Stable CRE Cap Rates Attract Chinese Real Estate Buyers
The sales volume during the 4th quarter of 2013 rose 8% year-over-year with a 1% sales price growth. The cap rates averaged 8.7 percent in the 4thquarter, a 50 basis point decline from the third quarter, based on survey data from the National Association of REALTORS.
Many of the survey respondents hold a positive attitude towards the property transactions in the year of 2014 and 2015. As the economy got better, the price gap between buyers and sellers was considered the biggest pressing challenge in the CRE market, instead of national economy. However, the inventory and financing is still a problem. Thus, more realtors keep their eyes on the big cake brought by international buyers, especially Chinese, who are able to pay by cash and prefer to park their money in the United States. Chinese have become the second largest foreign real estate buyers with a 69% cash transaction and an even mix of detached single family and multifamily house purchase in 2013. In addition, CRE investments in U.S. property by Chinese investors jumped more than 900% in 2013, according to Jones Lang LaSalle’s International Capital Group.
Along with environment and human right issues, the real estate bubble is pushing out more Chinese with their money to other countries, among which United States is the very preferred location. Although the Chinese government is working on creating a more sustainable economy, as long as the toxic air and real estate bubble exists and threatens China, the interest in oversea investment and second home purchase from affluent Chinese will keep coming in.
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