Chinese making smarter decisions when it comes to buying US homes

In her job as a psychologist, 31-year-old Shanghai resident Katherine Yan helps parents understand their children better. In her spare time, she is an international property investor who has spent months travelling around different US cities to find the best one to put her money in.

Yan owns two houses in Seattle and one studio in Fukuoka, Japan, and she is currently exploring if it is good timing to make a foray into London after Brexit, despite the fact that it is getting increasing difficult to send money out of China.

The story began in summer of 2014. Worried about the probable devaluation of the renminbi and future needs of her two small children when they were old enough to study abroad, Yan started looking at the US real estate market. “My investment principle is straightforward – ‘buy-to-let’ for stable returns,” she said. Rather than choosing California or New York, Yan eyed a second tier city that was home to Bill Gates’ Microsoft, Starbucks and Boeing. “I visited Los Angeles first, but the prices were already high,” Yan said. “Seattle’s development potential is much bigger than LA. It has a lot of high-tech company headquarters such as Amazon and Expedia,” she said.

In 2014, Yan splashed out US$390,000 for a 1,300 square foot townhouse in downtown Seattle. The market price surged to more than US$600,000 in 2016 after Amazon opened a new office in the area.Yan’s current tenants are a French couple who both work for Amazon. The monthly rental of US$ 2,600 generates an 8 per cent return annually. By contrast, in the top two mainland cities of Beijing or Shanghai, the yield is only 2 per cent.

As a member of the middle-class, Yan said she can’t afford luxury properties, but instead has focused on cheaper properties with prime locations in smaller US cities.

Over the past 12 months, East-West Property Advisors, a platform that connects Chinese buyers with US realtors, has seen more than 30 per cent of all inquiries for cities other than New York, San Francisco and Los Angeles.

However, the huge surge in Chinese buying of offshore real estate amid worries of currency weakening has caught the attention of the Chinese government. Over the past few years Chinese citizens have dealt with significant restrictions on money transfer which only allow them to convert a maximum of US$50,000 per person per year. “The difference is that since January [2016] the Chinese foreign exchange regulator has been more active in enforcing this policy than ever before,” said Sam Van Horebeek, a director at East-West Property Advisors. “As such, our team has seen a significantly longer time before purchase transactions of US properties are closed,” he said.

Still, agents say they haven’t seen any decline in buying inquiries on overseas properties. In fact, the numbers have increased.

“What’s for sure is that I won’t buy any more properties in China,” Yan said, “ The experience was just too bad – dishonest agents, house quality problems, all headaches,” she said.

Source: Excerpts of article published by South China Morning Post, Jan 1 2017