to an increase in foreign demand, as the NYC real estate market is often seen as a ‘safe haven’ for investment, with moderate risk, yielding high rates of return.”
Sustained concerns over the troubled Chinese economy could mean one of two scenarios. Either the Chinese engage in a moratorium of foreign buying or they could vow ultimate faith in the American economy, and therefore American property, and invest neck-deep.
Since last spring, the Chinese have already added $28.6 billion of U.S. property to their portfolios, according to The Real Deal’s September issue. At present, we are in a wait and see period if the dollars will continue to roll in.
Total foreign investment is on a cyclical upswing, and the nationalities of buyers are changing.
Chinese developers like China Vanke, Greenland Holding, and XIN Development are partnering with American developers to build 50-plus story condominiums and office buildings.
Norway is a noted player in the field, buying $2.61 billion dollars worth of New York real estate over the past three years, according to real estate advisory firm Real Capital Analytics and TRD. Norway’s holding makes the country New York’s third most prominent investor, following China and Canada.
Germany is another noted foreign buyer, with a recent $1.58 billion invested in the state’s property. The country’s fund managers, such as Union Investment, attract the average citizen with low upfront investment sums, making involvement in New York property considerably feasible at cost and from a distance.
Christian Goebel, East Coast advisor to Munich-based GLL Real Estate Partners, a real estate fund manager group, attests to the shift in focus on New York from clients. “We have become far more active in New York,” he tells TRD, “You can generally say that there is a lot more demand from German investors for U.S. real estate today—especially for New York City.”
Singapore, Japan, and the United Arab Emirates are also making their presence known, both as shareholders, construction lenders, and million dollar residential buyers.
Written by Alexandra Gámez New York
