Chinese Money Flooding U.S. Residential Real Estate

A recent Market Watch article highlighted the amount of foreign money, especially from China, that is flowing into the residential real estate market. The article cites a report prepared by the National Association of Realtors that shows $45.5 billion of the American residential real estate market activity from March 2013 to March 2014 came from nonresident international sources. This accounts for 3.5 percent of the total home sales of $1.2 trillion during the same period.

The international buying up of real estate appears to be especially prevalent in larger cities with higher costs of living—cities such as SeattleSan Francisco, New York and Dallas.

Both Bloomberg and the Wall Street Journal have reported on the various ways in which Chinese money is invested overseas despite Chinese law requiring citizens to only convert $50,000 of yuan each year into foreign currency. Utilizing trial programs in Hong Kong, many wealthy investors are far exceeding that, and shuttling billions into the U.S. housing market.

Canada and Australia have seen the same trend of real estate investment from foreign parties. Australia passed new regulations on foreign investors last month to ‘level the playing field’ for Australian buyers. The new law includes a $5,000 fee to enter the market, stricter crack-downs on non-compliant investors, and in some cases, prohibition of Chinese investors in existing Australian markets.