Chinese Investors very aggressive in California

NORFOLK, Va. - Dec. 3, 2013 - PRLog -- Chinese investors have been showing record breaking interest in San Francisco real estate, according to measures of activity of Chinese property investors on Juwai.com, the No. 1 Chinese international property portal.
The potential pool of Chinese investors is large. There are 2.7 million high net worth Chinese (in American dollars, this converts to those earning $1.5 million or more). China also boasts an  ” Upper Middle Class” 60 million strong, says Dave Platter to Global PR & Communications Director of Juwai.com. “These two groups have the money to buy overseas.”

The website, which measures searches, search results, page views and inquiries of Chinese investors in relation to property for sale internationally, rates the USA as the most popular country for Chinese investors. Chinese buyers spent US$30 billion on international property in 2012. Of that, US$9.08 billion was invested in the USA. Indeed,  The National Association of Realtors ranks Chinese buyers as the second largest group of investors, after Canadians, accounting for 11% of overseas buyers purchasing homes in the US. This percentage shows a decent jump from  the last major real estate boom the US enjoyed, 200, when Chinese purchases accounted for 5% of overseas transactions.

Among the United States, California is the most popular. More than half the homes sold to foreign buyers in California go to Chinese nationals, estimates CNN Money. In San Francisco proper, Chinese investor property hunting climbed 84%, month-over-month from July to August 2013– it was also 456% higher than it was this January.  And the favorite SF neighborhood? Think iconic San Francisco: “Nob Hill is the San Francisco neighborhood of the moment, for Chinese investors. So far in 2013, it has received more searches by name than any other.”

What do Chinese investors buy?

Joel Goodrich, Realtor with Coldwell Banker Previews International, says “It would be an oversimplification to say that all Chinese investors seek the same type of property.”

“However, in San Francisco, investors seeking properties for their own use typically seek out places where their children can be near good schools and universities, as well as be close to transport, shopping and amenities. Because San Francisco is a relatively expensive local market, Chinese investors active there tend to be wealthier, snapping up property in the $700,000 to $1.2 million range, in the $1.5 to $3 million range, or in the $5 million and above range.”
At a brand new housing development in Irvine, Calif., some of America's largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It's a rebirth for U.S. construction, while the customers are largely Chinese.

"They see the market here still has room for appreciation," said Irvine-area real estate agent Kinney Yong, of RE/MAX Premier Realty. "What's driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere."

Yong's phone has been ringing off the hook, with more than 5,000 new homes slated for the nearby Great Park Neighborhood. Most of the calls are from overseas, but prospective buyers are not looking solely for financial returns on the real estate.

"We are seeing a lot of Asians who are buying as an investment, but their kids are going to school here, so kids live in the home. They are looking at it more as an investment in education," said Emile Haddad, CEO of Fivepoint Communities, developer of the Great Park Neighborhood.

That is Brian Yang's plan. Speaking from his home in China, Yang said he purchased a home in Irvine this year, but he will wait five years, until his daughter turns 10, before moving his family to the U.S. He has several reasons for taking the leap.

"Education in America is very good and world class, so the first one is for education, and I think the second one is for the property appreciation," explained Yang.

While American secondary schools and universities are a big draw for the majority of Chinese buyers in California, Yang, and many of his colleagues, are also concerned about China's political instability, inflation, even pollution. They are paying all-cash for real estate in California, using it as a safe-haven for their wealth. Yang was reluctant to talk about the money, but he admitted, "I feel the same way to some extent."


For now, Yang is renting out the four-bedroom home, and, he said, getting a 5 percent return on the investment.

While Yang purchased an older home, the new model homes at Great Park are drawing thousands of potential buyers. In fact, more than 20,000 attended the opening weekend, according to developers. The vast majority of lookers were Asian, and that fact is not lost on the builders. Hoping to cash in on this new wave of investors, they are tailoring the homes to the demand. Some are incorporating multigenerational floor plans and even Feng Shui designs.

"The imbalance of supply and demand here is really driving a lot of competition for these homes," said Haddad.

The homes range from the mid-$700,000s to well over $1 million. Cash is king, and there is a seemingly limitless amount.

"The price doesn't matter, $800,000, 1 million, 1.5. If they like it they will purchase it," said Helen Zhang of Tarbell Realtors.

Zhang was coming out of one of the models with a Chinese couple pushing a toddler in a stroller and carrying an infant. As our CNBC camera crew interviewed Zhang, another group of potential buyers roaming the neighborhood models raised their brochures to hide their faces when they saw the camera.


While no one would say specifically why certain families were shying away from the media, some alluded to the fact that many of the buyers don't want any questions about where the cash is coming from. Some are buying multiple homes as investments, while others are moving their families to the U.S., intending to stay at least until their children graduate from college.
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