Foreign Investment in US Real Estate Plunges by 36% - Economist Cites “Trump Effect”

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ByG. Dautovic
July 22, 2019

The U.S. housing market faces increasingly tough conditions. According to a July 17, 2019, report from the National Association of Realtors, real estate purchases made by foreign buyers have dropped by a dramatic 36% in the span of a single year.

Last year’s NAR data showed that foreign buyers bought 266,800 properties valued at $121 billion. This year the totals are 183,100 properties and $77.9 billion. Buyers paid a median price of $280,600, compared to the $290,400 the year before.

Chinese investors continue to represent the largest portion of foreign buyers for seven years straight, with an estimated $13.4 billion worth of residential property purchases. But they’ve also seen the biggest decline compared to 2017-2018, with 56% fewer purchases made.

The drop in foreign demand for American homes is the result of several factors and events.

“A confluence of many factors — slower economic growth abroad, tighter capital controls in China, a stronger US dollar and a low inventory of homes for sale — contributed to the pullback of foreign buyers,” says NAR chief economist Lawrence Yun. “However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.”

Yun says the slowdown of the Chinese economy, which saw GDP growth drop from 6.9% to 6.3%, was a big factor behind the reduction of foreign investment. Tightening controls on outside investment by the Chinese government, a stronger U.S. dollar, and the souring political climate between the two countries are having an impact as well.

American real estate inquiries on Juwai.com, the largest Chinese real estate portal, are down 27.5% from a year ago.

“We call it the Trump effect,” says Juwai CEO Carrie Law. “It’s a combination of anti-Chinese political rhetoric, a clampdown on visa processing, and of course tariffs. The Trump effect is undercutting some of the primary drivers of Chinese demand for US property, including buying homes for students who are studying in the US and the country’s reputation as a safe investment.”

The NAR report shows that the states with the biggest share of foreign home purchases remain unchanged. Florida is the top choice, with 20% of all foreign buyers choosing this state. Leading the numbers are the so-called “snow birds,” buyers from Canada, 42% of whom chose homes in Florida. California, Texas, Arizona, and New Jersey followed in the rankings.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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