How Does the Chinese Stock Market Crash and Slowing Economy Impact the American Housing Market?
December 8, 2015
Local Real Estate Market Fueled as Foreign Investors Seek Safe Havens
Chinese investors who chanced domestic stocks are continuing to take financial hits this fall as the Chinese Stock Market slowly recovers from its summer crash. According to Charles Rutenberg Realty, Inc., this is causing a significantly positive impact on both the local housing and commercial Real Estate markets.
China is the world’s second largest economy, so when it crashes, the economic impact extends far beyond the nation’s borders. With the recent devaluation of the Yuan and a sudden collapse in the Shanghai Composite, the drop-off in the Chinese Stock Market has cost the country more than $10 trillion since its peak in early June.
The crash has many foreign investors, from both China and Russia, looking to the United States as a promising frontier that is much less risky than the currently volatile Chinese market. Working off a 2012 legislation in which China opened the gates for purchasing foreign Real Estate, investors are utilizing this open-door policy as a free pass to buy American property, to a sum of over $10 billion in the last year alone. According to data from the, 28 percent of all American property purchases by foreign investors is attributed to Chinese investment in Real Estate.
According to a recent article from the New York Times, “Chinese purchases make up a tiny slice of overall sales in the U.S. [28 percent of all sales to foreign investors], but they have had a disproportionate impact on the market for more expensive properties, buying one in 14 homes sold for more than $1 million. Buyers from China, including the mainland, Taiwan and Hong Kong, pay $831,800 on average for a home, more than three times as much as Americans spend, [National Association of REALTORS®] NAR data shows.”
Seventy-five percent of all Chinese and Russian investors in the United States are buying up property in New York City and the surrounding area, to the tune of $4.5 billion of the total $6 billion national sales to foreign buyers. For Charles Rutenberg Realty agents, this trend continues to extend onto Long Island, where Chinese and Russian investors are rapidly buying up homes in high-wealth areas with highly rated schools.
“Foreign millionaires seeking safe investments and higher returns are looking for long-term, stable homes in popular neighborhoods, continuing the aggressive trend that has brought 4.5 billion dollars into New York’s economy over the last 12 months,” explains Joe Moshé, Broker/Owner of Charles Rutenberg Realty of Long Island. “What’s more, they’re willing to purchase homes that require full gut-remodels and most frequently make all-cash offers. This is a major benefit for sellers, but the foreign interest in both residential and commercial Real Estate is sure to drive up list prices for domestic buyers.”
The Shanghai Composite reached a high of 5,166.35 on June 12, before plummeting to its low of 2,927.27 on August 27. The Composite has since slowly recovered to around 3,640, still just a fraction of its all-time high in June. While the Chinese stock market is beginning to see a slow upward trend, forecasts for Chinese involvement in the United States housing market continue to show an upsurge in interest, which will significantly benefit both the East and West coasts.
As a negative impact on the American homebuyer due to this renewed foreign interest, United States Federal Reserve Chairperson, Janet Yellen, is pushing for an increase in interest rates, which would be the first interest increase since December 2008.