From a relatively humble base, Chinese direct and indirect investment into Uncle Sam's real estate market has surged, and is likely to continue rising even if there are periods when financial wobbles slow down inflows, a report says.

Chinese direct investment into the US property market has surged in recent years, starting from a modest base in 2010 to being the source of at least $350 billion of real estate holdings in the country at the end of last year, according to a report from the Asia Society and Rosen Consulting Group. 

The $350 billion figure includes the direct purchase of real property and indirect investment through the purchase of agency mortgage-backed securities and provision of debt financing, among other channels.

The report also predicts that Chinese direct investment across existing US commercial real estate assets and residential purchases, excluding new development projects, could total at least $218 billion, cumulatively, from 2016 through 2020.

“In addition, we estimate that Chinese entities managing US real estate operations and individual investment through vehicles including the EB-5 programme may have created or sustained 200,000 jobs,” the report, which sheds light on Chinese FDI flows worldwide, said. It is titled Breaking Ground: Chinese Investment In US Real Estate.

Looking ahead, the report predicts that while economic turbulence in China will create short-term dips in real estate investment, carrying the risk of capital controls lasting up to two years, Chinese investment abroad will not stop.

“The long-term investment drivers remain: strong US demand for capital; a widening and deepening pool of Chinese investors, many of whom have not ventured into US real estate; increasing global appetite by Chinese developers and construction companies; a $1.6-trillion insurance industry that has become active overseas but invested just a fraction of funds available for real estate projects; and new Chinese investment vehicles, such as private equity funds, which have only recently become a factor in the US market,” the report said. 

Surge
Chinese investment worldwide has surged over the past 10 years from an early focus on natural resource extraction and energy in developing countries to broader industries and advanced products and services in developed markets, the report said. 

In 2014, Chinese outward FDI flows were a total of $116 billion, and around $18.1 billion flowed into the US. In 2015, Chinese outward FDI flows totalled $118 billion, and Chinese foreign direct investment flows into the US increased to $22.3 billion.

However, to put such figures into context, China accounts for less than 10 per cent of all foreign direct investment in the US. 

Chinese direct investment in US real estate was negligible until 2010 but has since grown dramatically and visibly. In 2015, China ranked third in US commercial real estate acquisition volume, trailing only Canada and Singapore and tied with Norway.

The report went on to chronicle how Chinese developers are building multi-billion-dollar projects in several major cities. A Chinese insurance firm, for example, bought the prized Waldorf Astoria hotel in New York City in 2015 and struck a $6.5 billion deal for Strategic Hotels & Resorts in early 2016.

Chinese investors have dominated an immigrant investor programme known as EB-5, and in 2015, China overtook Canada as the biggest foreign buyer of US homes.