More wealthy Chinese likely to buy homes in United States, analysts say
Wealthy seeking hedge against bearish outlook for Chinese economy, says analyst, with some moving from house buying into development
Henry Nunez, a real estate agent in Arcadia, California, met so many homebuyers from China that he bought an app for his phone that translated Putonghua into English.
The US$1.99 purchase more than paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one of them designed for smoky wok cooking.
The buyers were a Chinese couple who paid US$3.5 million in cash. "Last year, it would've been US$2.8 million," said Nunez, a broker for 27 years in the city east of Los Angeles.
"The biggest driver is a lot of people wanting to invest their money here."
Buyers from mainland China, Hong Kong and Taiwan spent US$22 billion on US homes in the year until March, up 72 per cent from the same period last year and more than any other nationality.
That's the equivalent of 24 cents of every dollar spent by international homebuyers, said the National Association of Realtors in its annual report on foreign home purchases.
Chinese purchases of US homes are likely to continue increasing as the country's swelling ranks of affluent consumers seek refuge from pollution and political and economic uncertainty, according to Thilo Hanemann, who tracks cross-border investment for the New York-based Rhodium Group.
"A lot of people are trying to hedge against a generally bearish outlook for the Chinese economy," Hanemann said. "Buying real estate overseas has been, in the past, limited to a relatively small group of wealthy individuals and sometimes government officials. But it's become a much bigger trend, involving affluent middle-class people."
Chinese buyers paid a median of US$523,148 per transaction, compared with a US median price of US$199,575 for existing-home transactions.
While Canadians bought more houses than the Chinese, they spent far less - a median of US$212,500 per residence, for a total of US$13.8 billion.
They bought 32 per cent of homes sold to foreign buyers in the state, double the share sold to Canadians, according to a survey by the California Association of Realtors. About 70 per cent of international buyers pay cash, the survey showed.
"That interest began accelerating in the second quarter of this year, in part because of China's property slowdown."
Buyers from China are driving up prices and fuelling new construction in Southern California areas such as Arcadia.
"About 90 percent of my buyers are from China," said Peggy Fong Chen, a broker with Re/Max Holdings, who sold 80 homes in Arcadia last year.
"They want new construction. They want two levels. In China, it is considered a mansion if it has two levels."
More than three-quarters of buyers pay cash, said Chen, a native of Hong Kong who's been selling real estate for 10 years. At least a fifth are absentee owners who don't have long-term visas yet. Many purchase houses for their children to attend high school or college.
Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and '80s, tearing them down and erecting larger houses like the one Nunez sold for $3.5 million.
"Local people cannot afford these homes most of the time," Chen said.
Sales of US houses to long-term foreign residents and non-resident buyers accounted for about 7 per cent of the US$1.2 trillion of existing-home transactions in the year through March, the National Association of Realtors said.
And the share of money arriving from China is likely to keep growing, said Lawrence Yun, chief economist for the Realtors.
"It's just the beginning of a tidal wave," he said.
