According to U.S. media reports, a wave of investment in overseas real estate is quietly emerging in China. Properties in the United States, Europe, and other regions are becoming new targets for Chinese enterprises expanding abroad, with investments often reaching billions of dollars, fueling an overseas “home-buying” market. The latest report from the National Association of Realtors shows that from March 2012 to March 2013, the total value of U.S. real estate purchased by Chinese buyers reached $12.3 billion (approximately 74.4 billion RMB), accounting for 18% of the total U.S. real estate purchases by foreigners that year, making them the second-largest foreign buyer in the U.S. housing market, second only to Canada.
Chinese Investors Acquire Landmark Building in New York
On December 18, 2013, local time, the Chinese private enterprise Fosun International acquired a 60-story office building in Lower Manhattan, One Chase Manhattan Plaza, for $725 million. This was one of the largest transactions by Chinese investors in the U.S. real estate market in 2013.
Located directly opposite the Federal Reserve and adjacent to the AIG Building, the site of One Chase Manhattan Plaza is considered a prime location in the highly valuable real estate market of New York City. As one of two landmark buildings of the Rockefeller family, the site for One Chase Manhattan Plaza was personally selected by David Rockefeller himself. Since its completion in 1961, the plaza had never changed hands and was continuously used by JPMorgan Chase. In 2009, One Chase Manhattan Plaza was designated a “New York City Landmark” by the New York City Landmarks Preservation Commission. With the high-profile acquisition by Fosun International from JPMorgan Chase, this historic and famous building came under the ownership of Chinese private capital at the end of 2013.
Foreign Media Praises Chinese Investors as Wealthy and Astute
U.S. media stated that the aggressive move by Chinese investors to snap up real estate in the U.S. as overseas buyers appears to be carefully calculated, with the Chinese being described as “wealthy and smart.”
The British magazine The Economist compared the behavior of Chinese investment in the real estate market to that of Japan in the 1980s, suggesting that the current overseas investment by Chinese private capital appears more rational. In 1989, the Mitsubishi Group's $1.4 billion (approximately 8.5 billion RMB) purchase of the Rockefeller Center was seen as a symbol of U.S. decline and Japanese rise. However, following the appreciation of the yen and the bursting of the Japanese real estate bubble, the economy fell into a recession, and the U.S. took the opportunity to buy back the Rockefeller Center at a low price, resulting in a loss of over $1 billion (approximately 6.05 billion RMB) for the Mitsubishi Group. The Economist pointed out that to avoid repeating the mistakes of the Mitsubishi Group, Chinese investors are carefully selecting their investments and striving to maintain fairness in transactions, ensuring that deals do not end in tears.
Most Favored Locations for Home Buying: New York, Los Angeles, Philadelphia, Detroit
New York and Los Angeles are the most popular places for Chinese buyers. Unexpectedly, however, Philadelphia and Detroit rank third and fourth among Chinese buyers. According to CNNMoney, the top ten U.S. real estate markets favored by Chinese buyers also include Houston, Chicago, Las Vegas, Atlanta, San Diego, and Memphis.
The report noted that from March 2011 to March 2012, Chinese investment in U.S. real estate was $7.4 billion (approximately 44.8 billion RMB). Throughout 2012, Chinese buyers invested $8.2 billion (approximately 49.6 billion RMB) in U.S. assets. The report stated that this is the customer base most welcomed by U.S. sellers. The median price of homes purchased by Chinese buyers in 2012 was $425,000 (approximately 2.57 million RMB), while the national median home price was $199,500 (approximately 1.21 million RMB). Transactions by Chinese buyers are usually fast and clean: 70% of Chinese buyers pay in cash. In Detroit, they do not even perform immediate repairs. They purchase those assets at tax lien auctions or mortgage foreclosure sales and hold onto them, sometimes leaving them vacant while waiting for appreciation. A local real estate developer said that a revival of downtown Detroit is on the way.
