Many people are wondering how China's economic slowdown will affect the U.S. housing market, especially Silicon Valley, where Chinese buyers are prominent. Michi Olson Alain Pinel Realtors vice president of Global Business Development and Relocation, recently told members of the Silicon Valley Association of REALTORS® she believes Chinese buyers will continue to look to the U.S. for real estate property and other investments, as long as the U.S. economy remains strong.
According to the National Association of REALTORS®, in 2015 the Chinese surpassed Canadians as the top foreign buyers of U.S. homes, with nearly half of them paying cash for properties. In the 12 months ending March 2015, the average home purchase price by a Chinese buyer was $831,800. Olson noted, China is also the top consumer of luxury goods and accounts for 25 percent of all luxury consumption.
The Chinese are looking to diversify their assets and invest their money abroad due to the country's unstable economy and unpredictable policies of the communist government. China is experiencing turbulence in its stock market and the recent devaluation of its currency.
The Chinese want to educate their children in better schools, which are here in the U.S. It is not unusual for families there to set aside 70 percent of their budget for their children's education, said Olson. The Chinese, like everyone else, dream of homeownership, which cannot be achieved in their homeland because the Chinese government has limitations on ownership of property. Add to these reasons the corrupt Chinese government and China's critical air and water pollution problems.
Olson said the Chinese look to the Bay Area as one of the best places to invest in real estate because of its close proximity to China, its mild weather, its excellent educational institutions, and its attractive lifestyle. They don't need to travel far to experience California's wineries, sailing, skiing and play golf. The Chinese love to dine in exquisite restaurants and San Francisco's Chinatown is the largest in the country, added Olson.
Olson said the Qualified Domestic Individual Investor (QDII2), a new pilot program launched by China, could further boost Chinese real estate investment in the U.S. The plan allows individuals from six cities, including Shanghai, to invest directly in overseas assets like stocks, bonds and real estate. The $50,000-cap on exchanging yuan for foreign currency, will not apply to QDII2 transactions. Olson added that the U.S. is the best country to capture these investments because of its attractive real estate and liberal foreign ownership rules.
Unlike some real estate analysts, Olson isn't worried that China's current economic troubles will negatively impact Silicon Valley's housing market.
"We should actually worry about what happens in our economy," said Olson. She explained if the U.S. stock market remains on shaky ground and the economy experiences another downslide, the Chinese could start to lose confidence in the U.S. and look elsewhere to invest their money.
"There is a saying that if the U.S. sneezes, Asia catches a cold," said Olson.
For now, expect interest from Chinese buyers to continue and even increase, so sharpen your skills, the global relocation expert told REALTORS®. Chinese buyers expect trust, discretion, expert advice, excellent service, strong negotiation skills. They are very knowledgeable about U.S. real estate because they have done their research and are well-skilled in using the Internet.
A Chinese buyer's trust and confidence, once gained, will go a long way through referrals. One source can mean 10 new deals, said Olson.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.