Could the slowing Chinese economy actually end up being a boon to U.S. real estate? Johns Hopkins economist Alessandro Rebucci thinks so. He was at NAR’s Washington offices for a REALTOR® University lecture on the impact of global capital flows on U.S. housing and he said China’s growing investment class will be looking for places to invest as their economy continues its slowdown, and that will make U.S. real estate, already attractive to them, even more attractive.
“If the Chinese see an economic drop,” he said, “U.S. housing markets could pick up speed.”
Right now, the Chinese housing market is in a good place, he says. Although housing in the country’s big cities, like Beijing and Szechuan, are over-priced, the country’s housing market overall isn’t in a price bubble. That’s because home prices in second- and third-tier cities are in relative balance with household income.
Even so, both the Chinese and U.S. housing markets are likely to ease in the year ahead, and that means Chinese investors will likely look to U.S. real estate as a place to put their money. It will help that the Federal Reserve is expected to start raising short-term interest rates at some point. That could cool home buying in the U.S., but it could also attract global investors attracted to the higher rates. At the same time, as U.S. home price increases slow because of the higher rates and slower demand, more Chinese money could flow into U.S. real estate.
Looking at the last big recession, from 2007 to 2009, Rebucci said the U.S. saw a steeper drop in home prices—about 20 percent—than other countries, but its recovery has been quicker and stronger. As a result, U.S. real estate remains attractive, particularly to the Chinese, who, he noted, have surpassed Canadians for the first time as the primary foreign buyers of U.S. real estate.