While some brokers report no change in business, others are feeling the impact of the coronavirus on the US real estate market. Chinese nationalists make up 20% of foreigners investing in US real estate. Brokers that work with this group of foreign buyers are feeling the full impact of the virus on their businesses as some Chinese nationalists are dropping out of deals while others are no longer showing interest in US real estate.
The Spread of the Coronavirus
Recent reports put cases of the coronavirus at 24,324 in China with at least 490 deaths, according to China’s National Health Commission. Hubei province, the center of the coronavirus outbreak, has the highest reports of death. According to the World Health Organization, there have been 191 cases of people infected with the coronavirus across 25 different countries.
The Drop in Chinese Demand for US Residential Real Estate
While the spread of the coronavirus is a new development, the drop in Chinese real estate investments in the US is not. NAR reported that in 2019, Chinese investors accounted for $13.4 billion in sales. This was a major drop from 2018 when Chinese investments in the US real estate market amounted to $30.4 billion.
This decline in buying activity can be traced back to a few different reasons. Among the uncertainty caused by the US-China trade war, home sales to Chinese buyers saw a drop along with a decline in general interest in US real estate from Chinese nationalists. The trade war also caused a sharp drop in the Chinese yuan relative to the US dollar. To make things even more complicated for Chinese buyers in the US real estate market, the Chinese government implemented new regulations on oversea real estate investments. The new regulations placed a severe limit on investments, keeping buyers from investing more than $50,000.
Xiang Jill Ji, a New York real estate agent, commented on how these regulations affected her clients:
That reduced their ability to purchase more expensive properties. In order to purchase U.S. real estate, most investors from China must now secure mortgages.
And trying to land a mortgage can be difficult for foreign buyers investing in the US real estate market as the requirements are more strict.
The situation could be further complicated if the travel restrictions from the coronavirus are imposed for much longer. Chief Economist at NAR, Lawrence Yun, explains:
Foreign buyers want to see the property in person before throwing their money at it.
Could the Coronavirus Lead to a Rise in Demand from Chinese Buyers?
While local brokers are seeing some clients backing out of deals right now, it’s possible that the aftermath of the coronavirus could see an increase in foreign demand in the US real estate market. Yun believes that Chinese investors will be looking towards the US housing market for stability:
The demand for U.S. real estate may actually rise from wealthy Chinese because they’re getting tired of this type of situation where Third World-type market behavior crops up.
How This Could Impact US Homebuyers and Real Estate Investors
In certain US real estate markets, homebuyers and real estate investors find themselves in competition with wealthy Chinese investors. If foreign demand does continue to wane due to the coronavirus through the hot spring and summer seasons in locations like the New York real estate market, college towns, and the West Coast real estate market, it may make it easier for US buyers to enter the housing market. Coupled with low mortgage rates, investing in real estate or buying a primary residence may become a more affordable option for locals.
If you’re ready to make a move in the US real estate market today, be sure to make informed decisions backed by data and analytics. Mashvisor wants to ensure that investors are making smart choices during this time. Use promo code BLOG15 for 15% off all Mashvisor plans.
Related: College Towns: The Best Places to Buy a Rental Property
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