- The dollar volume of homes purchased by foreigners from April 2018 through March 2019 dropped 36%.Over 50 percemt from China from the previous year, according to the National Association of Realtors.
- Foreigners bought 183,100 properties with a total value of about $77.9 billion, down from 266,800 properties valued at $121 billion a year earlier.
- “The magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.,” the Realtors’ chief economist says.
Apparently there is a limit to how many Boston luxury condos for sale Chinese investors can purchase. Foreign real estate purchases largely driven by Chinese investors plunged by over 36% as internal controls in China made it harder to move money out of the country and trade war talks are having an impact in this sector. While some might say downtown Boston real estate is small relative to the overall U.S. real estate market, yet you need to realize that money from China was hyper focused on certain areas (like Boston). At one point there were new Boston luxury condo developments in the Boston Seaport District and Millennium Tower that were seeing 65% real estate purchases from LLC, aka Chinese investors. This has the potential to hit markets hard where prices are valued at ridiculous levels inflated by outlier buyers. There are many areas in downtown Boston like that. This also applies to areas such as New York, San Francisco, and Seattle to name a few. So what does this mean for these inflated markets?
Looking at the numbers
The chart below shows a clear pullback in foreign purchases in the U.S. real estate market. The value of homes bought by foreign investors is at multi-year lows but more telling is the actual number of buyers is at a decade low:
This is significant and we’ve seen a drop across all areas. No surprise that the largest buyer in dollar amount is China. This is the group that has pulled back the most significantly and when it comes to prime downtown Boston real estate , I ensure you it will likely have an impact on our market.
The CEO of Juwai even points to this:
“(CNBC) The Chinese were the leading buyers for the seventh consecutive year, purchasing an estimated $13.4 billion worth of residential property. Yet that was a 56% decline from the previous 12 months and comparatively the biggest percentage drop of all foreign buyers. Chinese economic growth slowed to 6.3% in 2019 compared with 6.9% in 2017, when the previous buyer survey began. The Chinese government also tightened its grip on the outflow of cash to purchase foreign property.
The Chinese may also be souring on U.S. real estate due to the current political climate. Anecdotally, real estate agents in California have seen a pullback in Chinese buyer demand. Southern California had been particularly popular with Chinese parents hoping to send their children to American colleges.”
The word is starting to spread faster. Tougher visa policies and tighter internal controls will likely make this an ongoing issue, unless policies turn in another direction. And this makes total sense in inflated markets like Boston where certain neighborhoods where there is scant inventory and few buyers who can set the price. Even a few years ago the thought of Chinese money pulling back even a little in downtown Boston real estate was unimaginable for a few cheerleaders in the real estate industry. All they could see was how their glorious little Beacon Hill condo crap shack was “worth” $1 million even though the only updating they have done since the 1980’s was slapping granite countertops in their kitchen, added a few stainless steel appliances, made the home Alexa “friendly”, and lets not forget they made their bathroom look like a toilet at Caesars Palace. So who cares that its a 5th floor walk up, my wife or girlfriend needs to lose some weigh anyway. Elevators? Hell no this is Beacon Hill.
No surprise here that tougher U.S. policies on foreigners is making things tougher. But it isn’t all the doing from our President side since internal controls are also getting more stringent within China.
That’s it I’m done not posting anymore today. I’m getting depressed.
The good news is that I didn’t buy that GE stock last year when my uncle told me too.
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