As I noted in a prior post, there’s been a persistent increase in Chinese acquisitions of American real estate holdings. Both private investors and wealth management entities with surplus finances have begun allocating increasing reserves of capital to high-value American real estate holdings. Commercial and office property in economically flourishing cities have been a special focus, with Chinese investors centering much of their focus on thriving Eastern Seaboard metros like Boston and Washington, DC.
However, as a recent story from Reuters notes, Hong Kong-based Gaw Capital Partners has created a $500 million U.S. subsidiary dedicated solely to scoping stateside property holdings. The Reuters report further outlines that Gaw Capital’s focus is aligned with the general focus of Chinese investors – namely that the investment management firm is viewing commercial property acquisitions in business-friendly metros. However, the focus seems to lay on large-scale hotel and housing developments, indicating ongoing confidence in the value growth of American property.
It seems interesting to note that broad overseas interest in American real estate holdings is on the rise, certain nations have distinct investment patterns and property type foci. In a post I wrote at the close of August, I pointed out that German investors are becoming the most aggressive European property speculators. However, their interest lies overwhelmingly in residential property acquisitions, with a greater volume of recent purchases being made on the part of private buyers.
Wealthier Germans have begun to relocate their surplus capital away from shakier Eurozone investments and into stable American property. EU investors seem overall more focused on making comparatively minor purchases of residential holdings with promising growth outlooks. German investors have centered a particular focus on higher-value Florida homes and apartment properties, a sharp contrast to the overreaching ambitions of Chinese investors to mass purchase and develop office property.
So What’s the Takeaway?
As has become increasingly apparent, the value appreciation of American property is often self-reinforcing, with local escalation in real estate prices both encouraging sales and submerging underwater mortgages. However, overseas property investment could help trump the consequences of both flagging property purchases as well as regional hedge fund monopolization. The latter concern is particularly applicable in the case of bulk property investments in American metros.
Hedge fund orchestration was instrumental in the artificial skyrocketing of home prices, and their subsequent plummeting, that preempted the 2007 bubble burst. Wealth management entities have begun refocusing their acquisitions on broad property investments, and the influx of external investment could act as a mitigating factor against inflated real estate prices. With the long-term outlook of the American property sector remains unclear, a greater diversity in real estate management may contribute to stabilization.