The Coronavirus is keeping Chinese buyers away from the New York real estate market and brokers are feeling the effect.
Since the outbreak of the Coronavirus, which has killed over 1,700 people and infected over 75,000, New Yorkers have been on high alert, some with surgical masks firmly in place and tuned in to the latest news updates.
While Chinese investment in American real estate had already sharply dropped off last year due to changes in Chinese law and the ongoing trade war, it certainly hadn’t disappeared.
That is, until, Coronavirus came along and began keeping would-be buyers from being able to get on a plane and see the properties.
Nikki Sun, a China native and New York real estate agent with Compass, said she’s missed out on four potential home sales since the outbreak of the deadly virus.
The Chinese nationals interested in seeing apartments canceled appointments, either deciding not to fly to the U.S. out of precaution or because they were unable to get a flight because of Coronavirus concerns.
Sun said more than half her clients are Chinese, often affluent professionals in their 20s and 30s who’ve gone to Ivy League schools and earn six-figures.
They typically buy homes in the $1.3 million to $1.5 million range. However, they often can’t come up with the 25 percent down payment on their own.
“That’s where the parents come in,” said Sun. “They want to see the apartment to make sure it’s the right one and the parents make the call.”
As a result, would-be buyers haven’t been able to seal the deal without their parents’ approval. And since it’s unclear how long the effects of Coronavirus will be felt on global travel, those units may not still be around when the buyers are finally able to sign on the dotted line.
Still, Sun believes there will be a spike in deals signed after the wave of illnesses dies down.
“The situation is that purchases will be delayed, but it will not stop people from buying,” she said.
“When people set their mind to purchasing, they will buy. When this peak is going to be, no one knows. It could be six months, eight months, ten months.”
But when it does happen, buyers will still be sure to find something, Sun said. “This is Manhattan. There will always be new inventory coming up.”
For sellers who don’t want to wait, the veteran agent said exceptions can usually be made for sellers who price homes to move.
“Parents will say okay if it’s a deal,” she said. “If it’s a deal they will go ahead, so really ya gotta.”
She added that unlike 2019 when even discounted homes took a long time to close, 2020 is so far proving to be busier in general.
For sellers looking to attract Chinese buyers, she said it’s also important to have an agent that understands the preferences of that particular market.
Prior to the outbreak of the disease, Sun said in the past year or so, she’s seen Chinese buyers go from buying luxury homes ($3 million and up) to buying homes in the half million to $1.5 million dollar range, because it’s no longer as easy to move their money around.
She gave an example of how a Chinese client of hers in New York had to take a $250,000 loss on a home purchased in 2016 because it would have otherwise been an impossible transaction for the buyer, who was also Chinese.
As for the homes that have continued to sell to Chinese buyers, generally the preference is for new properties with grand lobbies. Apartments are spacious with floor-to-ceiling windows and open kitchens. They also like condos, not co-ops, since they’re more flexible towards pied-a-terre buyers and subletting.
“They like the same layout, they look for the same products,” she said. “They want something new, ready to go. They don’t like to have to renovate.”
Chinese buyers are also partial to buildings with plentiful amenities. “Not that they will use them, but it is nice to have,” said Sun.
One thing that could potentially impact their ability to invest in real estate in the near future, however, is if China experiences a major economic hit as a result of Coronavirus.
But like the current slump in New York sales to Chinese, Sun believes this too shall pass.
“People who haven’t gone out to eat in a month can’t wait to go out to eat, so restaurants will see a boom,” she predicted.
She added that the reason she began selling apartments in New York was because where she’d previously lived and worked as an agent in Christchurch, New Zealand, there had been a major earthquake in 2011.
The natural disaster destroyed so many buildings it left the industry with very little inventory to sell. However, as the community recovered, so did the local economy and value of local real estate.
“A home that was $300,000 before the earthquake went up to $500,000 after the earthquake and years later it’s about $1 million,” she said.
Ironically, despite the changes in Chinese behavior since the appearance of Coronavirus, Sun said she hasn’t taken a hit financially.
In fact, it’s been the opposite, considering the New York residential market is slowly waking up after a two-year-long slumber. It also helps that winter weather so far has been mild, making people more willing to go to open houses.
“My business for this winter has been the strongest in my eight years in real estate in New York,” said Sun.