Bloomberg - Why Are Chinese Millionaires Buying Mansions in an L.A. (Los Angeles) Suburb?

13 Replies

@Tom V.    I attend a weekly meet up in San Gabriel/Arcadia. The realtor who hosts the meet up sells regularly to Chinese buyers. He's been talking about this for the year or so that I've attended.

There is definitely Chinese money flowing into the San Francisco Bay Area.  

Nothing to the apparent concentration in Arcadia, but especially near university centers we see lots of all cash buyers.  As expensive as California is, it's still very cheap compared to Beijing, Shanghai and major cities.  

This is a great opportunity for a Mandarin speaking broker or developer to bridge a cultural gap and create a lot of value.  

Chinese Millionaires are buying in Arcadia/San Gabriel Valley/ Orange County and the San Francisco Bay Area due to the established base of Chinese and Chinese Americans living in these areas already. There are restaurants, stores, and activities that they can go to without knowing any English. In addition, they probably have relatives and family living in these areas. Where these investors are buying are safe neighborhoods with excellent weather. Finally, many of the Chinese like to keep up with each other and would like to out do their friends by buying a bigger house in the proximity of their friends.

I would love to hear if I missed anything. I have visited all of these areas and always enjoy the wonderful Chinese food. You cannot beat Arcadia with a Din Tai Fung there!

Happening in Palo Alto and it ain't cheap.

http://www.theatlantic.com/china/archive/2013/11/w...

Many of the home are sitting empty after all cash absentee Chinese purchases.  Neighbors are not happy.

I have a high end contractor friend in Palo Alto and he has built a $3-$4MM teardown rebuilt for the same Chinese family, one per year, four years in a row.

Think about it. Put yourself in the shoes of someone who has just made a bunch of money, whether you're living in China, or Russia, or Brazil or even India. Changes in government, politics, economy can all have an impact on your wealth.  The stock market is too volatile. The there are not too many liquid investments in China and the rules are continually changing. More importantly, many of these investments require constant monitoring (this is hard work). Many wealthy people need a place to park cash where it will be relatively safe.

Real Estate has that  quality. In excellent neighbourhoods, values are retained over the long term, and the US has historically been one of the most stable places to invest in. So all of this makes sense. In Canada, we're seeing the same effect in Toronto and Vancouver, and to a lesser extent in Calgary. Chinese investors want a place to park cash where it will be safe. Many are buying second homes and condos. They're almost always being purchased in cash with no financing. 

This past year, China replaced Canada as the #1 group of foreign real estate investors in US Real Estate. In 2012, Canada spent 18.5B on US Real Estate and China spent $16B. In the past 12 months, China has spent $22B, and Canada only $14B. The UK, and Brazil are in third and fourth place. So if you're a real estate professional, that's a significant market. You can make a very healthy living specializing on one segment of foreign buyers. 

OMG,

I was about to post this, Then I saw it was already covered.

HAHA

They come to Arcadia for the schools, existing Chinese community, and to park their money !

Understanding the market is important, as well as figuring the buyer's "why". The other side of the coin is that we can just accept and rehab to what the new money in town dictates and create a short-term business model around this phenomenon. Things are cyclical with different countries hitting the market at different times. Study the markets and build the business around these cycles. Right now it is Chinese money; many years ago it was mid-East money (anyone remember the 70's?). Keep on top of which markets are producing the best yields for buyers and create the homes for that market.

I think they're all just moving in so they can be close to Santa Anita :-D :-D

It is another "basket" for them. They get to invest in US economy and hedge themselves against their economy. The government is also much more relax and do not seize houses. California in particular the coast has seen huge inflation values. So they get a great place to come visit, parking their money in a safe investor friendly government and get the opportunity to take advantage of the growth if it continues :)