The sudden increase of Chinese foreign investment in real estate around the globe has been a popular topic in recent headlines.
A few years ago, the Chinese Ministry of Commerce made the decision to allow Chinese companies to invest overseas without approval by the Ministry beforehand. This event triggered the dramatic increase in investment.
The median housing price in Hong Kong is about four times that of New York. Consequently, the trend has seen a shift toward US markets. Many have the plan of relocating, moving their families, giving their children a US education, and, ultimately, giving their families a better life.
One of their destinations has been Arcadia, CA. Arcadia has become an area where developers need land on which to build mansions for the influx of rich clients from mainland China, a trend that is becoming common in many areas throughout the country.
In Arcadia, properties that would have sold a year ago for just over $1 million are now asking for double due to the higher demand.
Arcadia is in such high demand for its excellent schools and lenient building codes. These reasons make it a great place for people to invest their money where it is out of reach of the Chinese government.
Money from China has even helped Arcadia build a $20 million high school arts center, among other enhancements.
China’s wealthy elite are quickly growing, and almost two-thirds of its millionaires have emigrated or plan on doing so. In the past year, $22 billion of offshore personal wealth was used to acquire homes in the US, according to the National Association of Realtors.
Some of these new residents in lavish homes do not speak English and most are granted EB-5 visas. These visas are given by the government to foreigners who invest at least $500,000 in American development projects.
This year was the first time that the annual 10,000 visas were given away before the year was over, and 85 percent of them were given to Chinese nationals.
Commercial real estate is also a sector that is experiencing a lot of Chinese investment, reaching $33.7 billion from 2008 to 2014. This is growth of more than 200-fold according to leading international agent, Cushman & Wakefield.
Many large-scale projects are also the goal of Chinese investors, who are getting very comfortable with international construction. A project in the Bahamas is a $3.5 billion development with the Export-Import bank of China providing $2.5 billion of construction debt and four to five thousand Chinese workers.
John Cahill, a partner with Globest.com, commented on the effects that Chinese investment in US real estate may have. He sees a generally optimistic view for outbound investment and that Chinese investors are putting their money in places they believe will have the best returns.
With the promise of high returns or a chance at a better life, China’s rising millionaire class is seizing the opportunity to invest in foreign real estate resulting in lavish mansions and pricy developments around the globe. This amazing investment trend is something to keep an eye on as markets continue to flourish.