Ever wonder why New York real estate prices are so high? Well, sure there is an issue of space, and the fact that New York is a world city with people from Russia and China gobbling up apartments like Pacman enroute to a power pellet. But one of the biggest supporters of real estate pricing these days is the Chinese buyer.
Foreign purchases jumped to 35% last year, and Chinese customers led the way with $22 billion out of the $92.2 billion total spent by foreign buyers in the U.S. real estate market, according to a report published July 8 by the National Association of Realtors (NAR).
From April 2012-March 2013, Chinese buyers spent approximately $12.8 billion in the U.S. housing market, according to the NAR, and the previous year foreign buyers spent $68.2 billion on U.S. real estate.
"The US real estate market is a relatively safe investment," said Selma Hepp, senior economist at the California Association of Realtors, one of the favorite states for rich Chinese buying investment property.
The NAR said Irvine, California, and Los Angeles' San Gabriel Valley were some of the most attractive housing markets due to their Chinese immigrant communities. "They're interested in already established Chinese communities, in California and they are the predominate buyers there," Hepp was quoted saying in the China Daily on Thursday.
Rich Chinese buyers are more likely to make all-cash purchases, something brokers love. So far this year, nearly 60% of reported international transactions were all cash, compared to only one-third of domestic purchases.
China home buyers here are spending an average of $590,826 to buy a home. China was the fastest growing source of real estate transactions this year, now accounting for 16% of all foreign purchases, up 4% from last year. Mexico ranked third with 9% of sales and India and the U.K. both accounted for 5%.
Chinese buyers tended to buy properties in higher-priced markets such as California, Washington, and New York.
Five countries have historically accounted for the bulk of the reported purchases: namely, Canada, China (including Hong Kong, Taiwan), Mexico, India, and the United Kingdom. In the latest survey, these countries accounted for approximately 54% of the reported international transactions from 61 countries. Canada still accounts for the largest share of clients, but China is the fastest growing source of clients, according to the NAR.