San Diego Housing Market News and Analysis
Chinese Buyers of California RE = Fortunate Cookies
User Forum Topic
Submitted by gzz on July 3, 2018 - 4:17pm
China's own real estate market has done fairly well, but appears to have underperformed all the major California markets.
Look at the Shanghai price index in the above link. It was at about 2500 in 2008, almost flat for a few years, and then moved up to about 4000 in 2017. That 60% nominal increase isn't bad at all, but California's major markets all did better.
Beyond that, buying as an investment in California would have also produced greater rents. I've heard many times that rent to price in China is among the worst in the entire world. Meanwhile in California rental income is pretty solid outside of a few really high end areas. All of my properties here in SD were solidly cash-flow positive on day one, including my late in the game 2016 condo purchase.
On top of all this, many Chinese investors in the USA got yet another bump of up to 10% from the rise of the dollar. For a good while it was semi-fixed at about 6.8 CNY per dollar, but from Aug 2011 to Dec 2015 it moved around a 6 to 6.5 range, and is now back up to 6.64.
As for other costs, China does not have a property tax, but taxes rents and property transactions more heavily. Looks like they take 12% of gross rent. At the very low 2% cap rate, that is pretty low. The reason for the lack of property tax is you don't actually own houses or apartments in China, rather you have 70-year leases from the government. There are plans to start taxing property next year however.
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