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Tuesday, November 19, 2013

What Are the Implications of Selling American Real Estate to China?

[Published Nov. 21, 2013, in the Jeffco editions of the Denver Post's YourHub section. An abbreviated version was published in five Jefferson County weekly newspapers.]

In last week’s column, I mentioned that Golden Real Estate has signed up with a Chinese real estate website, http://www.juwai.com, to publish our listings in Chinese.

One of our listings [see separate blog post] is already, at the seller’s request, posted on that website and getting hits.

Why are we doing this, and is it good policy to facilitate the purchase of American real estate by Chinese nationals?

It turns out that 85% of China’s  2.8 million high-net-worth citizens already send their children to study abroad and last year spent an estimated $50 billion buying real estate in 36 countries.

The United States is just one of many countries where the Chinese are buying real estate. A June 2013 report which I’ve posted at http://JimSmithColumns.com shows extensive buying of real estate in Europe, Asia, Australia, the Middle East, Brazil and Africa — not by businesses, but by individual Chinese wanting to invest/live outside China.

According to the China Private Wealth Report 2011, prepared by China Merchants Bank and Bain & Company, the key motivations for Chinese nationals to invest abroad are 1) children’s education, 2) getting cash out of China for security, and 3) preparation for retirement.

Chinese are not the only foreigners investing in and moving to the United States. Analyzing the list of sold homes published in last Saturday’s Denver Post, I figure that 4.5% of metro area sales are to buyers with Asian or Middle Eastern names.

But China is the only country with high-end cash buyers which severely limits online access to American real estate websites like realtor.com, Trulia and Zillow, as well as search engines like Google. That is what has driven the success of domestic Chinese websites like Juwai.com, which records 90 million searches per month within China.

Two readers sent me emails expressing the same questions and concerns which I had before signing up for this service, so I thought I would address them in this week’s column.

A reader from Morrison urged me not to "sell out" to the Chinese, who already own the Panama Canal. (I didn’t know that.)  He suggested it was greed that would motivate me to advertise our listings in China.

I responded to that reader and will share with the rest of my readers the considerations I had in making the decision to put our (and other brokerages’) listings on China’s leading real estate website. A half dozen other brokerages have contacted me about having Golden Real Estate upload selected listings to Juwai.com as part of their marketing strategy.

First, there’s my responsibility to my sellers to market their home and sell it for the highest possible price.  Having learned of this pool of cash buyers, could or should I refuse to show them our listings?

Secondly, these high-net-worth Chinese, themselves capitalists, are interested in the United States because they like living here in our free society. If anything, we are participating in their own subversion of China’s communist form of government by allowing them to experience our way of life. And these are bright, educated people who, like other Asians, are valuable additions to our population and commerce. They create businesses which create jobs for Americans. They are here already, stimulating our economy, and we should welcome them.

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