Testing the Waters: Chinese Investors Buying US and UK Properties

[Account Closed]

This article is mainly about Chinese investors in the UK, but let me tell you that they are here in the US as well. According to the article, investors from China and Hong Kong make up 11% of all UK sales.

Perhaps the most interesting part of the below article is the mentioning of Chinese banks opening branches here in the US, to specifically cater to Chinese buyers and the financing of US property purchases.

Proper marketing to these types of clients, including those from other cash rich countries in the Middle East (UAE, Saudi) and South America (Brazil) can prove lucrative.

The key to connecting with Chinese clients in particular is to present an offering of what else can they get in the US with the purchase of a home? The key is that Chinese buyers want to move here, or send their kids here for education.

----

Testing the waters
Chinese Economic Review

http://www.chinaeconomicreview.com/cer/2010_08/Testing_the_waters.html

[Account Closed]

One of the most important aspects of doing business with Chinese people is the concept of guanxi (guan she). You can learn all about it by doing a google search. Secondly, it is the language requirement. All of it relates to trust and security, and not wanting to get ripped off. I have been successful in targeting Chinese customers by advertising in Chinese language publications both here and in the US. Many Chinese newspapers in the US sell only local advertisements. When I advertise on those newspapers I use a phone number that lets me know I need to answer the phone in Chinese when it rings. I am sure a non-Chinese speaker can successfully target Chinese clients provided they have some type of Chinese-speaking resource such as a language proficient staff member. Part of it is knowing how to give face. By speaking in Chinese you as an American are going to their level to reach out to them. Psychologically it makes a huge difference as the Chinese have a sense of cultural vanity. Probably a bad term to use, but its all about giving face.

In my experience in the last 3 years, I have had a few Chinese buyers that fit different profiles. I think maybe some anecdotal information about these characters can give you more information. Like the other posters mentioned, most clients are first generation Chinese that are naturalized US citizens. Most have made their money here. However, one person I have worked with, a young woman from Macau, only deals in cash and for a 30 year old seems to have millions to spend on real estate... I have asked for the source of her funds and she says these are family investments. I believe China-based family are sending money to invest. I do not know her family background and trust me I have tried searching. She is a US citizen but she said she only moved to the US for university. Very savvy on the part of the family - direct their kid to buy real estate in the US since they're here anyways for university.

For investment purposes many Chinese investors are seeking to shift away from Chinese property investments. Firstly, the prices of Chinese real estate, especially in major cities like Hong Kong, Beijing and Shanghai are so high that potent fears of a bubble have pushed the Chinese Communist Party (CPC) to institute capital controls to curb real estate speculation. (From the FT: http://www.ft.com/cms/s/0/5f86cb48-2cad-11df-8abb-00144feabdc0.html)

Flipping actually holds a really strong place in Chinese culture, and is complex dance between private investor and big time developer that has made some of the richest people in the world (such as Sun Hung Kai, and Cheung Kong the firm of Li Kashing). In Hong Kong during 80s-present, the idea of 炒樓 (translated: fry buildings) was so prevalent that housewives were doing it as a side job and being wildly successful. This continues today. The appreciation alone is comparable if not more drastic than the rate of value increases that we experienced in the US. Also, because of the sheer amount of people China have there is constantly a demand for good real estate. In Hong Kong, I know that the average apartment that is pretty poor on the inside and may be tiny but still cost $1million or more. If you goto http://www.midland.com.hk/eng/ you can see a few samples of Hong Kong real estate.

Looking at their top "hot" picks you can see a sample: Kowloon, 2172sqft, $38m ($4.8m USD); Tung Chung (near airport) 1,237' Sq.Ft. HK$5M (640,000 USD); North Point, 1,068' Sq.Ft. HK$12.8M ($1.6m USD).

The situation in Shanghai is the same. It was mentioned to me by someone that the rate of speculation in Shanghai is very high and that legitimate home buyers and smaller investors are priced out of the market. Those with international connections, such as the Chinese that immigrated to UK, Australia, Canada and the US, are taking advantage of this unique diaspora to take advantage. I am not saying that there are a lot of these people, but I would say these are the sophisticated investors that will probably end up buying a lot of houses, and they are starting to come to the US to find the great deals. Good luck!