Over the past several months, the Chinese stock market and economy have been in a downward spiral. This has led many Chinese investors to seek other investment options outside the country. Over the past several years, one area that has been particularly popular with many investors is California real estate. With the recent economic instability in China, U.S. real estate is an appealing alternative for those looking for more stable investment alternatives.
Southern California Real Estate Southern California has become more international in recent years, making it more attractive to Chinese real estate investors. In fact, California is the most popular of all U.S. states for Chinese real estate buyers. In 2014, 80 percent of new homes constructed in Irvine were bought by Chinese purchasers, and 36 percent of all homes sold to foreign buyers in California were bought by Chinese purchasers. Sixty-six percent of all international investors pay cash for real estate purchases, and purchase more expensive homes, on average.
Chinese Stock Market Turmoil China has recently been undergoing financial turmoil. The Chinese stock market and general economic activity have both dropped over the past several months. Until June of 2015, China’s stock market was on an upward streak. As more people invested in stocks, the stock market soared. But this growth was not sustainable. With the slowing of China’s economy and the increase in debt, the stock market suffered a sudden drop. Additionally, the Chinese government lowered the exchange rate of the yuan, which is pegged to the U.S. dollar. All this has encouraged investors to move assets out of China. Generally, the Chinese government has made it difficult to get money out of the country, but standards have recently loosened. The Chinese government has made regulatory changes and opened up capital accounts to allow investors to take money overseas. The economic turmoil and regulatory changes are likely to create higher demand for real estate in California among Chinese investors.
Real Estate Investments Real estate is often a good investment, and California real estate may be an attractive option for those who want to move money out of China. The U.S. markets are currently more secure for investment than China. Additionally, real estate is often safer than many other types of investments for those interested in long-term financial planning. Recent changes in U.S. tax law have also made California real estate more appealing to Chinese investors. President Obama recently signed a law waiving the tax on foreign pension funds under the 1980 Foreign Investment in Real Property Tax Act (FIRPTA). The law also increased the limit on how much of a real estate investment trust foreign pension funds may buy, from five to ten percent, without falling under FIRPTA. Further, Southern California has a high concentration of Chinese residents, making it attractive to potential Chinese investors. Real estate in California is also less expensive than in many major Chinese cities. If you are considering investing in California real estate, an attorney can help you make an informed decision and make the most of your investment. Please contact an Orange County real estate investment attorney at Hershorin & Henry, LLP, to schedule a consultation.