Buying frenzy buoys sector

Hong Kong and mainland investors give boost to rebounding US market, writes Peta Tomlinson

PUBLISHED : Wednesday, 22 August, 2012, 12:00am
UPDATED : Wednesday, 22 August, 2012, 2:22am

The struggling United States property market is being buoyed by a tide of investment from China. Reports abound of wealthy buyers from Hong Kong and the mainland snapping up distressed real estate and premium apartments.

In what has been dubbed the "great wall of cash", Chinese investment in US property is up 24 per cent year-on-year, according to data from the National Association of Realtors. Mainland and Hong Kong buyers also spent US$1.71 billion on commercial property in the US last year, Real Capital Analytics figures show.

In this the first of a two-part series, we look at one of the hot US markets, San Francisco, California.

According to at least one benchmark, San Francisco is the frontrunner in a market at last showing signs of stabilising. The latest S&P/Case-Schiller index, released in June, shows US house prices across the 20 biggest metropolitan markets rose 1.3 per cent in April - a marked turnaround following seven consecutive months of falling home prices.

It found San Francisco was the strongest market, registering a 3.4 per cent gain, ahead of second-placed Washington DC, up 2.8 per cent.

"There is so much drama in the San Francisco homes market right now that it is difficult to decide which statistics to present in our newsletter," Paragon Real Estate Group said this month.

Its account of "huge" buyer-demand and "extremely low inventory", resulting in "the most ferociously competitive environment for buyers", is being repeated all over town.

In his San Francisco Property report (, realtor Matt Ciganek describes the present "slim pickings" for buyers. Buying a home in San Francisco is challenging right now, he says. Selling one, on the other hand, "is easier than it has been since 2008". Ciganek says: "With consumer confidence rising, steady to positive stock markets and lowering unemployment, especially locally, people just want to buy a home again. Quickly climbing rental rates and slim pickings in that category are also important factors in the decision to own rather than rent."

Very few people "are still under the impression that the market is going down", he says. "It's not and shouldn't any time soon".

Renters are finding it harder than ever, according to reports. Jon Sterling, of San Francisco Condos (, describes this common weekend scene: "A line of people waiting for an open house at an apartment that just hit the market, with rental applications, credit reports, and certified checks in-hand.

"The first one who qualifies wins the prize."

Tales follow of multiple offers on condos for sale, even sight unseen, and buyers being gazumped by higher offers above the original asking price.

"There is still fierce competition for apartments," Sterling says. "[Silicon Valley] tech companies are still raising big money and hiring like crazy, plus there are several big IPOs and acquisitions that have put money in renters' pockets."

According to Sterling, the vacancy rate for San Francisco rentals is about 2 per cent, compared with a national average of about 5 per cent. The national number has also fallen because large numbers of people in the US are choosing to rent instead of own homes, he says.

All of which augurs well for landlords. Chinese demand for its latest San Francisco development, Millennium Tower, also contributed to New York-based developer Millennium Partners' decision to open an office in Hong Kong, its first outside the US. "So far, a significant number of [Millennium Tower] owners are of Asian origin," says Richard Baumert, partner.

He says these buyers were attracted to the building's combination of design, detail, services and amenities, including its "excellent location" at 301 Mission St, offering proximity to elite universities such as Stanford and the University of California, Berkeley. Prices for a unit here range from US$1 million to US$3.5 million.

Climb Real Estate Group agrees that new construction projects in San Francisco have been few and far between, with any available filling up quickly. However, three new condo developments are on their way this spring, with some "very friendly entry-level pricing".

These include Milwheel South, located at Indiana and 23rd St, comprised in phase one of 32, 1,200 to 1,500 sq ft units priced between US$500,000 and US$800,000.

The building and its counterpart, Millwheel North, scheduled to open in 2013, offers commuter convenience with access to the Third Street MUNI rail line.

Madrone, Mission Bay, is in one of the fastest-growing neighbourhoods. Located near the University of California, San Francisco campus and AT&T ballpark, home of the San Francisco Giants, the complex comprises two towers and a mid-rise structure with easy access to water, open space, and the city nightlife. Prices start at US$579,000 to US$789,000 for one-bedroom units.

The third new development on the Climb radar is 1029 Natoma, a boutique, four-unit condominium building designed "with modern zen sensibility" by Stanley Saitowitz/Natoma Architects. Prices start at about US$800,000.