Jim Park is a partner with The Mortgage Collaborative and the current chairman of the Asian Real Estate Association of America, and he took time to discuss with us the realities of what Chinese investment means for U.S. real estate.
Houston Agent (HA): Chinese investment has increased over the last few years, and a big part of that seems to be tied to the country’s economic instability. However, with things improving on that front, and the country possibly inching towards more long-term stability, how can we be certain Chinese investment in American real estate is going to continue to grow?
Jim Park (JP): Chinese investors are strategic buyers, and they are making a long-term investment in pushing capital into the United States. Economic and political instability around the globe certainly creates opportunities for the U.S. market; however, Chinese buyers are looking at long-term economic stability, quality of life, education and environmental concerns as they look to invest.
HA: The big international markets, like Miami and New York, are obvious places for Chinese money to go. But what are the emerging U.S. real estate markets as far as Chinese investment is concerned? Where should we be watching?
JP: The big investment markets for Chinese buyers have been the traditional gateway cities like New York, L.A. and San Francisco. More recently, we have seen strong interest in markets like Seattle, Houston, Atlanta and Boston. Miami is starting to get on the map with increased commercial investments from China. However, on the residential side, the opportunity is yet to be fully realized. The work that the AREAA Miami chapter is doing will spur on additional awareness and future interest in Miami residential market.
HA: Are there any potentially negative side effects to the U.S. real estate market, or any particular market within, from this surge in Chinese interest?
JP: With any real estate market that relies on foreign capital to bolster the local economy, they risk facing some volatility in home prices and inventory issues. That certainly has been the case here in Miami, where significant percentage of buyers have come from Latin America. So when the currency exchange shifts, the real estate inventory can take a direct hit. That’s why having multiple international buyer pools is critical to diversifying the demand side of the market, which should lead to a stronger and more stable real estate market.
HA: We have seen the Chinese government attempt to throttle the amount of capital leaving the country. Is there any chance or indication that the amount of investment coming out of China will be forced down by the government any time soon?
JP: We have been hearing that for many years now. Despite those efforts to clamp down on capital outflow, the Chinese have become the biggest buyers of residential real estate by a substantial margin, and one of the largest purchasers of commercial properties. I do think there will be a slight slowdown of residential acquisitions from Chinese buyers, and some real estate agents are reporting that it has become more difficult to move funds out of China. While individuals are having some challenges moving funds out of China, the government efforts have not impacted institutional investors and private companies. That’s why I believe China will become the No. 1 commercial investor in the U.S. in the not too distant future.