“Opportunity knocks at the door only once” as the proverb goes. The Chinese have certainly seen opportunity knocking in the American market. Now the largest foreign buyer of American property, China is responsible for over $110 billion of investment in US residential and commercial property from 2010 to 2015. And that number looks set to increase.
The Chinese government’s efforts to stimulate economic growth and policy changes that eased restrictions on individuals helped kick-start the increase in investment. These changes, coupled with the relative lack of restrictions on what foreigners can buy in the US in comparison with the UK, have encouraged growth.
The surprising element has been the breadth of investment seen in the US market. Some are purchasing second homes, or moving for their children’s education. Others are investing as they buy, using EB-5 investor visas, and others are buying to let and capitalising on high local rent. Some of the Chinese investors, it seems, simply want to move their money out of the reach of their government.
Chinese buying habits seem firmly concentrated in the high-end market. Sales are taking place in New York, Los Angeles, San Francisco and Seattle, and showing no sign of slowing down, with one LA suburb even dubbed the ‘Chinese Beverly Hills’. This trend sees Chinese investors paying well above the average US home price. Chinese buyers paid on average around $832,000 per home in the United States last year, while the average across all other foreign purchases was $499,600.
Understanding the buyers
Of course foreign buyers, especially with such high spending power, require greater attention and an adapted strategy to allow real estate agents to develop a good relationship with them. Previous experience is certainly a bonus, as are language skills and sensitivity to cultural differences. Working with an agency that has the requisite language confidence can be beneficial, especially as their expertise can help with advertising in foreign media and making a good impression at trade shows.
Knowledge of, and respect for, concepts such as feng shui, lucky numbers and auspicious dates is useful when interacting with Chinese clients. By avoiding obvious faux pas at the start of the relationship, it’s easier to gain respect and therefore potential clients by building a positive reputation in the Chinese market.
Although language can be a barrier, wealthier clients are likely to either have a good grasp of business English or a translator at their disposal. Business hours can present a minor hurdle and it’s advantageous to show willingness to work at hours that are convenient for potential customers – and possibly less convenient for your office. Personal space is another issue to be aware of. While in many western cultures a relaxed and friendly dynamic is the key to a successful business relationship; in China much more formality is expected.
A solid understanding of foreign monetary restrictions is also highly advisable to avoid tripping points, such as US tax implications, on the way to the close.
This market is certainly booming. The key to success here is a personal approach and intensive time-investment in potential clients, as well as building up a business network.
Engel & Völkers are experts in the global property market, with 700 offices operating in 36 countries, visit the website or contact your local E&V office for more information.