Why Are Chinese Investors Purchasing U.S. Real Estate?
by Kevin Khoi | Jun 25, 2015
Between April 2014 and March 2015, the U.S. real estate market saw a significant surge in the number of Chinese investors purchasing property. Investors of Chinese origin surpassed Canadian investors by 2%, meaning China claimed 16% of all international real estate transactions in the U.S per the National Association of Realtors® latest statistics.
According to the National Association of Realtors® 2015 Profile of Home Buying Activity of International Clients, investors from China purchased an approximate $28.6 billion in U.S. property. Learn why Chinese investors are showing heightened interest in U.S. real estate and how to tap into this valuable market.
Chinese Investors Look to U.S. for Real Estate
Since China’s housing reforms became effective in the late 1990’s, the goal of purchasing property in China was not only possible – it was desirable. The initial demand caused by housing reformation led to a boom in real estate development that eventually outpaced the number of buyers; now, as China’s housing prices continue to fall, wealthy Chinese investors are seeking better opportunities that promise higher returns.
The implementation of EB-5 in 1990, a Visa program that encourages foreign real estate investors to purchase U.S. property, further encouraged China’s wealthy to seek investments in America.
EB-5 Attracts International Investors
Commonly known as EB-5, the U.S. Immigrant Investor Program attracts thousands of international investors. Despite starting the pilot for EB-5 in 1992, the program received a low number of applicants — less than 1,000 per year — until 2007 when the U.S. financial crisis was beginning to escalate. In that year and the those to follow, the number of temporary visa applicants (I-526 petitions) hit record highs, signaling a renewed interest in U.S. real estate, per statistics reported by the U.S. Citizenship and Immigration Services (USCIS).
theadesign | shutterstock.com
Partially responsible for the real estate industry’s progress, international investors see opportunity and security in U.S. real estate. In the second quarter of 2015, USCIS noted that more than 5,000 I-526 petitions have been received thus far, which may prove to outpace 2014’s nearly 11,000 total petitions (pdf). By offering entrepreneurs, their spouses, and dependent children under the age of 21 permanent residency, EB-5 Visas have become highly sought after among Chinese investors.
To meet the requirements of EB-5, interested investors need to designate as much as $1 million to U.S. real estate investments, per U.S. Citizenship and Immigration Services. Though this amount is reduced by 50% if choosing to invest in an area considered rural or having high unemployment rates, a $500,000 investment is primarily an option reserved for China’s wealthiest citizens. In addition to capital minimums, investors must promise the creation of at least 10 full-time jobs in a new business or opt to invest in a “troubled business” to prevent job loss.
Buying U.S. property is considered a safe bet for many Chinese investors. As revealed in the National Association of Realtors® report, 55% of foreign investors from China use cash to purchase real estate with the most popular states being Florida, California, Arizona, Texas, and New York. Apart from higher returns on investment, Chinese real estate investors expedite the process of obtaining legal permanent residency in the U.S.; typically, green cards are received in six months to one year, which is significantly quicker than the average delay of two or more years.
How to Engage Chinese Real Estate Investors
Between the threat of a potential real estate bubble and the benefits imparted to foreign real estate investors by EB-5, Chinese investors are increasingly interested in U.S. property. For Realtors® who want to tap into this market, there are a few ways to attract Chinese investors.
- Become certified as an international property specialist. Working with Chinese investors requires Realtors® to go above and beyond to prove their expertise and trustworthiness. When trying to tap into a global market, obtaining certification as an International Property Specialist through the National Association of Realtors® can provide a competitive edge.
- Cater to language and time zone needs. As with any customer, simplifying communication and decision-making is key to closing a sale. Because Chinese investors usually do not speak English and are still located in China, partnering with a knowledgeable translator is essential. Rearrange your work flows or hire a China-based assistant who can speak on your behalf to make communication convenient for potential clients.
- Use recent data and facts. When working with potential buyers from China, it’s important to have solid data about the current and projected benefits of a real estate investment, including the area’s property appreciation rates, nearby attractions, and business climate. Chinese buyers want to consider safe, lucrative investment opportunities.
- Review the big picture. In most cases, Chinese investors plan to bring their immediate or extended families to the U.S. on an EB-5 Visa. Discuss residential real estate investments, commercial opportunities, and local amenities, like educational opportunities, with Chinese investors to communicate value.
A segment of the international real estate market projected to grow in the U.S., Chinese investors respond best to sound opportunities that promise high returns and low risk.
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