According to an August 16 article in The New York Times, China’s nearly $5 trillion economy surpassed Japan to become the world’s second largest economy. China is already a major driver of global growth. In July 2010, the International Monetary Fund (IMF) had projected the U.S. and Japanese economies to expand by 3.3 percent and 2.4 percent, respectively, while China’s 2010 growth rate would be 10.5 percent.
Based upon National Association of Realtor’s (NAR’s) 2010 Profile of International Home Buying Activity, international home buyers came from 53 different countries around the world and were reported in 39 states, with a slight majority of the total buyers concentrated in Florida, California, Arizona and Texas. The top four countries were Canada, Mexico, the U.K. and China/Hong Kong. Eight percent of recent home buyers coming from China/Hong Kong. Forty-one percent of the Chinese purchases of residential property in the United States were in California.
There will be more and wealthier Chinese investors/home buyers looking to relocate to the U.S. and most of them will come from Beijing, Shanghai, Nanjing, Chongqing and Dalian. Below are 10 facts I would like to share with you while working with these international home buyers:
1. Know their primary purpose of home buying. Almost 40 percent of Chinese home buyers are seeking either a residential investment or vacation home, 13 percent for residential rental property only, and another 13 percent for a vacation home with family/friends, according to the 2010 NAR survey. Therefore, most of these home buyers are looking for the residential property not only with great potential for appreciation, but that provide a healthy environment for the family;
2. Know median price of the home purchased. Median home price for this group of buyers is $275,000, which is much higher than the national median home price of $167,000 in the U.S. for the first quarter of 2010. Almost 60 percent of these Chinese home buyers purchased homes in the $200,000 to $400,000 price range. And there is a significant number of homes costing more than $750,000;
3. Know the American and Chinese currency rate. The weak U.S. dollar provides Chinese investors with more opportunities. Many homes were actually cheaper to buy in the U.S. than in China. Although China’s 2009 average home price was estimated at 4,518 Yuan per square meter, in major cities like Beijing , Shanghai or Guangzhou/Shenzhen, an average 100 per square meter high-rise/condo costs about 2 million Yuan (about $300,000 U.S. dollars), which is about 20,000 Yuan per square meter. One thing worth mentioning here is that the Yuan can only be exchanged under certain conditions for trade, tourism and other purposes which could potentially stop Chinese investors from getting their currency out of the country to put toward foreign investments;
4. Children’s education and exemplary schools. When relocating to the U.S., the Chinese family typically regards its children’s education as the first priority. Since China’s one child family policy was first announced in 1979, most of recent home buyers sponsor their only child either to come here for college study or have their spouse accompany their high school-aged kids here to ensure a smooth transition;
5. Safety issue and settling close to friends or family. Another important consideration is that the final location either be near their best friends/relatives or close to an Asian community center where their children can participate in various after-school programs;
6. Keep private and low-key. Most of these home buyers prefer to keep private about whether they’ve bought property and what they’ve spent. And even if they bought the property already, only some of their really close friends know the details. Agents should always communicate with their clients, ask what to say, guide them and act professionally;
7. Large down payment or cash transaction. Chinese consumers traditionally pay cash for a home, taking on minimal debt and limiting the risk of a significant mortgage bubble. Moreover, most Chinese families are financially conservative and maintain good savings habits;
8. Advice and support from family and friends. Seniority is very important to Chinese people, especially when dealing with major issues like home buying in a family. Always show the property to the buyers’ parents and relatives, if possible, before the final offers are made. It is always appropriate to address the other party by as Mr. or Mrs. so and so or by their designation in Chinese style (i.e.- Chairman so and so, Director so and so or Manager so and so) when you make the initial contact with your clients;
9. Self-improvement and cultural differences. Seek to advance your industry knowledge by getting your CIPS and TRC or sign up for HAR’s international real estate course. Knowing the cultural differences, i.e. giving face (aka giving due respect) is a very important concept in China. You must give the appropriate respect according to rank and seniority. If you are buying gifts for your clients, make sure you buy better gifts for the senior managers instead of buying similar gifts across the board. Gifts are always appreciated and will continue to play an important part in your business relationship.
10. Get involved in the local Asian community and build the relationship. The Chinese business relationships inevitably become social relationships after a while. Unlike Western business relationships which generally remain professional over time, Chinese business relationships become social ones. The more you share your personal life, including family, hobbies, political views, aspirations, the closer you are in your business relationship. There is no business talk in China without at least one trip to a restaurant. Sometimes a trip is made to the restaurant even before any business discussion takes place. Inevitably, the restaurant will always be a grand one and you are likely to be hosted in a private room.
In summary, it’s important to remember that international home buyers from China come to the U.S. not for the promise of making a huge profit, but for the stabilized market and their children’s education. There will be more and more Chinese investors/home buyers who are looking to relocate to the U.S., and that’s been called “the third wave of immigration” for the last 30 years in China.