Chinese Investments Dropped Sharply Across NYC And Nationally in 2018

Posted by Anthony Licciardello on Thursday, March 21st, 2019 at 5:00pm.

In the Staten Island market, Chinese buyers have shown the most interest in properties near the Verrazano-Narrows Bridge

 

Foreign investment activity can be a litmus test for the real estate market conditions. And lately, it has practically slowed to a crawl.

Over the past several years in New York City, real estate has been heavily propped up by Chinese investments. This has been a major vehicle driving more intense bidding wars and rising prices, particularly through the period of 2015-2017.

The New York Metro area has the largest foreign buyer pool in the United States. While the city has long been known for its high-priced real estate, foreign capital has been instrumental in pushing values to record highs over the past five years.

Now, foreign real estate purchases in the United States are down a startling 90% from their peak. Nationwide, Chinese investments fell to just $4.8 Billion in 2018, down from their height of $46 Billion in 2016.

This shift has largely been the result of government restrictions on the Chinese side and also the United States. As the trade war intensifies, China’s government has sought to limit the flow of capital outside of the country. The United States government has placed their own restrictions on outside investments as well.

Not all outside investments have ceased though. With the Chinese pullback in 2018, Canada stepped in as the dominant foreign buyers, followed by Germany and The Netherlands. But even considering this increase, foreign investments in New York real estate are down 50% from their height in 2019.

The Chinese are expected to sell more real estate than they will be buying around the globe this year. The real estate market decelerated noticeably last year in tandem with the drop in foreign investments. This will likely cause prices to stagnate or even fall slightly over the coming year.

Domestic capital was the main source of real estate investments during 2018. Of the $50B put into investment properties for 2018, US buyers represented the biggest portion. Although this means that more profits will flow back into the US economy, the decrease in international buying will likely bring values down.

The Chinese are also moving to different types of investments, such as senior and student housing. These properties are less subject to regulations from their own governments. Opulent purchases, such as the record-setting $1.95 Billion Waldorf Astoria hotel acquisition by Anbang Insurance Group, will take a backseat to less flashy and more practical investments.

 

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