Chinese investors are drawn to the U.S. real estate market, snapping up properties in areas of booming shale exploration.
In the shale-rich areas like North Dakota, where oil workers flock to capitalise on the growing job market, housing problems are common. As the real estate company North Dakota Developments states on its website, the state saw an increase in employment of 5.1 per cent (22,200 jobs) between the 2013 and 2014. North Dakota’s economy has doubled in size in just over a decade, producing $24.7 billion per year in 2002 and $49.8 billion in 2013, according to Bureau of Economic Analysis figures. According to figures reported by the Bonney-Lake Courier Herald, North Dakota’s average annual pay has increased by 44% since 2007, with the average worker in the oil and natural gas sector earning an annual salary of $111,451 in 2013.
This ‘gold rush’ has created a steady stream of oil workers and their families moving to the area putting pressure on the property market and pushing prices up. Charlie Rosier, director of Blackfish, a Hong Kong-based firm focusing on United States property investment, told the South China Post that US companies often lacked the funds to set up the infrastructure for drilling operations. “Chinese firms provide this capital,” he explained. This void is often filled by Chinese investors, eager to increase their exposure to the U.S. shale boom.
“Shale drilling is the main driver of Chinese companies’ investment into property [in the US resources sector],” said Charlie Rosie.
Large Chinese companies – such as Sinochem, which last year bought a 40 per cent stake in the 84,000 hectare Wolfcamp Shale project in Texas for US$1.7 billion – follow in the footsteps of Chinese exploration companies, with real estate turning out to be as lucrative a deal as acreage.
Since the shale-related real estate boom started in 2007, companies like North Dakota Developments have grown from strength to strength, in recent months having generated sales of US$1 million to US$2 million from Chinese clients.
Robert Gavin, the company’s founding chief executive, said: “Sales have grown, especially now that we have offices in Shanghai and Beijing. We intend to open an office in Hong Kong shortly, once we expect to increase sales from Chinese investors by 50 per cent year on year over the next five years.”
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