Institutional investors from China have begun to divert their attention to prime properties in the U.S., opting instead to acquire mid-range assets in residential, student housing, and other sectors. Americas Housing Alliance, LLC and other property experts added that turnkey rental properties are also another potential source of investment yields.
For the Chinese, their transition from snapping up premium real estate such as luxury hotels and offices to plain-vanilla properties signify their more prudent approach in U.S. investments.
In the past, these investors favored prominent cities like New York and Los Angeles when looking for property investments. Now, their appetite for big-ticket purchases seems to have waned, as they look elsewhere in smaller cities.
When Chinese investors became aggressive in recent years towards buying prime real estate in the U.S., prices for high-profile properties surged to record numbers, leading overseas buyers to reconsider their investment plan for the market.
Some of their other currently favorite picks in the mid-tier range include retirement living communities and skilled nursing homes, while other projects involve middle-class condominiums with some rental units.
As China has recently become a major force behind driving up commercial and residential property sales in the U.S., a tougher set of outbound capital rules from China’s regulator poses a threat.
In November 2016, the State Council of China required all government units to pre-approve overseas acquisitions worth US$10 billion. The council also explicitly prohibited state-owned companies from acquiring real estate worth more than US$1 billion in offshore markets.
The regulatory oversight is not entirely new. However, as outbound capital from the country reached a new high in October 2016, the Chinese yuan has further depreciated that led the government to take stricter action.
Chinese investors are not the sole culprits behind the yuan’s depreciation either, as they wanted to diversify their portfolios abroad due to the weaker yuan against the dollar and high real estate prices back home.