(Originally published as part of The Insider series for Union Street Media.)
It’s no secret in the real estate industry – investors in China have turned their focus abroad, particularly, on the United States. In 2015, China became the largest foreign buyer of U.S. real estate in the world, generating $1.71 Billion in commission for American real estate agents, according to Juwai.com.
In this issue of The Insider, we will highlight the primary factors contributing to the influx of Chinese spending and give you a few tips on how to be prepared to capture foreign leads online.
China’s Economy Stumbles
For years, the world’s second-largest economy was a leading target for global investors as it grew at double-digit rates, year after year. China happily absorbed global investment expenditures, while the country’s enclosed financial system ensured that domestic money remained within its borders.
Recently, things have changed. Chinese growth is waning and the government has loosened currency restrictions and decreased interest rates in an effort to reinvigorate the economy. The problem is that lower interest rates have discouraged savers to keep their money in the county and (slightly) relaxed restrictions make it easier to move that money elsewhere.
Meanwhile, the value of China’s currency, the renminbi, is falling and the U.S. Dollar is strengthening, giving Chinese home buyers further reason to believe in the stability of an American investment. Although a strong dollar means that American homes are likely to become more expensive, prices in the U.S. are still dramatically cheaper than those in China.
Home Prices Rise
Chinese home price growth has hit a 2-year high, with increases most dramatic in “first tier cities” like Shanghai and Beijing, where prices have jumped 20% and 12.9%, respectively. The boom is most extreme in the southern tech hub of Shenzhen, with prices up 52% in the last year.
These dramatic pricing changes have potential Chinese buyers wary of a bubble burst, and many new families are unable to afford real estate desirable cities.
American Advantage
While China’s market remains clouded in uncertainty, the American market is stable and less expensive – $1 Million in Shanghai will buy you less than 500 sq. ft. of prime residential real estate, whereas the same investment buys 700 sq. ft. in Los Angeles and 830 sq. ft. in Miami.
Because of China’s remaining currency restrictions, foreign real estate investment is one of only a few opportunities to legally move money outside of the country.
Real estate investment is attractive because it is relatively “hands-free,” meaning it typically does not require the same level of attention as an investment in a foreign business. Additionally, real estate markets tend to move in different cycles from country to country, therefore allowing for diversification of risk – it is unlikely that national real estate markets will have bubbles that burst simultaneously.
5 Tips to Attract Foreign Buyers:
- Consider hiring bilingual and multilingual agents. Americans are notorious for an inability to speak anything other than English. Having team members with an ability to transcend the language barrier is a great way to show foreign buyers that you value their business.
- Create translated landing pages. While it would be best to have all of the listings on your website translated in multiple languages, you can work around this by creating landing pages tailored to foreign buyers/investors. Include some brief information about your services and with a call-to-action to speak with a bilingual agent.
- Stay up-to-date on international real estate news. No one expects you to be an expert in every country, but it is important to be aware of what is going on outside of the United States. Showing a potential client that you are cognizant of the factors impacting their investment goals is a great way to earn their trust.
- Take every lead seriously. Foreign buyers often rely on an English-speaking family member or American business partner to act on their behalf, especially early on. Respond to every inquiry in a timely, professional manner; foreign buyers tend to start their purchasing process earlier than domestic buyers because of the need to book flights and make scheduling arrangements down the line.
- Be mobile responsive. In 2015, 58% of China’s population reported owning a smartphone – that’s about 800 million people. (The total U.S. population in 2015 was only about 320 million.) By the end of 2016, smartphones are expected to account for more than two-thirds of the 1.3 billion internet-connected devices in China.