The United States attracts more Chinese real estate buyers than any other country. Chinese investors are buying U.S. property in order to diversify their assets outside of China, for investment purposes, for immigration reasons or because they have a child studying in the U.S.
According to the National Association of Realtors (NAR), Chinese buyers spent an estimated $22 billion on U.S. properties last year. Of these purchases, NAR noted that 51 percent were completed in California, Washington and New York, and 76 percent of all transactions were cash purchases.
Realtors across the country have seen the great potential that these overseas Chinese real estate buyers bring. As a result, many Realtors have actively been trying to understand these prospective buyers better.
Where are they buying?
My company, East-West Property Advisors, is a U.S. real estate advisory firm in China that is connecting Chinese buyers with U.S. agents. One of our recent surveys shows that overseas buyers from China show most interest in the San Francisco Bay Area (34 percent), followed by New York City (22 percent), Los Angeles (17 percent) and San Diego (13 percent). Although the popularity of coastal cities makes them top choices for Chinese investors, other cities are also seeing increasing interest from Chinese investors. For example, cities such as Houston, Philadelphia, Cleveland, Chicago and Memphis are noticing growing interest from Chinese investors.
Many factors can affect the popularity of a city for Chinese investors. Recently, Seattle has become a key city, which is often credited to the popularity of a Chinese film, “From Beijing to Seattle.” In this drama, a Chinese woman moves to Seattle, where she falls in love. Another example is Miami, especially because of the development activities of Hong Kong developer Swire Properties. Swire has injected billions of dollars into developing the Brickell area and Miami’s downtown neighborhood. These high-profile developments have created significant interest from Hong Kong investors who are already familiar with Swire.
There are three main reasons why Chinese buyers are looking at properties in the U.S.: investment, education and immigration. Each of these factors will drive the location of the real estate acquisition and affect how a Realtor needs to handle these buyers.
We have noticed that most of our mainland Chinese investors are interested in capital growth. The focus on appreciation often outweighs a need to achieve high rental yields. These types of investors will be drawn to established markets such as New York, San Francisco and Los Angeles because of the potential for strong appreciation in those cities.
This is often different from our Hong Kong clients. Hong Kong clients tend to be more open to investing in second- and third-tier cities where they can achieve higher rental yields. For example, many of them are drawn to cities in the Midwest, where rental yields of 20 percent could be achieved.
Each year the number of Chinese students arriving in the U.S. increases. Last year, close to 270,000 Chinese students came to the U.S. to study. Up to 70 percent of these Chinese students plan to make this country their long-term home. Because of this, many families will choose to buy a home near the school that the student will attend. They then use this home as housing for the student or as a home for the family when they visit.
Although the primary focus of these buyers is a home near a particular school or university, many of these buyers are also interested in homes that will have high resale value as they plan to sell and buy a new home when the student graduates and moves to a different city.
As the air quality worsens and the overall situation in China is often dubious, many Chinese plan to emigrate to foreign countries. Of these countries, the U.S. remains the top location for Chinese moving abroad. EB-5, a process for obtaining a green card in the U.S. via investment, is a well-known acronym in China, and each EB-5 seminar typically attracts hundreds of people. As a result, over the past five years, 85 percent of EB-5 green cards were issued to Chinese citizens.
Chinese citizens who are looking to emigrate have a different set of requirements than those looking for investments. Realtors should realize that easy access to good schools and good communities are key for these buyers.
What are Chinese buying?
Chinese immigrants are drawn to single-family houses. For many of them, the idea of a U.S. home is a single-family house with a yard and private garage. These homes are rare in China and are often reserved for the ultrawealthy. Naturally, our clients are excited to see houses in Los Angeles or Houston, which are much larger and cheaper than those available in Shanghai or Beijing.
Many Chinese immigrants are also interested in new condo apartments in large metropolitan cities. Schools and safety are among their top concerns when making decisions about which neighborhood to call home.
How should you prepare for buyers from China?
With the influx of overseas Chinese buyers expected to increase significantly, U.S. Realtors can prepare to achieve a higher success rate in one of the following ways:
1. Engage Chinese-speaking staff members.
Many Chinese buyers don’t speak English, which makes communication difficult for a U.S. real estate agent. It is important to work with staff or partners who can relate to and communicate with the Chinese client.
2. Improve coordination across time zones.
The clients are living in China, which means it is hard to communicate, as these clients are living 12 to 15 hours ahead of a Realtor in the U.S. In order to assure the highest probability of a sale, it is important to build a relationship before they come for a visit. Email communications will often take 24 hours to be answered on both ends, and setting up calls can be difficult. Coordination is key.
3. Be aware that Chinese clients often use different Realtors.
Initially, Chinese clients will check all the information you provide, and they often will be working with more than one agent. It is important to build trust and a relationship with the client rather than simply selling them a property. Agents who can gain their trust first will be more successful. Furthermore, Chinese citizens always work with different agents when they are looking to buy a property in their home country because centralized multiple listing service (MLS) systems are not common. As such, agents in China will each have access to different listings, so clients must use different agents to find a suitable home.
Real estate agents in the U.S. should communicate to Chinese buyers about their access to the MLS systems and listings, and as a result, why there is no advantage for a client to use different Realtors.
4. Be patient and use data.
Often, Chinese clients will want to make sure the property is the best option available. Sometimes, this makes it difficult for Realtors — especially those who work in seller’s markets. In markets like San Francisco, where properties are currently being sold at prices much more than the asking price in a matter of days, the client may not have time to react and make a quick decision. Or the Chinese buyer might not feel the need to put an aggressive offer in due to fear that the agent is trying to maximize his or her commission.
In order to help the client, it is important to show data — why you recommend the amount they should consider offering for the property. Data that provides an overview of the recent closed sales (showing the closing price higher than asking price) will help assure the client that you are on their side.
There is no denying that Chinese interest in the U.S. real estate market is growing each year. Many believe that this is the beginning of a much larger wave — another reason for Realtors to start understanding this group of overseas buyers.
Sam Van Horebeek is a director at East-West Property Advisors, a real estate advisory firm based in China.