and 61 percent of all sales were made in suburban areas.
The Chinese Pursuit of the American Dream By Linda Poon, Assistant Editor, CityLab One of the latest listings in the Seattle-area real estate market boasts a newly renovated home with seven bedrooms, heated floors, and a “spacious and tranquil” feel inside the quiet suburb of Sammamish. It’s asking price: $1,260,888. Another listing— this one in Bellevue, with much grander amenities like a builtin sauna and a private tennis court—is priced at a staggering $6,888,000. The prominence of the number eight here is likely no coincidence. Both listings are found on Juwai, one of the largest online portals for Chinese citizens looking to buy property overseas (the name translates to “living abroad”). And the number eight, according to Chinese superstitions, is considered lucky. As China furiously erects high-rises for its ever-growing population, wealthy mainlanders have been seeking out the American dream in the suburbs of… well, America. Not even the harshest of anti-immigrant rhetoric in the U.S., nor the toughest of foreign investment regulations from China, has substantially deterred them. At least not yet. “Many Chinese who grew up in the high-rises of those big cities in China see having a backyard as an attractive [alternative],” says Lawrence Yun, chief economist and head of research at the National Association of REALTORS® (NAR). Single-family homes are also more attractive to Chinese investors, he adds, because they’re generally more abundant than affordable condos in popular destinations like Los Angeles and New York City. According to a recent report by NAR, Chinese buyers have been the top foreign buyers of U.S. residential property for three straight years, hitting a record high. As a group, they surpass top buyers from Canada, the U.K., Mexico, and India. Between April 2016 and March 2017, Chinese buyers purchased more than 40,500 housing units, worth a total of $31.7 billion. That’s up from of 29,000 units and $27.3 billion the year before. Sixty-seven percent of those units were single-family homes, 16
ARCADIA REALTOR® · JULY/AUGUST 2017
With housing prices on the rise, Chinese buyers are also looking beyond just California and New York, which have been popular thanks in part to the prominence of Chinese culture there. Texas, Virginia, Florida, and Indiana, for example, have become top destinations this year, according to NAR, as buyers expand their geographical reach in search of a better bang for their buck. And while Washington state didn’t make it to NAR’s top destinations (NAR analysis actually found investment there declined), data from Juwai suggest that the top market so far this year lies in the greater Seattle area. The area saw an influx of foreign interest last year after neighboring Vancouver (another hotspot for Chinese investors) imposed a 15 percent tax on foreign buyers. In particular, college towns have flourished over the years as Chinese students move to American colleges and their parents opt to buy rather than rent. “It’s a perfect match,” says Susan Wachter, co-director of the Penn Institute for Urban Research at the University of Pennsylvania, referring to the growing wealth in China and the desire for an American education. “Instead of spending the money on rent for three, four years, why not just invest in property? You’re going to come visit it anyway.”
The Impact of Foreign Investors Chinese investors are surely welcome business for sellers, who hope to attract buyers with customized homes adhering to feng shui principles, and developers breaking ground on new projects, including luxury high-rises and McMansions catering specifically to that group. On average, Chinese buyers spent $781,801 on a home in the 12 months before March 2017— that’s more than $200,000 above the average spent by buyers from the next leading countries. “The U.S. real estate market has always been out there as a risk diversifier [for Chinese millionaires and billionaires] who are quite aware about the potential for a bust in China,” Wachter says. Wealthy buyers have even shelled out millions for a home (or multiple homes, many of which were bought for investment purposes and sit empty), sometimes paying as much as 40 to 60 percent above the asking price—and often in cash. In fact, according to the NAR report, more than two thirds of sales made by Chinese buyers were paid in cash. That spells big business for smaller cities where a $200,000 home is on the higher end of the market—but bad news for American homebuyers. And while the data isn’t conclusive across the board, the influx of foreign buyers could play a role in limiting housing affordability. When it comes to the bidding process, for example, American homebuyers who require mortgages are