Tags: chinese | us suburbs | buyers | homes

Barron's: China Is Buying Up US Suburbs

Barron's: China Is Buying Up US Suburbs
(WANG ZHAO/AFP/Getty Images)

By    |   Saturday, 23 July 2016 04:01 PM


The Chinese were the largest group of foreign buyers of U.S. homes in the year ended March 31.

A National Association of Realtors (NAR) survey for the second straight year showed that Chinese nationals (including those from Hong Kong, Taiwan, and the mainland) topped international home buyers in the U.S., with purchases of 29,195 homes totaling about $27 billion from April 2015 through March 2016, Barron’s reported.

The second-place Canadians bought 26,851 homes totaling only $9 billion, preferring vacation locales to homes in pricey suburbs, in states from New York to California to Washington, Barron’s reported.

Chinese buyers paid $936,615 per home on average during the period, up from $831,761 a year earlier, and far more than the average $477,462 paid by all international buyers, according to the NAR. U.S. home buyers paid only $266,683 on average, Barron’s reported.

The dominance of Chinese buyers is “striking,” Lawrence Yun, chief economist at the trade group, tod Barron’s. And about 71% of Chinese buyers pay these large sums in cash. That’s in part because of a lack of access to mortgage financing—it can take years for foreign buyers to build up the credit necessary to qualify—and in part because of a cultural tendency to save before making a big purchase, Yun told Barron’s.

Many of the Chinese home buyers have been in America for two years or less. The Chinese view home ownership “as a very important part of their dream in their newly adopted country,” Yun says.

And 64 percent of all homes bought in 2015-16 were in the suburbs, up from 46 percent last year. Yun speculates that the Chinese buyers, many with families, seek suburbs with quality public schools.

But other experts warn that the United States’ appeal to foreign homebuyers may be fading.

The National Association of Realtor’s 2016 Profile of International Activity in US Residential Real Estate, which took into account home sales to international clients between April 2015 and March 2016, found that foreign buyers purchased $102.6 billion in residential properties, a 1.3 percent drop compared to the previous year’s survey.

Edward Mermelstein, the managing partner of law firm Rheem, Bell & Mermelstein, agreed that Chinese investors have been gradually retreating from the US over the past year.

“We’ve definitely seen a pullback over the past year from Chinese investors. That has more to do with the fact that, internally, China has been having some serious economic issues, as well as political issues,” he told Real Estate Weekly.

The lofty prices being paid by foreigners such as the Chinese may also be on borrowed time, other experts warn.

Wei Min Tan, an associate broker at Rutenberg who works with a lot of Chinese clients, told Real Estate Weekly that foreign buyers have scaled back their price targets.

“In New York, you have a lot of these super-luxury buildings and many of them, by super-luxury I’m referring to ones priced seven million dollars and above, a lot of them were built with the intention of selling to rich Chinese buyers. I think that there’s an oversupply and the question would be: ‘Where are they going to find all these ultra-luxury buyers?’ he said.

Apartments that float under the ultra-luxury category will continue to be attractive to Chinese buyers, Tan told Real Estate Weekly. “I think the mass market, which is one to three million dollars, I think it’s still strong because it’s more affordable,” he said.

Meanwhile, home prices have hit record highs in some major U.S. metropolitan areas, and house-flippers are behaving like it’s 2005: It’s no wonder people are chattering about another housing bubble, Bloomberg warned.

"But residential real estate isn’t in a speculative bubble, industry observers contend. Instead, a low inventory of available homes is driving prices higher — prices, however, will eventually recede as buyers throw up their hands, or as more new homes come on line. The structural issues that led to the housing collapse last decade aren't present," Bloomberg reported.

“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit,” Jonathan Smoke, chief economist at Realtor.com, told Bloomberg. “That’s the exact opposite of what we have today.”  

(Newsmax wire services contributed to this report).

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A National Association of Realtors (NAR) survey for the second straight year showed that Chinese nationals (including those from Hong Kong, Taiwan, and the mainland) topped international home buyers in the U.S., Barron’s reported.
chinese, us suburbs, buyers, homes
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2016-01-23
Saturday, 23 July 2016 04:01 PM
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