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of undeclared recession is making rounds and is not exempt from foreign real estate investments in California.
Since late 2021, the US dollar has dominated other financial markets.a strong dollar offers better exchange rates for the United States. This sounds like a good thing for US tourists visiting other countries. But the scale of the economy, as noted by The New York Times, poses problems for states like California, which are major players in the global economy.
According to Maurice Obstfeld and Haonan Zhou, commodity prices drop globally when the dollar rises against other currencies. In other words, when the US rises, the rest of the world economy falls.
negative Exchange rate For investors from other countries, purchasing power drops immediately. Just as rising mortgage rates in 2022 plummeted the purchasing power of buyers, foreign buyers relying on exchange rates are now paying more for the same price home.
As a result, buyers of all types are unwilling or unable to pay the same high prices as earlier this year.
California home prices have already begun to fall as mortgage rates skyrocket and buyers are less willing to jump into the booming market. In addition to these market pressures, regions and industries that rely heavily on foreign investment are also seeing reduced demand.
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ghost owned by china
Of the many international buyers currently owning California real estate, the largest number of investors are China.
Consider a Chinese buyer who purchased a home in California in January 2021.
At that time, the Chinese yuan (yen) was trading at 6.48 yuan to the dollar. The purchase price is 1 million dollars, equivalent to 6.48 million yen.
In October 2022, the yuan is trading at 7.22 yen to the dollar. In other words, using the Chinese yuan to buy the US dollar made it significantly stronger. But the buyer who bought in January 2021 and sold today has basically seen his investment increase from 6,480,000 yen to 7,220,000 yen. This is an increase of ¥740,000 or $102,493 in the strength of the dollar alone.
In other words, Chinese investors sell In this high exchange rate environment possession Especially with today’s price drop, there is little chance of investing in their investment and buying under these oppressive exchange rate conditions.
In 2021, Chinese investment will begin to slow, both at home and abroad, and the decline seems unstoppable.
Instead, China and others are looking to profit off California’s assets. LiquidityBy doing so, international homebuyers provide themselves with a cushion while they wait for negative exchange rates. You can bounce back from a strong dollar loss because you’re prepared for
International buyers will eventually return around 2025-2026 along with other investors. In the meantime, this is just one of many blows to real estate in the next two to three years.
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