NEW YORK – April 4, 2012 – China’s great wall of cash is pouring into the struggling U.S. property market, from multimillion-dollar mansions on the West Coast to venerable hotels on the East Coast.
Buyers from mainland China and Hong Kong are snapping up luxury homes, often paying cash, in major U.S. cities such as New York, Los Angeles and San Francisco. They’re coming by the dozens to buy foreclosed properties in downtrodden cities in Florida and Nevada. Chinese buyers are even starting to snap up pricey commercial buildings and hotels in Manhattan.
Chinese interest in U.S. real estate began climbing during the U.S. housing meltdown, when plunging property prices made the U.S. a magnet for global buyers. Today, interest is growing as a rising yuan – up more than 8 percent since mid-2010 – gives the Chinese greater purchasing power, and the mainland’s restrictions on property purchases encourage them to look overseas. With U.S. single-family home prices a third lower since 2006, the U.S. also compares favorably with other top markets for Chinese investment, such as the United Kingdom, Australia and Canada.
“For China, the world is an emerging opportunity,” says Andrew Taylor, founder of Juwai.com, a real estate site based in Hong Kong that was launched in 2011 to match Chinese buyers with U.S. real estate. “We’re talking about a huge chunk of people with cash and the desire” to invest overseas.
In the U.S., the Chinese are now the second-largest foreign buyers of homes, behind Canadians, accounting for $7.4 billion of sales in the 12 months ended March 2011, up 24 percent from the previous 12 months, according to the National Association of Realtors. Buyers from China and Hong Kong also spent $1.7 billion on commercial property in the U.S. in 2011, more than quadruple their investment in 2008, says Real Capital Analytics.
Those numbers likely understate Chinese investment, as investors may buy property under business entities they’ve set up in the U.S., says Patrick O’Neill, founder of O’Neill Group, a Hong Kong-based company that helps Chinese buyers find U.S. property.
Roughly 40 percent of Chinese buyers want property in the U.S. as investments, while 60 percent are buying in anticipation of their children going to school here, or for business or immigration purposes, says Steven Lawson, chief executive of Windham China, a firm that helps match Chinese buyers with U.S. sellers.
Lily-Sui Zhang, 30, says her husband’s Beijing family bought a house in South Pasadena, Calif., last year so her three young children would have access to good public schools. The family thought investing in the U.S. was “probably more stable than in Beijing” due to concern about a Chinese real estate bubble, Zhang says.
Some Chinese buyers also see the U.S. as an attractive place to invest because on the mainland, Chinese never own land – they just lease it from the government.
While mainland China allows each citizen to exchange only $50,000 of yuan into foreign currency per year, wealthy clients often do business overseas and have offshore funds they can use to buy property, says Alan Liu, managing director of North Asia for Colliers International, a brokerage and real estate firm. The currency restriction doesn’t apply in Hong Kong, a special administrative region of China.
Hong Kong residents Lillian and Frank Yan say they bought a condo in Honolulu this year because U.S. property prices are relatively low compared with major cities in Asia. They plan to stay there two to four weeks a year, and rent it out the rest of the time.
“The majority of our equity is tied to the Hong Kong or Chinese economy, so we wanted to diversify our portfolio,” says Lillian Yan, 42.
Copyright © 2012 USA TODAY, a division of Gannett Co. Inc., Kathy Chu and Julie Schmit, USA TODAY. Chu reported from Hong Kong; Schmit reported from San Francisco.