One of the major forces in US real estate over the past couple of decades is Chinese buyers. For years they have invested heavily in the major urban areas of the country buying up choice properties. However, that effort has now changed and their sights are set in the suburbs, which has changed the dynamic in their investment process.
The reasons why Chinese buyers are switching gears and shifting towards suburban areas are numerous, but the main thrust seems to be creating safe investments as well as having cool homes to call their own. You can find these buyers along the North Shore’s Gold Coast as well as many of Long Island’s priciest houses. For the Chinese buyer, they represent what they perceive as safe investments that offer a great place to stay while US real estate investors see them as a new opportunity in terms of getting more from their own investment plans.
Depending on the data, the Chinese rank either first or second when it comes to being the most prolific foreign purchasers of property in 46 US states, spending an amazing $22 billion in 2014 alone at least according to the National Association of Realtors. Although spread out across the US, almost half of the real estate transactions occurred in Washington, California and New York with the largest perfect happening in the suburbs.
One of the more interesting reasons behind the move is education. With more Chinese buyers now living and working in the US, they want the best education for their children in a safe environment which can be found in the rich suburbs. The new push towards buying up these expensive homes seems to be an offshoot of simply finding the right place with good schools. The investment themselves makes sense on a number of levels.
Low Risk: With real estate markets on the full rebound from the 2008 crash, investing in an expensive home in a good neighborhood makes good sense. With property values rising, the turnaround on the home will be quite substantial once the children have grown up and there is no longer a need to live this type of lifestyle.
Status: The property being purchased are colloquially known as “trophy homes”, a term that reflects the posh neighborhood, oversized house and all the nifty features that are found inside that drive up the value of the property itself. Owning such a home makes a powerful impression on friends and family when they come to visit as well as potential partners if they come by as well. Plus, having a picture taken in front of such an outstanding residence as many Chinese buyers as well as most people are wanting to do almost screams success and living the American dream.
Setting: Besides the great home, another advantage is the overall setting and security that living in the suburbs provides for the families of the Chinese buyer. An investor with a spouse and children is going to want a safe, healthy environment to raise their family and the suburbs, particularly around New York offer such as place. With great schools and a very low crime rate, this open, quiet setting is far more attractive than living in the heart of the city. It may very well be that the interest many Chinese buyers have in the suburbs simply grew out of practicality for their families.
Of course, there are other interesting factors as well that may have played a powerful role in shaping the suburban focus. The recent agreement between the US and China to provide the citizens of each country access to ten-year business and tourist visas meant no more annual renewals which in turn helped Chinese investors stay in America. Another example is the 2013 Chinese film “Finding Mr. Right” which was inspired by the US hit “Sleepless in Seattle”. The result was that Seattle attracted more Chinese investors and residents.
However, much of the Chinese focus on the suburbs may be lost on many real estate investors in New York who mostly see big headlines such as when the Chinese paid for the expensive One57, a prominent condo tower in the city. Meanwhile, of the high-end real estate deals in Long Island in the month of January, 2015 for $3 million or higher in terms of price, 27% went to Chinese buyers which is a very high number.
Of course, it helps that many of these locations offer the best in schools, waterfront access and a close proximity to many Chinese communities in the Queens, Flushing and Manhattan area. For the US real estate investor, there are certainly opportunities to take advantage of this new trend, especially if they can find some bargains when searching for the appropriate homes that fit the profile of what Chinese buyers are currently searching.
It also helps that three-quarters of Chinese buyers use cash to buy the properties. Cash means quicker purchases with less closing time. However, they are also quite sharp when snapping up bargain homes as well and will negotiate for the best price.
There are some interesting stories associated with certain Chinese buyers as well, such as buying well in advance of moving into their new home which may startle some sellers. This is because in China there is a strong fear of losing wealth overnight and many of the view the US as a place where their investments are safe and secure. So, some of these investors will actually purchase homes long before they move in, which means that tenants may be found to occupy the homes for months and sometimes years.
Overall, the typical Chinese buyer is shifting their aim from the urban centers to the suburban sprawl, which means that new opportunities will be rising for US real estate investors who can successfully identify the right properties to take maximum advantage. Needless to say, the typical Chinese buyer is also quite savvy as well and many of the techniques they use, while seemingly simple and straightforward, offer a great chance for others