While stock markets in the U.S. have been more than a little volatile lately, the dip is nothing compared to China’s stock market volatility. The Hong Kong Hang Seng index is down more than 21 percent so far this year and more than 38 percent from its 52-week high. What impact will troubles in the world’s second largest economy have on the U.S. housing market?
A recent article in Realtor.com said the shaky Chinese market may be a double-edged sword for real estate here. On one hand, Chinese buyers have been major drivers of the Bay Area real estate market. Tough economic times could mean less competition from those offshore investors. At the same time, a strong desire by the Chinese to invest in the U.S. still exists. “Interest in luxury tower apartments as well as larger commercial real estate opportunities is likely to even increase as China’s millionaires seek safe investments and higher returns in the United States,” Realtor.com noted, quoting a report in the Epoch Times, a Chinese news service based in New York.
While the Times comment referred specifically to New York, I think the same could be true for the Bay Area. It would not surprise me if the Chinese stock market meltdown actually encourages Chinese corporations and wealthy individuals to seek refuge and better returns in major U.S. commercial and residential markets like San Francisco, Los Angeles and elsewhere.
Additionally, let’s keep in mind that offshore buyers are one of many factors driving our local housing market. Our robust real estate market is fundamentally the result of a very limited supply of homes for sale coupled with strong demand from buyers who want to jump in while interest rates remain near historic lows.
Add to that, the Bay Area continues to have one of the strongest economies in the nation, with steady job creation in the high tech, biotech, social media and investment sectors, and that equates to many well-capitalized buyers chasing too few properties on the market.
My sense is that a slowdown in Chinese investment, if it happens, will not likely change the dynamics of the Bay Area housing market unless the world’s second largest economy worsens and leads to an overall global economic slowdown. Most economists don’t see that happening.
— by Coldwell Banker San Francisco Bay Area President Mike James; compliments of Anne Dautun Laury, Luxury Real Estate Broker, Coldwell Banker