We've chronicled extensively the capital flight taking place out of China and into anything that is perceived to hold value as fears that the yuan will devalue persist (here, here, and here). We've have also covered the massive debt bubble that has been created during China's ferocious attempt to prove those who say a hard landing is inevitable wrong. George Soros and Kyle Bass also agree that China will inevitably have to devalue its currency in order to soften a crash landing, certainly not without its consequences.
We know that Chinese buyers have taken over the Canadian real estate market, and we've witnessed the massive amount of corporate M&A being done in the name of preserving shareholder capital. Now we're able to learn, courtesy of a study done from the Asia Society and Rosen Consulting Group, just how much individual wealth has been poured into the United States real estate market over the past few years.
According to the study (which excludes most purchases by companies and trusts), Chinese buyers have invested a massive $110 billion into the US real estate market between 2010-2015. The $110 billion is broken out into two parts, commercial and residential real estate, absorbing $17 billion and $93 billion respectively. Furthermore, despite the speculation that China will find a way to clamp down even harder on capital controls, the study estimates that for the second half of this decade the number will likely double to $218 billion.
Geographical areas of concentration were New York, Los Angeles, San Francisco, and Seattle, with Chicago, Miami, and Las Vegas also seeing significant investment as well. The impact of course is that real estate prices are being significantly distorted as Chinese buyers are paying huge premiums to ensure deals go through. According to the study, last year Chinese buyers paid on average $832,000 per home in the US, while the overall average for all foreign purchases was just $499,600.
As China continues to flood its economy with new loans, albeit down recently, and the subprime debt bubble gets ready to burst, the race to perceived safety is on for those Chinese buyers fortunate enough to have capital to preserve. As the study suggests, billions more will find its way out of China before the government truly puts a stop to it once and for all.