While Chinese buyers led international home purchases in the U.S. for the second year in a row, there are some indications that Chinese investment might be heading south.
Chinese buyers from the People’s Republic of China, Taiwan and Hong Kong purchased a total of 29,195 U.S. properties worth $27.3 billion in 2016, according to the National Association of Realtors (NAR). The findings are based on a survey of about 6,000 real estate agents covering transactions during the period of April 2015 through March 2016.
Chinese buyers left other foreign purchasers trailing far behind, by both dollar volume and the number of properties bought. However, both numbers are noticeably lower than the previous year. Last year’s report found that Chinese buyers invested a total of $28.6 billion in 34,327 U.S. residential properties. The dollar value dropped 4.5% while the number of properties decreased nearly 15% from last year to this year.
MORE:What to Know About Chinese Buyers in the U.S.
“When it comes to long-run outlook, it partly depends on the economic performance in China,” said Danielle Hale, Managing Director of Housing Research at NAR. “However, China’s level of significance in the U.S. real estate market will stay.”
The slowdown of China’s economy and devaluation of the yuan have caused hesitations among Chinese investors looking to buy properties in the U.S. Another major factor is the Chinese government’s tighter controls over money outflow.
The dollar value’s “decline of a few percentage points is not surprising, given the interest of Chinese authorities in reducing capital outflows while focusing on currency issues and economic reforms,” said Arthur Margon, a partner at Rosen Consulting Group.
| Chinese Investment in U.S. Residential Properties 2010-2016 | |||||||
| Year | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
| Total value (in billion dollars) | $11.20 | $7.0 | $12.0 | $12.8 | $22.0 | $28.6 | $27.3 |
| Number of properties purchased | 27,053 | 18,972 | 24,743 | 23,075 | 37,223 | 34,327 | 29,195 |
| Share of total international sales | 16.90% | 10.60% | 14.50% | 18.80% | 23.90% | 27.50% | 26.70% |
| Average price | $412,162 | $370,902 | $483,984 | $555,903 | $590,826 | $831,761 | $936,615 |
| Data source: NAR | |||||||
But “$27.3 billion is still a lot of houses being bought,” Mr. Margon told Mansion Global. “This is in line with our view that the pace of purchases would slow for a few years, but not stop, and we still think it will pick up again once China stabilizes its economic and financial situation.”.
“Breaking Ground: Chinese Investment in U.S. Real Estate,” a report Mr. Margon released this May, predicted that the Chinese residential purchase volume could drop to about $24 billion in 2020. However, over the long term, the annual flow could accelerate to as high as $50 billion by 2025, if open capital flows become more institutionalized and the U.S. economy remains strong.
Write to Fang Block at fang.block@dowjones.com