By Tim Johnson
RISMEDIA, April 2009-(MCT)-Amid a downturn in real estate prices, some wealthy Chinese are signing up for home-buying tours to the U.S., and Chinese media tout the trend as another sign of the strength of what’s now the world’s third-largest economy behind the U.S. and Japan.
“The real estate prices in America have gone down drastically,” said Yin Guohua, a partner in a law firm who recently returned from an 11-day U.S. tour with a group of Chinese elite. “It’s a good option for Chinese people who want to buy for investment.”
In prime time last week, China Central Television’s popular Oriental Horizon program dedicated half an hour to the topic of house-hunting tours to the U.S. The tours also have been the subject of numerous newspaper articles, some of them suggesting that the buying power of newly rich Chinese might help salvage U.S. real estate woes.
“We’ll probably take more than 10 groups this year,” said Vincent Mo, chairman of SouFun Holdings, one of two companies known to be organizing the house-buying trips.
“There are more than 500 people applying to go with the SouFun team to look at property in the U.S.”
Not all of those on the tours are serious property investors. Some want a quick look around the U.S. Others want a son or daughter to obtain a U.S. education and think that buying property will get a foot in the door.
Mo acknowledged that he doesn’t know if anyone among the first group of 40 Chinese investors, who traveled in February, bought U.S. property.
“When we asked them, no one said they had made a deal, or bought something. It’s a privacy thing,” Mo said.
Yin, the lawyer, demurred when asked whether he’d bid on a house: “Chinese people like to keep private about whether they’ve bought property and how much they’ve paid for it.”
The U.S. real estate slump has made property in major U.S. cities seem cheaper than in China’s larger cities, real estate professionals said.
“If you take a brand new apartment in a first tier city, like Beijing, Shanghai or Guangzhou, you can buy a lot more equivalent in the United States,” said Anna Kalifa, a vice president of business development at GTC Real Estate China, a development arm of the Kardan Group, based in the Netherlands. In a city such as Washington, she said, “you can get more bang for your buck, square meter per square meter.”
Luo Jie, a tour organizer for those wanting to buy U.S. property, concurred: “You can buy a much better home in America for $400,000 or $500,000 than you can buy here.”
Luo pulled out a promotional folder written in Mandarin with numerous listings of foreclosed U.S. properties in Los Angeles, San Francisco, Las Vegas, Boston and New York.
“There are more and more foreclosed properties on the market,” Luo said, adding that his company, China Swan International Tours, will take an initial tour group within a few weeks.
“Some of these businessmen already have links to America and want to get property. Others are simply looking for a good investment,” Luo said.
Luo acknowledged that Chinese investors face hurdles in getting their wealth out of the country. The Chinese currency, the yuan, is not fully convertible in currency markets, and can be exchanged only under certain conditions for trade, tourism and other purposes.
Those difficulties may be the reason few Chinese taking part in the tours speak to the media. Holding wealth out of the country may raise questions about tax evasion or how the wealth was amassed. Some participants also appear to be government officials who want to avoid explaining how they got wealthy.
The Oriental Horizon program said 7.5% of U.S. residential property sold to foreigners last year went to investors from mainland China, Taiwan or Hong Kong.
One real estate commentator, Wang Shitai, downplayed the significance of the tours.
“In times of crisis, entertainment is needed,” Wang told the TV program. “News about people buying houses in America has strong entertainment value. Agents want commissions, and the media focus on the topic.”
Organizers of the tours, however, say that they satisfy a need. Few Chinese dare to venture on their own to buy a house in the U.S. because of the language barrier and lack of familiarity with legal procedures.
“They need an organization like SouFun to consolidate professionals into one place,” Mo said. “We have the broker agents there, and the law firms and insurance companies standing by.”
Yin said some Chinese think the slide of the U.S. real estate market may continue.
“Some people think it’s still not time to buy. In some places, the prices haven’t gone down so far yet,” Yin said.
© 2009, McClatchy-Tribune Information Services.
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