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Chinese outspending Canadians in apartment market

By Dan Orlando

The Canadians might be America’s most prolific foreign real estate investors, but it’s the Chinese who are spending the big bucks.

Foreign buyers spent $92.2 billion of AMerican real estate in the last year, the bulk of which came from Chinese buyers, according to the latest survey from NAR.
Foreign buyers spent $92.2 billion of American real estate in the last year, the bulk of which came from Chinese buyers, according to the latest survey from NAR.

In its annual Profile of International Home Buying Activity, the National Association of Realtors reported that Canadians bought the most properties in the U.S. — 19 percent of all foreign purchases — but the Chinese led the pack in dollar volume by spending more money per purchase than all other countries.

Chinese buyers spent $22 billion on US homes and apartments between April 2013 and March 2014 — some 16 percent of all foreign sales and an average of $523,148 per purchase, usually in cash. More than half of their purchases were in California, Washington and New York for a home they’ll spend at least six months of the year living in, according to the NAR survey.

Canadians spent a comparatively modest $13.8 billion, an average of $212,500 per purchase, buying predominantly single family vacation homes or resort condos in Florida, Arizona, and California.

The news comes as no surprise to New York’s leading brokers and developers who have witnessed the trend first hand.

“The international buyer profile for New York is driven by sheer population size,” said Wei Min Tan, a founder of the Castle Avenue Team at Rutenberg Realty specialist at Rutenberg Realty who speaks English, Cantonese, Mandarin, Malay and Hokkien.

“In Manhattan, the biggest foreign buyers are the Russians and the Chinese. They are two of the world’s strongest emerging economies and, if you only apply, say, one percent of their total population of multi-millionaires, that’s a lot of millionaires.”

Tan said most of his foreign clients are not the billionaires buying luxury homes at One57, but shrewd investors with successful primary businesses looking to make their money work for them to create a secondary or tertiary source of income. Buyers from China are a growing segment of Tan’s foreign buyers.

“The sweet spot for many of my clients is the $3.5 million range,” explained Tan. “That means they are spending anything from $600,000 to $4 million for a property that they are more than likely going to rent out as a way to create a regular flow of income.

WEI MIN TAN
WEI MIN TAN

“Today’s Chinese multi-millionaire has a successful business, he has invested in property in his home country, stocks and bonds and the next thing he wants is a piece of blue chip real estate. New York is a global city and he wants a piece of that.”

New York ranks fifth nationally in popularity with foreign buyers — behind Florida (23 percent); California (14 percent); Texas (12 percent ) Arizona (six percent) — evidence that it is ordinary Chinese who are investing in America’s bricks and mortar.

Santo Rosabianca, an agent with Wire International Realty, said he sees those statistics represented in his client base.

He estimates that 15 to 20 percent of New York properties purchased by foreigners “are limited to the rare breed that travels often for business.”

“This is distinguished from the classic pied-a-terre use of many other foreign purchasers,” he said, suggesting that most homes acquired by foreign buyers in New York are, at the very least, semi-permanent residences, and not merely accommodations for a quick layover.

Chinese buyers aren’t really flocking to specific New York City neighborhoods, either, according to Rosabianca.

He said, “While those who are active, outdoors types may tend to seek out Central Park, and those who work in finance may prefer Downtown, real estate is highly personal. Immigrant tendencies to settle down in certain areas are a thing of the past.”

Jacky Teplizky, a leading broker at Douglas Elliman Real Estate, said that most foreigners buying New York homes do so because they love spending time in the City That Never Sleeps.

JACKY TEPLITZKY
JACKY TEPLITZKY

“They come here several times a year. It’s a second home to them,” she said. “They come for shopping, for Broadway shows, to meet their wealth managers.”

Teplitzky noted that, compared to cities such as Monaco, Paris, Hong Kong and London, New York is still considered a bargain among the international crowd.
And she agreed the deal is very much about preserving capital. “Most investors don’t take out a mortgage — they are buying cash. Their return on investment is about three-to-four percent, so this is about preserving capital and counting on price appreciation,” said Teplitzky.

Kathy Braddock, managing director at William Raveis New York City certainly understands the interest.

“Where else can foreigners feel this comfortable parking their money? New York has been tested time and again,” said Braddock.

“I think foreigners in general still see New York City as a relatively safe and lucrative investment.”

Braddock lists Russia, China and various locations in Europe as areas that provide William Raveis with the bulk of its foreign clientele. The reason why is simple. “In our market, even though we (domestic buyers) think a million dollars is expensive for an apartment, to those countries, we’re a bargain.

“The top prices are top prices because people will pay them.”

But even with $92 billion following in from abroad, NAR president Gary Thomas, broker-owner of Evergreen Realty in Villa Park, California said that foreigners are still facing hurdles when it comes to buying US brick.

“Tight credit standards have made financing challenging for immigrants, and low housing inventories have made finding a house difficult. However, none of these factors appear to be permanent,” said Thomas.

And atleast one group of international buyers appears to have learned to navigate the market working with New York-based brokers and is expected to increase its profile on the International Home Buying report in coming years.

According to Elliman powerbroker Teplizky, Latin American buyers are developing a huge appetite for Manhattan real estate.

Mexico clocked in third in the NAR report of biggest buyers, with a total of nine percent of overall sales.

Said Teplizky, “While unrest in the Ukraine has stifled Russian buying activity, Latin Americans have become very active in the market.

“They already own first and second homes here and now they have an appetite for investment property and commercial property. They really like New York and feel it is a safe haven for them.”

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