Chinese companies and individuals have been aggressive buyers of U.S. real estate in recent years, mostly out of concerns that their own real estate market may collapse on artificially stimulated growth and a volatile Chinese stock market.
Just in the past few years alone, Chinese companies or individuals have purchased the 60-story One Chase Manhattan Building for $725 million, the $1.4 billion General Motors office tower, the Detroit Free Press Building for $9.4 million, and the Waldorf Astoria for $2 billion. Changes in the Real Estate Property Tax Act in 2015 have made investing even easier and other vehicles, such as the EB5 program, have backed local qualified projects like the new Downtown Everett Potala Market Apartments.
China’s premier, Xi Jinping, has been hard at work trying keep this exodus of capital from leaving his country.
But unless he enforces his mandate to reinvest in China or changes how the Chinese government manipulates markets, it’ll be impossible to reverse the flow.
According to Kristi Heim, president of the Washington State China Relations Council, the Seattle area is attractive to Chinese buyers “not only (for) the financial value but also the culture and environment.” Washington state now ranks second only to California for Chinese home buyers in the U.S.
Worldwide, interest rates are low, job growth is finally steadily improving in the U.S. and there’s little reason for the Fed to increase interest rates just yet.
All of this still makes the U.S. real estate market a safe haven and an attractive place to own real estate of any kind.
The Seattle area’s popularity seems to be particularly appealing to the Chinese, though, with more local purchases in the past year than any year prior.
What this all means for the Puget Sound real estate market is a bit hard to gauge. Some real estate experts think this is the new normal for Seattle and the Puget Sound region.
If Chinese capital goes back to China or leaves for other safe havens, it could dampen demand and bring prices down here, so it is a topic of conversation to be sure. But the more likely scenario is that Chinese capital is here to stay as the conditions that create volatility in China are tied to government manipulation of markets, breeding distrust and encouraging investors to keep looking elsewhere.
That is unlikely to change anytime soon, so Seattle remains a top option for foreseeable future.
Tom Hoban is CEO of The Coast Group of Companies. Contact him at 425-339-3638 or tomhoban@coastmgt.com or visit www.coastmgt.com. Twitter: @Tom_P_Hoban.
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