The Chinese Investments in The US Real Estate

dollar charts

According to a report, the Chinese economy may be slowing down, but the investors from China are projected to make substantial investments in the US over the next 10 years.

Actually, the decline of China’s economy could be a key reason driving up investments in nations such as the US.According to a research by the Asia Society and Rosen Consulting Group, “Chinese direct investment across existing U.S. commercial real estate assets and residential purchases could hit at least $218 billion from 2016 through 2020 — and that’s excluding new development projects.”

Chinese FDI in the US cumulatively increased from $18.1 billion in 2014 to around $22.3 billion in 2015.

As far as the real estate sector is concerned, Chinese investors secured nearly $8.5 billion in commercial real estate and nearly $28.6 billion in residential real estate in 2015.

The commercial purchases are projected to be around $20 billion along with the residential purchases reaching $50 billion in 2025.

There are several reasons for the same. Several firms based in China are looking at the real estate sector in China as an investment opportunity.

From a business perspective, investments result in better understanding of the market dynamics which lead to more investments. The estimated increases of joint ventures could also enhance the number of deals.

In fact, the economic uncertainty in China could spur foreign investment in the short-term as capital moves from China prior to the nation’s currency losing value.

Stringent capital controls could reduce the pace of Chinese investment overseas in the next two years, but that would not impede the long-term growth of investment into domains such as the real estate in the US.

A prominent example of Chinese purchasers spending in the US was the projected $14 billion acquirement of Starwood Hotels by a conglomerate managed by the Anbang Insurance Group. The offer was expected to beat another bid from Marriott, but the conglomerate unexpectedly withdrew the tender – referring to market conditions.

However, Anbang has already made significant investments in the US by purchasing the Strategic Hotels & Resorts from Blackstone for $6.5 billion in 2016 and clinching a deal to acquire New York’s Waldorf-Astoria for $1.95 billion in 2015.

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