'Home abroad' gaining traction with purchasers

By Bloomberg (China Daily) Updated: 2014-07-10 07:16

"The uncertainties in China's domestic market are contributing to a higher rate of growth in Chinese interest in US property," Andrew Taylor, co-chief executive officer of Juwai, said in an e-mail. "That interest began accelerating in the second quarter of 2014, in part because of China's property slowdown."

New home prices in China fell in June for a second straight month as a slowing economy and excess supply deterred buyers, according to the China Real Estate Index System Survey. US house prices have climbed 26 percent since March 2012 after falling 35 percent from their June 2006 peak, the S& P Case-Shiller Index of 20 cities shows.

Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.

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The median home price in Arcadia's 91006 ZIP code was $1.28 million in May, up 18.5 percent from a year earlier, according to research firm DataQuick.

"About 90 percent of my buyers are from China," said Peggy Fong Chen, a broker with Re/Max Holdings Inc, who sold 80 homes in Arcadia last year. "They want new construction. They want two levels. In China, it is considered a mansion if it has two levels."

Three out of four buyers pay cash, said Chen, a native of Hong Kong who has been selling real estate for 10 years. At least 20 percent are absentee owners who don't have long-term visas yet. Many purchase houses so their children can attend high school or college, she said.

Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and '80s, tearing them down and erecting sprawling houses like the one real estate agent Nunez sold for $3.5 million, which has a double-height entry hall and wood-paneled library.

"Local people really cannot afford these most of the time," Chen said.

While buyers may be driving up prices in some pockets, the wave of money is good for local economies, said Hanemann of Rhodium Group. Arcadia issued building permits for 167 single - family homes worth $120 million in the fiscal year ended June 30, contributing to a 71 percent annual gain in construction fees for the city's Community Development Division.

"It's a huge opportunity for builders and of course it's a huge opportunity in terms of bringing in real economic investment that's creating local jobs," Hanemann said. "If the US is able to respond and provide the supply, it's a very positive thing."

Buyers from China and Asian-Americans purchased about 80 percent of the 47 houses sold at Tri Pointe Homes Inc's Arcadia at Stonegate community in Irvine, according to Tom Mitchell, president of the Irvine-based builder.

Almost half of the buyers paid cash for houses in the development, at prices starting at $1.16 million, he said. The company has been surprised by how word travels among overseas buyers.