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Chinese buyers step back from US housing market

Dec 02, 2015 10:00 AM EST

Chinese investors are pulling back from the US property market owing to adverse economy conditions back home.

The Yuan depreciation and Chinese government's restrictions on capital outflows are tightening strings of investors' purses. A majority of Chinese buyers are slashing down their budgets while some of them have slipped into wait and watch mode.

The US property market is witnessing gradual withdrawal of Chinese investment. The investors from the world's second largest economy are not willing to invest in the US market.

The devaluation of Yuan, a sluggish financial market, and the slowdown in the economy are discouraging Chinese investors. It's learnt that Chinese investments were reduced by over 50 percent.

According to a report by Wall Street Journal, the adverse conditions in the dragon country are major hurdles for Chinese investments.

China's benchmark stock index tumbled 5.5 percent, indicating its steepest fall in a single session since August, as the government has initiated probing into the financial markets. The recent short selling was at the center of controversy and subsequently, the Chinese regulator has begun cracking down on the securities sector.

The US-based Sotheby's International Realty sees a bleak situation in the US property market for Chinese investors, which account for half of the deals of the property firm.

Southeby's International Realty deals properties with values ranging from $2 million to $10 million. Daniel Chang, a New York-based broker for the property firm, said, "We are ready to embrace a winter for Chinese buyers in the next one year, two years."

China has been leading the property market purchases among international buyers for the past five years. From 2013 onwards,

Chinese purchases surpassed $25 billion and nearing $30 billion this year, says Zero Hedge.

Chinese investment in the US property market left other global buyers far behind as Canada above $10 billion mark, India at $7 billion level, Mexico at $5 billion and the UK just below $5 billion level, according to the data from National Association of Realtors.

The situation was different until few weeks ago. The economy slowdown and weaker financial markets had propelled Chinese investors to park their money in safe havens. As a result, Chinese investors were pouring their money in the US property market.

The New York Times reported that the Yuan devaluation and restrictions on capital outflows by the Chinese government has changed the situation overnight. Not only in the US market, Chinese investors were purchasing properties in the UK and Canada housing sectors.

For the first time, Chinese buyers figured in the largest group of overseas home buyers in the US. Chinese buyers were even keen on prime locations in San Francisco and Manhattan.

With imposing of restrictions on capital outflows by the Chinese government, investors from the dragon country are either reducing their buying size or preferring to wait and see.

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