Chinese citizens know better.
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Chinese are now by far the biggest foreign buyers of US real estate in terms of units, dollar volume and price paid, according to a report from the National Association of Realtors, which tracks property purchases across the country.
In the 12 months to the end of March, Chinese buyers spent $28.6bn on mostly residential property in the US, a 30 per cent increase from the previous year and more than two and a half times the amount spent by Canadians, the next biggest group of foreign buyers.
With the Chinese economy and real estate market slowing dramatically and a vociferous anti-corruption campaign in full swing at home, Chinese buyers have been scrambling in the past few years to buy real estate abroad.
As a group they have become the biggest buyers of housing in many major western cities, including New York, London, Sydney, Vancouver, Toronto and Auckland.
Houses in English-speaking democracies with good education systems, excellent quality of life, strong rule of law and strong property rights are regarded by Chinese buyers as excellent stores of wealth.
In the year to the end of March, Chinese buyers spent more than three times the average American buyer, paying an average of $831,800 per property, compared with the national average transaction price of $255,600.
For all international buyers, the average purchase price was $499,600, although the next biggest buyers — from Canada, India, Mexico and the UK — all spent less than that on average.
Although Chinese buyers of American property overtook Canadian buyers in total transaction volume a year ago, they only overtook them in number of transactions in the latest 12-month period measured by the NAR report.
Buyers from China (including Taiwan and Hong Kong) accounted for 28 per cent of total sales of US real estate to foreign buyers and 16 per cent of the number of transactions, compared with Canada’s 14 per cent of transactions.
The favourite Chinese investment destination in the US by far was California, accounting for 35 per cent of all purchases, followed by Washington state, New York, Massachusetts, Illinois and Texas.
About 70 per cent of Chinese purchases were reported as all-cash, compared with 55 per cent for all foreign purchases and 25 per cent for purchases made by domestic US buyers.
As recently as 2011, Chinese buyers spent a total of just $7bn on real estate in the US and much of that came from Hong Kong and Taiwan.
The surge in recent buying appears to be mainly from mainland China and came mostly in the two years to the end of March 2015, the period coinciding with the anti-corruption campaign launched by President Xi Jinping in early 2013.
“Actually, domestically the space [to buy property] is limited,” said Ai Jingwei, an expert on the Chinese real estate and author of Great Recession in the Chinese Property Market. “After the American recovery started, lots of capital started to be transferred to the American property market.”
The average price of newly built residential housing in China’s 70 largest cities fell 6.1 per cent from a year earlier in May, a slightly better performance than April’s 6.3 per cent drop but still a far cry from the double-digit increases China saw for most of the past decade and a half.
Since China has strict capital controls that limit individuals to transferring just $50,000 a year out of the country, it appears that most of the money flooding into global property markets is technically illegal.
While there are legal ways to transfer larger sums, several major banks in Beijing told the Financial Times they had never conducted such transactions for offshore real estate buyers.
People involved in the market say the vast majority of money for overseas property purchases is transferred out of China illegally.