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Ed Fuller: International Buyers, Chinese Buyers and American Real Estate

By Ed Fuller |

A recent National Association of Realtors report, "2014 Profile of International Home Buying Activity," presents data gathered on purchases of U.S. residential real estate by international clients made during the 12 months ending in March.

Ed Fuller
Ed Fuller

For the period April 2013 through March 2014, the total sales volume to international clients (“international sales”) was estimated at approximately $92.2 billion, a 35 percent increase from the previous period’s level of $68.2 billion. The dollar level of international sales was roughly 7 percent of the total U.S. Existing Homes Sales (EHS) market of $1.2 trillion for the same period.

Four states accounted for 55 percent of the total reported purchases — Florida, California, Arizona and Texas. Florida remained the destination of choice, claiming a 23 percent share of all foreign purchases. California was second with 14 percent.

According to a 2013 survey by the California Association of Realtors, Los Angeles County was the top location in the state with 35 percent of the international buyers purchasing properties there. International buyers also purchased homes in Orange (22 percent), San Diego (20 percent), Riverside (14 percent), Contra Costa (7 percent) and Santa Clara (7 percent) counties.

In the NAR report, five countries (Canada, China, Mexico, India and the United Kingdom) accounted for 54 percent of the reported transactions in the recent study. Canada was the top source of international clients in terms of transactions volume, but China accounted for the largest sales dollar volume because of the higher average price of properties purchased by Chinese buyers. Chinese buyers tended to buy properties in higher-priced markets such as California, Washington and New York, while Canadians bought in lower-priced markets such as Florida and Arizona.

The NAR estimates that the total international sales from Chinese buyers rose to $22 billion in the 12 months ended in March, up from $12.8 billion in the prior period. This accounts for about 24 percent of the total international dollar sales but only 12 percent of all U.S. homes purchased by foreign citizens last year. In California, 35 percent of the international buyers had permanent residences in China or Hong Kong.

Although China’s currency controls appeared to allow its citizens to move only $50,000 a year out of the country, an unpublicized program offered by some banks in the southern province of Guangdong, across the border from Hong Kong, known as Youhuitong, was introduced in 2011 for overseas property purchases and emigration. As this program recently gained media attention in China by allegations of money laundering, the People’s Bank of China, China’s central bank, has suspended the program pending a full investigation.

This may have a serious impact on Chinese real estate purchases in California, now and in the future. Or, if this program obtains full official sanction, it could create an even larger wave of Chinese real estate purchases in California.

Ed Fuller is a real estate broker with San Roque Realty Inc. and president of the Santa Barbara Association of Realtors. Contact him at [email protected] or 805.687.1551. The opinions expressed are his own.

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