Chinese Investors Are Buying Hub Condos at an Unprecedented Pace

David Bates / February 22, 2014-2:51 pm

Massachusetts is one of the most preferred states for Chinese real estate buyers.

Massachusetts is one of the most preferred states for Chinese real estate buyers.

Last March, the National Association of Realtors didn’t consider Massachusetts one of the top destinations for Chinese buyers; but by June the Realtor organization had the commonwealth in a three-way tie as its second-most preferred destination. Based on what I am seeing in the Boston condo market, I’m thinking it might not be long before California is the only state that surpasses Massachusetts’ volume in this important niche.

Juwai.com, a leading international real estate search portal in China, kind of the Chinese equivalent of Trulia, estimates that 63 million Chinese have the wealth to invest in real estate overseas. Despite the fact that the Chinese government prevents outside firms from marketing real estate to its citizens by blocking their websites with a firewall and that 99 percent of Chinese can’t read anything but Chinese, this is a huge market. In 2011, Chinese buyers purchased $28 billion worth of international real estate, $12 billion of it in the U.S. While $12 billion of sales is a big number, an executive at a financial holding company in China told me “unofficially, it’s probably way bigger than that.” How big? One report asserts that it won’t be long before Chinese acquisitions of international real estate will exceed $50 billion a year.

What does that mean for Boston?

Simon Henry, Juwai’s co-CEO, told me that in 2013, Chinese buyer interest in Boston grew nearly ten-fold on their site. He added, “Chinese buyer interest in Boston has increased faster than top-ranked destinations like New York City, Los Angeles or Philadelphia. That means the momentum is with Boston and has begun to catch up with the other destinations, in terms of how much interest from Chinese buyers it receives.” From the other side of the world, the co-CEO identified several prominent Boston developments that Chinese buyers were actively acquiring condominiums.

Naturally, Hub real estate agents and brokerage firms are strategically trying to attract these valuable buyers.

All In The Marketing

A good example of marketing geared toward Chinese buyers is the Newton real estate brokerage that has English on the left side of their web pages and Mandarin on the right side.

Another firm profiting from Chinese buyers is The Pillar Capital, a real estate investment and brokerage firm with locations in San Francisco, Hong Kong and now Boston. The Pillar Capital listed for rent and then rented eight one-bedroom condos at the newly built Millennium Place. Acquisitions were in the $550,000 to $700,000 range and the deeds for the units recorded the names of individual buyers, not corporations. These condos garnered rents between $3,300 and $3,700.

Ricardo Rodriguez, a well-known agent at Coldwell Banker Residential Brokerage in the Back Bay says that as far as the downtown condo market goes, there has been an influx of buyers from China, Hong Kong and Singapore and they want new construction, look at properties from $500K to $2.5 million, and generally aren’t looking to occupy the property themselves. Incredibly, Rodriguez has had occasions when he has shown as many as four different international buyers the same property at the same time.

Charles Wang, an agent at Gibson Sotheby’s International Realty (the brokerage firm where I work) says that nearly all his transactions in 2013 were by mainland Chinese buyers who paid cash. Wang, who is fluent in Mandarin and a member of the Asian Real Estate Association of America, speculates that each year, international Chinese buyers account for hundreds of transactions in the Greater Boston market.

What is provoking the Chinese interest in the Hub? Charles Wang says that these affluent buyers are nervous about the Chinese economy and feel it’s best to diversify. While they are unsure about their own economy, Wang says, “The Chinese have always believed in America and its capacity to do better and to recover from recessions and grow healthy.” In real estate, as opposed to the stock market, Wang says they get a “simple way to invest and get a return.”

In addition to investors, there are also many new-to-Boston Chinese residential buyers. Jin Qui, who came to the United States four years ago, recently attended an open house I held. According to Jin, the major reason a lot of Chinese move to the Boston area “is that Boston has a lot of good schools,” making it a perfect fit for Chinese people who are committed to their children’s education.

Since 2011, East West Bank has focused efforts on this market and provided a niche product to new immigrants and Chinese investors. Ricky Lam, a loan officer at the bank, says the program which now offers 60 percent loan-to-value ratio is doing very well. Asked how much this market had grown recently, he said, “If in 2011 we had one buyer, last year we had at least three buyers.”

I’m not saying that as a broker I’m excited about this trend – but I’m doing everything I can to remember that it’s the Year of the Horse, stage my next listing with a wok and put as many 8’s (a lucky number in China) in the list price as possible.

(This post first appeared as my Feburary column in Banker and Tradesman)