How to find qualified Chinese buyers?On March 12, 2015, East-West Property Advisors organized a seminar for the clients of top tier global Private Bank. Fifteen high-net worth individuals were invited to join this luncheon in an exclusive club on the Bund in Shanghai.
The event started with exchange of business cards between representatives from East-West Property Advisors, bankers and guests. Speakers from East-West Property Advisors then provided an overview of the US real estate market in order to set the foundation for the investors. The bankers provided insights on how the financing could play an important role in order to invest in US real estate. This introduction was followed by a more detailed discussion on several US cities as well as a range of property examples from US real estate agents.
Using financing is a new concept for most Mainland Chinese buyers. Buyers from China often use cash to purchase a property in the US. Over the past year, many have realized that the use of financing offers attractive options to buy a larger or higher value at a low interest rate. This would generate even better returns than paying cash. Knowing that several US banks allow this option offers for many wealthy Chinese an alternative avenue to proceed with investing in the US real estate market. Furthermore, the interest of middle-income class families in China who are hoping to obtain financing to buy a house in the US is increasing. They do not have the funds available to pay the asking price in full but certainly have cash for the deposit and then will use financing for the rest. This also means that the number of Chinese buyers for US real estate market will continue to increase as more middle-income class families are considering to invest in the US housing market. This is one of the reasons why American banks are becoming more aggressive in providing loans to foreigners overall – they realize that there is a significant amount of wealth creation outside of US and are looking for ways to get a piece of that market.
While the interest rate for overseas investors might be higher than for American citizens, financing can still remain an interesting option for overseas buyers. Clearly, the decision to use financing has to be balanced with the fact that in certain real estate markets (e.g. San Francisco, New York), being a cash buyer might offer more advantages. A key role for the US real estate agent is to outline the pro and cons of using financing versus paying cash for a property. During the seminar, the guests appreciated the fact that these pros and cons were identified so they are able to make informed decisions.
Lastly, US real estate agents often can provide a service to Chinese buyers by introducing their clients to the bankers in the US. This will enable the agents to build the relationship with clients further.
The feedback from guests on the lunch seminar was very positive and requests were made for more seminars. Seminars are a very effective way for US real estate agents to gain exposure to their clients. While traveling to China to give or join seminars is a significant investment from a time and cost perspective, working with a team of advisors based in China could be another option that agents can consider.
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