In The News

Sound Off: What synergies exist between China’s and the Bay Area’s real estate markets?

A: The San Francisco Bay Area, a popular location for Chinese investors, continues to attract home buyers. According to the National Association of Realtors, for the sixth consecutive year, China exceeded other countries in both the number of units and the dollar volume of residential housing in the U.S.

California, and in particular, the Bay Area, continues to be the favorite among Chinese home buyers, due to its good weather, strong economic growth and already large concentration of Chinese communities.

According to the NAR’s annual report, 90% of all international investment is on one coast or the other–as it’s more appealing, better investment and the appreciation is stronger.

Traditionally some wealthy buyers come here to invest in expensive properties, and these days we do find more parents are buying homes for their children who work or study in the Bay Area (and an NAR survey found that Chinese buyers were the most likely to purchase a house for student housing).

However, analysts have pointed to China enacting tight, new restrictions on U.S real estate investment, in which the Bay Area real estate market may now start to feel the effects of—and investment and purchases did slow mid-third quarter of 2018.

A: The United States and China have many synergies and some polarizing differences. Tariffs have certainly been the one common theme we’ve been reading about most recently, and the reliance on both countries to get along so each can benefit from the others products and natural resources.

Both economies depend on exports to keep our economies going. Another economic component is the stability of the U.S. dollar and how the Chinese see this stability as a safe harbor for investing in U.S. real estate. Unlike China, where the land is owned by the government and the home owner basically owns the home with a long term land lease.

The Chinese government also has a large investment in US treasuries because of the stability of the U.S. dollar. On the real estate front both places are very desirable locations to live and there isn’t much excess land in either spot so our real estate both trade at a premium. This premium forces both the U.S. and China to struggle with affordable housing for the working class.

I think this has continued to change not only living arrangements with more people sharing their living accommodations or alternatively forcing longer commutes to reach more affordable areas.

Matt Heafey, the Grubb Co., 510 541-1754, heafey@grubbco.com.

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