China's Housing Market Cools, NYC to Reap the Benefits

The New York real estate market is about to see more gains this year as China’s housing market cools, a new report on the U.S. edition of the International Business Times showed.

China’s housing market is on a downward spiral with housing prices dipping by 0.3 percent in August. While home prices in the country were up 4 percent year-on-year on a national level, these represent a fifth consecutive decline in prices. The report noted that economists and industry representatives expect Chinese investors to turn to the United States to build their portfolio, particularly in markets in New York, as a result of China’s housing market downdraft.

China’s red hot real estate market started to cool as fears of an impending bubble surfaced due to market over activity. And to prevent the bubble from bursting, the Chinese government ordered investors to limit domestic housing purchases and increase equity payments.

Obviously, wealthy Chinese investors have to find a new place to put their money.  

Another event that has the potential to push Chinese investors out of their homeland is China’s plans of further loosening its capital controls. This could lead to more capital outflow, warned the International Monetary Fund, according to the report. China’s capital account suffered a 3 percent deficit in 2012 when it loosened its capital controls. 

Patrick Chovanec, Silvercrest Asset Management economist, said when China pushes through with its plans, a considerable amount of money would pour into “markets like New York City.”

“It’s worth thinking about what the asset classes are that would receive all these capital outflows, and there’s one big answer: property markets,” he said in the report.

He added that no matter what China’s GDP growth is, forces pushing money out of China would persist. “For all the talk about China being the place to be, that China is going to eat our lunch, that China’s economy is going to be the biggest and the best, it’s worth remembering that so many people in China just want to get their money out,” he said.

China accounted for the largest sales dollar volume in U.S. real estate this year, as they were inclined to purchase properties in more expensive markets like California, New York, and Washington, according to the National Association of Realtors’ 2014 Profile of International Home Buying Activity.

NAR stated that wealthy Chinese buyers bought about $22 billion worth of U.S. real estate in the 12 months ending March 2014, up from last year’s figures of $12.8 billion.

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