Chinese investment in US real estate growing dramatically: AREAA panel

Among Miami's attractions: ability to own a single-family home, and value

Nov.November 04, 2016 08:45 AM

The dramatic upward trend in Chinese investment in U.S. real estate – both residential and commercial – is likely to continue, and Miami stands to benefit as the Chinese learn more about the local market, two experts on Asian real estate told a group of professionals in Miami.

Jim Park, national chairman emeritus of the San Diego-based Asian Real Estate Associate of America (AREAA), said that Chinese buyers have been the largest group of international investors in U.S. residential real estate for about three years, surpassing Canadians, who were formerly the leaders. In 2015, for example, China accounted for $28.6 billion in residential purchases, compared to $11.2 billion for Canada, according to figures from a comprehensive report done by the Asia Society and the Rosen Consulting Group.

He spoke before more than 125 real estate professionals at an event in Miami on Wednesday organized by the Miami chapter of AREAA. The event is part of a nationwide educational effort leading up to AREAA’s Global Luxury Summit scheduled for April this year in Miami.

“The Chinese are slowly becoming a dominant player in the commercial real estate market,” Park said. For 2015, China tied with Norway with $8.5 billion invested, behind Canada ($24.6 billion) and Singapore ($14.6 billion).

Citing the recent $10.9 million purchase of a bloc of condos in Miami’s Brickell City Centre by a Chinese investor and a CBRE report ranking  Miami as the fourth most important destination for Chinese investment in the country, Park said: “Miami is finally on the map among Chinese investors. Previously, it was not even in the top 10 cities. But is this an aberration, or will it continue?”

John Wong, a longtime expert in Asian real estate investment in the U.S. and founding chairman of AREAA, indicated that the positive trend in Chinese capital flows to U.S. real estate should indeed continue and expand, depending on economic conditions in China and the Chinese government’s attitude toward investment abroad.

Commenting on the data provided in the 112-page Asia Society report, Wong said that 2013 was the “tipping point” when Chinese foreign direct investment (FDI) in the U.S. exceeded FDI from the U.S. to China.

Why are Chinese investors increasing their focus on U.S. real estate? The country is viewed as offering the most stable and secure real estate investments, compared to nations like Germany, the U.K., Canada and Australia, he said, and the best opportunity for capital appreciation, when compared with Brazil, Spain, Ireland, the U.K. the Netherlands and China.

While Chinese institutions continue to invest here in U.S. government bonds, real estate and commerce and industry, increasing numbers of Chinese students are attending U.S. universities. This is a key factor since families often buy their children places to live here. At the same time, other Chinese individuals are buying condos or homes to vacation or live here, as well as to invest.

Another big attraction for Chinese buyers is the ability to own a single-family home. Most Asians are accustomed to living in high-rise buildings, since single-family units are typically very expensive or not available. In the U.S., these homes are readily available at different price ranges.

Also, real estate prices in Miami are much more attractive than those in New York City and San Francisco, two traditional targets for Chinese investment, and Miami offers a large stock of new builds at different price levels.

Of note, about two-thirds of real estate closings by Chinese purchasers are in cash.

For real estate professionals (or any businesspeople) who want to attract Chinese investors in the U.S. or do business in China, Wong stressed the importance of understanding the country and its people, following events in China and – at a minimum – making an effort to learn Chinese.

In the past, he said, people who wanted to work in the Chinese market often thought that their knowledge and technology were the most important elements, and that they could always work thorough representatives or employees who speak Chinese.

“This has changed,” Wong said. “You need to invest in a new skill set, make an effort to communicate. You don’t have to speak perfectly, but it’s helpful to learn the language.”

Some suggestions on promoting real estate in Miami (or anywhere else) to the Chinese: 

  • Make a real effort to learn Chinese.
  • Travel to China, get a feel for the country.
  • Link up with trade groups or other organizations that can provide support and often lead groups of businesspeople to China. ARREA is one example.
  • Build relationships with people who do business in China and who speak Chinese.
  • Bring value to someone else: Set up a real estate office in China.

Cities like Miami need to invest time and money in promotion. The same goes for companies that want to do business there or attract buyers to Miami’s real estate market. Basic elements in any serious effort to promote Miami’s image in China involve  sending trade missions to China, setting up reciprocal visits from Chinese, translating promo leaflets and other documents into Chinese and making sure that local real estate offerings cater to Chinese taste and customs.

But beyond these traditional steps, Wong noted that people interested in attracting Chinese investors must themselves invest in learning about China and pay attention to what changes are occurring at the social and governmental levels.

The opening to Cuba is a plus for relations between the U.S. and China, Wong noted, since both Cuba and China are both communist states and Cuba is a neighbor.

“Be informed,” Wong said. Government attitudes toward allowing Chinese to invest abroad and economic conditions there can change. “You have to be patient. Things go up and down.”

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