CHINA: Chinese Looking in America, but Not Buying

January 8, 2010

By KEVIN BRASS

When Angel Calzadilla, a Florida real estate agent, received an e-mail a few weeks ago from a man who said he was a Chinese executive and wanted to buy a house, he suspected a scam.

“I thought it was fishy,” said Mr. Calzadilla, who is based in Fort Lauderdale, where Chinese buyers are a rarity.

But the executive was real. He hired a lawyer, transferred $750,000 into a trust account for the purchase and is now searching, with Mr. Calzadilla’s help, for a four-bedroom house in the range of $500,000 to $1 million.

Agents and industry executives around the United States are reporting similar experiences. Chinese buyers, once a novelty in many areas, are growing increasingly common, heralding what some believe — and many hope — may be an important new buying group.

Early last year, in the depths of the financial downturn, several groups of investors from mainland China toured properties around the United States, setting off a wave of media coverage. The tours were organized by companies like SouFun, a Beijing-based real estate Web site owned by Telstra, the Australian telecommunications conglomerate.

Many in the U.S. real estate industry hoped that the trips were an early indication that a wave of Chinese buyers was on its way. But, so far at least, the Chinese have mostly been what the agents call Lookie Lous — checking out properties but not buying.

“A lot of these buyers are very cautious right now,” said Kelvin Wong, owner of Resource Real Estate Services in Temple City, California, outside Los Angeles. “They are coming over and taking a look at what is going on to be prepared for when opportunity comes.”

And that will be when market conditions stabilize, according to experts like Paul Brewbaker of TZ Economics, a research and consulting company based in Honolulu.

“Trust me, there are going to be a lot more Chinese investors over here,” he said. “We’re very much in the early stages of this.”

Several factors are fueling the optimism. Thanks to China’s fast-growing economy, its population of millionaires is now the fourth largest in the world, moving past Britain in 2008, according to the 2009 Merrill Lynch-CapGemini World Wealth Report.

Prices in many parts of the United States dropped 25 percent to 35 percent last year, but it is the secure, established nature of the U.S. residential sector — especially in comparison to the wild gyrations of many Asian property markets — that is particularly attractive to Chinese investors.

“They come to the U.S. not for the huge profit, it’s for the stabilized market,” said Kenneth Li, an agent with Century 21 in Houston who deals with many Chinese buyers.

In many ways, the interest in U.S. property is part of a general economic shift. Direct investment by Chinese companies in the United States grew to $1.2 billion in 2008 from $385 million in 2002, a 220 percent increase, government data shows.

Officially, China strictly limits its citizens on the amount of money they can invest overseas, usually the equivalent of about $50,000 a year. But industry executives say there are a variety of methods for wealthy Chinese to avoid the restrictions, including overseas bank accounts and trusts.

In 2007 Chinese buyers accounted for 7.5 percent of international buyers in the United States, according to a survey by the National Association of Realtors. Although that number dropped to 5.4 percent last year, agents in California and Texas report a sharp increase in contacts from China in the same period.

Forty-one percent of the Chinese purchases of residential property in the United States last year were in California, according to the national realtors group. In the past three years, the Chinese population in the state grew by more than 80,000 to about 1.2 million, according to the U.S. Census Bureau.

Many buyers have children studying in the United States or have relatives here, said John Wu, president of the Chinese American Real Estate Professionals Association, in San Gabriel, California.

Typically, he said, the buyers are not looking for ostentatious properties, but rather for houses that can be easily rented or resold. “They really buy houses with more flexibility,” Mr. Wu said. “They understand the market here.”

The West Coast is not the only area seeing activity. In New York, for example, interest from China is “infinitely stronger now,” said Chaim Katzap, chief executive of Lion’s Property Development Group, an investment advisory firm based in New York with offices in Beijing and Shanghai.

Mr. Katzap met with several investor groups from China last year. Like other executives, he reports the interest did not translate into big deals but, “they keep calling.”

Copyright 2010 The New York Times Company