Is the Trade War Making Chinese Buyers Skittish?

June 27, 2019

As a trade war continues on, recent data is showing Chinese home buyers are investing less in U.S. real estate. The Chinese have been among the U.S.’s most popular international buyer over the last few years. But U.S. homes sales to Chinese consumers dropped 4% from 2017 to 2018, according to new data released from Juwai.com, China’s largest foreign property sales site.

“The worsening trade relationship between China and the U.S. may cause Chinese investors to shift their presence into other key markets,” Knight Frank, a property consulting firm, wrote in a new report. Knight Frank’s 2019 Wealth Report said that Chinese buyers are increasingly being lured to other areas like Australia, Japan, and the United Kingdom.

International buying of U.S. properties appears to be down overall. Foreign spending on U.S. homes dropped by 25% in 2018, according to Juwai.com.

“Chinese buyer inquiries for U.S. property were down in four out of the five last quarters,” Carrie Law, CEO of Juwai.com, told CNBC. In the first quarter of 2019, Chinese inquiries on U.S. properties fell 27.5% from a year prior, she told CNBC.

Beyond the trade war dispute, Chinese prospects may have other reasons to be leery. Both China and the U.S. have issued travel warnings to its residents about the other. The U.S. Department of State issued a travel warning on China, and then China responded this month by issuing its own safety warning that Chinese citizens and companies in the U.S. “raise awareness, strengthen preventative measures, and respond properly” when traveling and doing business in the U.S.

Regardless of the rising tensions, housing analysts believe Chinese investment in American homes will remain attractive to many oversea investors.

“[The] Chinese will always be substantial buyers of U.S. property and even now are probably still the largest foreign buyer group in the country,” Law told CNBC. “The thing that makes the buyer most nervous is uncertainty. If the trade war simply becomes the new normal, or if it is resolved on good terms, you will likely see an increase in Chinese buying in the U.S. There is still tremendous demand for the U.S. property. It is still the most liquid and appealing market in the world.”