China Ramps up Investment into US Real Estate

With things looking shaky on the home front, Chinese investors have decided to try their hand in American real estate. Wealthy Chinese are pouring money into commercial and residential properties across the United States, from high-rise condominiums in San Francisco to office towers in Manhattan.

Ms. Zhang Xin, the CEO of China’s largest commercial real estate developer, recently teamed up with Brazilian investors to buy a 40 percent stake in the General Motors building in New York City. Another Chinese developer has plans to build a luxury hotel in the Big Apple. Chinese and Hong Kong investors have also become the second-largest foreign buyer of American homes.

There are a multitude of reasons for this influx of Chinese money into US real estate. The Chinese government currently owns $1 trillion dollars in US Treasury securities. These investments generate marginal returns due to low interest rates, so Chinese leadership is looking to expand their investment scope. State-owned banks are strongly encouraging foreign real estate investment, as Bank of China currently stands as the largest foreign lender of commercial real estate deals in the States.

China’s search for alternative investment options has led them to America, where the housing market is finally recovering after the 2008 recession. Office vacancy rates have fallen across the board, and rent prices have stabilized. Investors are also shifting their assets overseas with the uncertainty surrounding China’s weakening economy and housing market. The country could be in need of a government stimulus program to alleviate some of their economic concerns.

Chinese investment into US real estate shows no signs of slowing down, and properties threatened by foreclosure are being bought up left and right by rich Chinese. This bodes well for both American property owners and the future prospects of the commercial real estate market. (NYT, WSJ, CNBC)