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Ever since the U.S. real estate market bubble burst in 2008, property prices have plunged greatly and buyers’ confidence has eroded. But strong demand from Chinese and other international buyers has boosted an otherwise bleak market.
According to a report published by the National Association of Realtors in June, buyers from China and Hong Kong made up the second-largest group of foreign buyers of homes in the U.S. in the 12 months to March – Canadians took first place – accounting for $9bn of sales or 11 percent of the total value.
That is a 23 per cent increase on the $7.3bn of sales they notched up in the previous 12 months and an 88 per cent increase from $4.8bn of sales in 2010.
Buyers from China and Hong Kong also spent $1.71 billion on commercial property in the U.S. in 2011, more than quadruple their investment in 2008, says Real Capital Analytics.
Those numbers likely understate Chinese investment, as investors may buy property under business entities they’ve set up in the U.S., says Patrick O’Neill, founder of ONeill Group, a Hong Kong-based company that helps Chinese buyers find U.S. property, according to USA Today.
“Most of my buyers are from Shanghai, Beijing and, of course, Hong Kong. I have also had buyers from Guangzhou.” Kathy Tsao, chairwoman of Asian Real Estate Association of America (AREAA) and a real estate agent for 30 years, according to China Daily.
Reasons for purchases
Reasons for purchases vary, say those who have dealt with overseas Chinese buyers, the Financial Times reported on June 12.
Some are buying because they want to emigrate or they have children who will go to school in the U.S.
Others buy because the numbers add up: despite its recent dip, the renminbi is still up more than 4 per cent against the U.S. dollar since the start of 2010 while U.S. house prices are still in recovery mode and appear cheap compared with Australia or Canada.
“When you look at how cheap U.S. real estate is now compared with China, it makes a lot of sense to buy there, especially since you have more rights when you own a property in America,” said a wealthy Chinese investor who has bought several properties in the U.S. but asked not to be named so as not to draw attention to the fact of shifting assets abroad.
In China, all land is owned by the state and investors can only buy leasing rights of usually up to 70 years, rather than to secure outright ownership.
Still others are simply looking for somewhere safe to park their cash.
China has more money to invest than ever. Mainland China now has 960,000 millionaires — defined as individuals with residences, private businesses and investable assets of more than 10 million yuan or $1.5 million, according to the Hurun Report, a Shanghai publisher of magazines for China’s wealthy.
Nearly half of those millionaires are considering moving or getting permission to reside overseas. And their top country of choice is the USA.
In the year ended Sept. 30, Chinese applicants accounted for 78% of the 3,805 EB-5 applications in the U.S., up from 35% four years before, according to government data. In that program, foreign investors can get permanent resident status, or “green cards,” in exchange for investing $500,000 or$1 million, depending on the part of the country, in ventures that create or sustain at least 10 jobs within two years of the immigrant investor’s admission to the U.S. as a conditional permanent resident.
Preferences
New York, Los Angeles and San Francisco areas are most popular with Chinese home buyers, according to Realtors and data from real estate website Trulia.
International buyers prefer properties in metropolises such as New York, Los Angeles, San Francisco and Miami, brokers say. For instance, Brazilians tend to congregate in South Florida, while Chinese customers seek properties in the Bay Area, according to China Daily report.
“The city is closer to China, the weather is warmer and there is a large established Chinese community,”White says of San Francisco. “I guess that’s why Chinese investors flock to buy properties there.”
New York City’s priciest borough is another favorite for Chinese buyers, Tsao says.
“Many of my customers are purchasing properties because their children will be attending school in the city. Most of them are attending Ivy League schools on the East Coast. So a property in Manhattan is an ideal situation for them.”
Hiroko Akutsu Lee, a New York broker with Prudential Real Estate Affiliates who mainly sells houses and apartments on Long Island, says Chinese have replaced Japanese buyers as her primary clientele in recent years.
“Twenty years ago, Japanese came to buy properties. But after the burst of the real estate bubble in Japan, their enthusiasm in properties subsided,” Lee says. Since the March 2011 earthquake and tsunami, Japanese have become even more cautious about potential purchases abroad.
Chinese buyers tend to prefer paying cash rather than taking out mortgages, Lee says. She once saw a Chinese customer buy a house on Long Island with $1.2 million in cash.
New York City is also popular with a growing number of Chinese investors looking for commercial property. Last year, China’s HNA Group, which owns Hainan Airlines, paid$265 million for 1180 Avenue of the Americas, a 23-story office building in Manhattan, and $126 million for the luxury Cassa Hotel and Residences near bustling Times Square.
Hong Kong billionaire Cheng Yu-tung’s family also bought five U.S. luxury hotels in 2011, including Manhattan’s iconic Carlyle, for $570 million. Chinese investors are looking to buy hotels as a growing number of mainlanders travel overseas, says Chris Brooke, chief executive of broker CBRE, Asia.
Local responses
Despite allegations that some Chinese investors have brought hot money into the US market and helped create a bubble, industry analysts deny this is the case. In fact, they say, Chinese buyers have eased the inventory pressure and helped perk up a sluggish market.
“We are happy to have these Chinese buyers,” Philip White, president of Sotheby’s International Realty Affiliates LLC, a luxury property broker, says. “So far, I haven’t seen any sign they have disturbed the market; in fact, they helped stabilize it.”
Even politicians have turned their eyes to international buyers in an at- tempt to revitalize the real estate sector.
Legislation proposed last fall by Sens. Charles Schumer, D-N.Y., and Mike Lee, R-Utah, would let foreigners get a three-year resident visa if they invest $500,000 in U.S. real estate, including $250,000 for a primary home. They’d have to live at least 180 days a year in the property and pay taxes here.
The big demand from Asian communities is leading to a quiet shuffle within the industry as well. Alan Parter, president of Alan Parter International Inc, which helps international companies register and operate in the U.S., says he is increasingly getting requests from brokers in China - many from Hong Kong - to establish a U.S. presence to serve the needs of potential property buyers.
As more Chinese become affluent, this trend will continue, Tsao from AREAA predicts. “I think there is still much more potential, with the (yuan) appreciation, and more people to diversify their investment portfolios.”
She adds that housing policies back home, which limit the number of properties each citizen can own, has also led to increased demand.
To curb the soaring properties prices in major cities and minimize the bubble, China’s government has implemented a series of policies since 2009 to restrain what it considers excessive investment in real estate.
According to a report published by the National Association of Realtors in June, buyers from China and Hong Kong made up the second-largest group of foreign buyers of homes in the U.S. in the 12 months to March – Canadians took first place – accounting for $9bn of sales or 11 percent of the total value.
That is a 23 per cent increase on the $7.3bn of sales they notched up in the previous 12 months and an 88 per cent increase from $4.8bn of sales in 2010.
Buyers from China and Hong Kong also spent $1.71 billion on commercial property in the U.S. in 2011, more than quadruple their investment in 2008, says Real Capital Analytics.
Those numbers likely understate Chinese investment, as investors may buy property under business entities they’ve set up in the U.S., says Patrick O’Neill, founder of ONeill Group, a Hong Kong-based company that helps Chinese buyers find U.S. property, according to USA Today.
“Most of my buyers are from Shanghai, Beijing and, of course, Hong Kong. I have also had buyers from Guangzhou.” Kathy Tsao, chairwoman of Asian Real Estate Association of America (AREAA) and a real estate agent for 30 years, according to China Daily.
Reasons for purchases
Reasons for purchases vary, say those who have dealt with overseas Chinese buyers, the Financial Times reported on June 12.
Some are buying because they want to emigrate or they have children who will go to school in the U.S.
Others buy because the numbers add up: despite its recent dip, the renminbi is still up more than 4 per cent against the U.S. dollar since the start of 2010 while U.S. house prices are still in recovery mode and appear cheap compared with Australia or Canada.
“When you look at how cheap U.S. real estate is now compared with China, it makes a lot of sense to buy there, especially since you have more rights when you own a property in America,” said a wealthy Chinese investor who has bought several properties in the U.S. but asked not to be named so as not to draw attention to the fact of shifting assets abroad.
In China, all land is owned by the state and investors can only buy leasing rights of usually up to 70 years, rather than to secure outright ownership.
Still others are simply looking for somewhere safe to park their cash.
China has more money to invest than ever. Mainland China now has 960,000 millionaires — defined as individuals with residences, private businesses and investable assets of more than 10 million yuan or $1.5 million, according to the Hurun Report, a Shanghai publisher of magazines for China’s wealthy.
Nearly half of those millionaires are considering moving or getting permission to reside overseas. And their top country of choice is the USA.
In the year ended Sept. 30, Chinese applicants accounted for 78% of the 3,805 EB-5 applications in the U.S., up from 35% four years before, according to government data. In that program, foreign investors can get permanent resident status, or “green cards,” in exchange for investing $500,000 or$1 million, depending on the part of the country, in ventures that create or sustain at least 10 jobs within two years of the immigrant investor’s admission to the U.S. as a conditional permanent resident.
Preferences
New York, Los Angeles and San Francisco areas are most popular with Chinese home buyers, according to Realtors and data from real estate website Trulia.
International buyers prefer properties in metropolises such as New York, Los Angeles, San Francisco and Miami, brokers say. For instance, Brazilians tend to congregate in South Florida, while Chinese customers seek properties in the Bay Area, according to China Daily report.
“The city is closer to China, the weather is warmer and there is a large established Chinese community,”White says of San Francisco. “I guess that’s why Chinese investors flock to buy properties there.”
New York City’s priciest borough is another favorite for Chinese buyers, Tsao says.
“Many of my customers are purchasing properties because their children will be attending school in the city. Most of them are attending Ivy League schools on the East Coast. So a property in Manhattan is an ideal situation for them.”
Hiroko Akutsu Lee, a New York broker with Prudential Real Estate Affiliates who mainly sells houses and apartments on Long Island, says Chinese have replaced Japanese buyers as her primary clientele in recent years.
“Twenty years ago, Japanese came to buy properties. But after the burst of the real estate bubble in Japan, their enthusiasm in properties subsided,” Lee says. Since the March 2011 earthquake and tsunami, Japanese have become even more cautious about potential purchases abroad.
Chinese buyers tend to prefer paying cash rather than taking out mortgages, Lee says. She once saw a Chinese customer buy a house on Long Island with $1.2 million in cash.
New York City is also popular with a growing number of Chinese investors looking for commercial property. Last year, China’s HNA Group, which owns Hainan Airlines, paid$265 million for 1180 Avenue of the Americas, a 23-story office building in Manhattan, and $126 million for the luxury Cassa Hotel and Residences near bustling Times Square.
Hong Kong billionaire Cheng Yu-tung’s family also bought five U.S. luxury hotels in 2011, including Manhattan’s iconic Carlyle, for $570 million. Chinese investors are looking to buy hotels as a growing number of mainlanders travel overseas, says Chris Brooke, chief executive of broker CBRE, Asia.
Local responses
Despite allegations that some Chinese investors have brought hot money into the US market and helped create a bubble, industry analysts deny this is the case. In fact, they say, Chinese buyers have eased the inventory pressure and helped perk up a sluggish market.
“We are happy to have these Chinese buyers,” Philip White, president of Sotheby’s International Realty Affiliates LLC, a luxury property broker, says. “So far, I haven’t seen any sign they have disturbed the market; in fact, they helped stabilize it.”
Even politicians have turned their eyes to international buyers in an at- tempt to revitalize the real estate sector.
Legislation proposed last fall by Sens. Charles Schumer, D-N.Y., and Mike Lee, R-Utah, would let foreigners get a three-year resident visa if they invest $500,000 in U.S. real estate, including $250,000 for a primary home. They’d have to live at least 180 days a year in the property and pay taxes here.
The big demand from Asian communities is leading to a quiet shuffle within the industry as well. Alan Parter, president of Alan Parter International Inc, which helps international companies register and operate in the U.S., says he is increasingly getting requests from brokers in China - many from Hong Kong - to establish a U.S. presence to serve the needs of potential property buyers.
As more Chinese become affluent, this trend will continue, Tsao from AREAA predicts. “I think there is still much more potential, with the (yuan) appreciation, and more people to diversify their investment portfolios.”
She adds that housing policies back home, which limit the number of properties each citizen can own, has also led to increased demand.
To curb the soaring properties prices in major cities and minimize the bubble, China’s government has implemented a series of policies since 2009 to restrain what it considers excessive investment in real estate.