Chinese Descend on New York Housing Market

99 John Street, just blocks from Wall Street, is one property featured in The Brooklyn Ink that has caught the eye of Chinese buyers. (Photo via The Brooklyn Ink)

Chinese demand for residential property in the city has caught the eye of New York real estate brokers, some of whom, like Kevin Brown of Sotheby’s International Realty, have even traveled to China to learn the language and culture of this prolific new customer block. When it comes to international buyers, the Chinese now rank second in the U.S. housing market, after Canada.

In an article for The Brooklyn Ink, Ding Chenjie and Adam Molon look at this emerging segment of the New York housing market. They point to recent data that shows a growing number of Chinese citizens investing in property abroad, with the United States as the most popular location.

According to Hurun Research Institute , more than 2.7 million people in China have a net worth of US $1 million or more, and about 30 percent of them are already investing in international properties.

As Chinese buyer demand broadens from super luxury properties to all levels choices, more middle-income Chinese investors who want to preserve their wealth in a more mature and stable market opt to apply for mortgage when they are purchasing, the same as what they do in China.

A survey of 12 million potential Chinese buyers released earlier this month by SouFun.com showed that the United States is the top choice among Chinese buyers for overseas real estate purchases. Forty-four percent of respondents listed immigration as their main purpose for overseas real estate purchases, followed by education at 25 percent, and investment at 23 percent. Top real estate purchase destinations in the U.S. are Los Angeles, New York, San Francisco, Washington, D.C., and Boston, respectively, with over 60 percent of those surveyed stating overseas purchasing budgets of more than US $500,000.

Brown estimates that Chinese referrals made up 12 percent of his personal business three years ago, reached 20 percent last year, and today account for about a third. Last month, he sold two apartments at 72 Berry Street in Williamsburg to Chinese investors for just under a million dollars each. The apartments’ original asking price was $895,000 each.

Real estate broker Ryan Serhant in his office, with a photo of Shanghai in the background. (Photo via The Brooklyn Ink)

According to broker Ryan Serhant, of reality TV show “Million Dollar Listing New York City” fame, most transactions are in cash, as a result of strict qualification requirements. Transactions, in any form, from Chinese buyers have made up nearly a third of his brokerage company. Serhant says that many opt for investing in property instead of in the stock market, especially here where it’s relatively cheaper.

Even as inventory decreases and prices increase in the New York market, “We are still seeing a lot of Chinese buyers coming through to buy anything with statistically proven appreciation rates,” says Serhant. He said 30 percent of the $70 million that his Manhattan-based company, Nest Seekers International, closed last month came from Chinese buyers.

“A lot of them would rather put money into property rather than put money into the stock market, even now as the stock market is continuing to rise, they still feel real estate is the best investment,” said Serhant. “The average price per square foot in the next twelve to eighteen months will be $2,000, which is still a discount compared to London and Hong Kong. So if you are a rich Chinese citizen and are looking for a way to diversify your investment portfolio in China, it’s more expensive to buy there. But here, it is still a bargain,” he said.

The amount of investment in the U.S. housing market from Chinese buyers last year was $9 billion, which ranks second after Canadian buyers among all international buyers, according to data released by National Association of Realtors.

For Brown, the influx of Chinese buyers has been a learning experience in itself. The broker takes occasional trips to China to gain some insight into current and potential customers from the country.

“Ten years ago, it was East meets West, but now it’s West meets East,” said Brown, who began making periodic trips to China and taking Mandarin classes in order to better understand his Chinese clients.

“I’ll never ever be fluent in Mandarin,” says Brown, “but my purpose was to find out, ‘Are there things that Chinese are doing that limit the possibilities of a successful transaction?’ There must be things that we’re doing on our side that also limit the possibilities of success. ‘What are the things that will ruffle their feathers? What am I doing that will affect them negatively?’ That’s just what I found fascinating.”

“It’s not just numerology, you know, staying away from things beginning with the number 4. For instance, you’d think Central Park is the normal view that everybody wants but they’re not interested in it. Instead, they want southern exposure.” Brown said.

“If there is one characteristic of Chinese, they’re never going to overpay for anything. They’ve been at this a lot longer, for thousands of years, than we have.”

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