Chinese real-estate investors have been experiencing greater pressure from Beijing to curb back on their US real estate investment. The Chinese government is cracking down on certain types of outbound investment, which includes real estate, in order to stabilize the currency. Analysts say that the increasing tensions over the trade war and national security issues between China and the US have also contributed to this. David Blumenfeld, a Hong Kong-based partner at Paul Hastings commented that, "The China-US outbound cross-border real estate climate has been negatively impacted by the geopolitical climate."
Although Chinese buyers were never big players in terms of the buying power in the US real estate market, their companies often made headlines for the steep prices that they were willing to pay for the properties and this helped push the value up in certain areas of the market. This trend started when Beijing officials loosened restrictions on foreign investors, and Chinese investors quickly scooped up high-profile properties in cities like Los Angeles, San Francisco, and Chicago, including the $1.95 billion purchase of the Waldorf Astoria, the highest price ever paid for a US hotel.
Why were Chinese investors willing to pay such exorbitant amounts for US properties? Many of the executives of these acquiring firms felt that controlling trophy properties conferred prestige and built their brand recognition for any future expansion of their company. Many of these investors also planned to hold these properties for a few decades and so they were not worries about short-term price fluctuations even in major markets such as New York.
Chinese investors have sold $1.29 billion worth of US real estate in the second quarter while only purchasing $126.2 million worth of property. This is the first time that they were net sellers for any single quarter since 2008. Likely sellers include Anbag Insurance Group, which was taken over by Chinese regulators and whose chairman was recently convicted of fraud and abuse of power. It was Anbag that purchased the Waldorf in New York, but the company has yet to make any definitive deals. Dalian Wanda Group is looking to sell One Beverly Hills, a condo and hotel development, and Greenland, a Shanghai-based property development, also put their condo and hotel, One Beverly Hills, on the market. Greenland purchased it for $171 million in August 2016 and reports show that the construction was at around $600,000 per room or more. They have already sold Oyster Point to Kilroy Realty Corp. for $308 million and said they will invest $1 billion to build a biotech complex. Dalian Wanda Group is looking to sell its Chicago Vista Tower and the Beverly Hills hotel for a reported $2.1 billion.
This retreat of Chinese investors from the US real-estate market could further slow American growth. Especially after China formally implemented its measures in August against "extensive overseas investments," there has been a lot of uncertainty for Chinese investors. The government has also pressured companies to reduce debt levels and credit risk in the banking sector. However, not every Chinese investor is under pressure to sell. Small property developers who own warehouses and senior living centers are sticking around, and even for those who do face the pressure, some have actually been able to sell for profit. The government has allowed them to see properties that have increased in value first.