California’s Worldwide Appeal
Chinese buyers are prominent here, spending almost twice the average.
By Camilla McLaughlin
In the Golden State, it’s not uncommon to hear reports of builders consulting with feng shui masters on both land plans and home designs. And some even go the extra step of holding a “ming tong” ceremony to ensure good fortune for future residents.
While not an everyday occurrence, this example does illustrate the influence international buyers, particularly from Asia, exert in California, where last year one in three foreign buyers hailed from China (People’s Republic, Taiwan and Hong Kong) and one in six Realtors closed a transaction with an international client. Visit cities such as San Francisco and Los Angeles and you see new residential and mixed use buildings going up, many financed all or in part by investment dollars from Asia.
California’s appeal is no surprise. San Francisco and Los Angeles long have been considered top global cities and number in the top 10 markets to watch in 2016, according to the Urban Land Institute; others in the top 50 include San Diego, San Jose, Orange County, San Diego, and the Inland Empire.
In the U.S. overall, China moved into the top place as the country of origin for foreign buyers, according to the National Association of Realtors’(NAR) 2015 Profile of International Buyers, purchasing an estimated $28.6 billion in properties in 2014. This is a steep increase from the approximately $4.1 billion they spent five years earlier in 2009. More than a third of purchases by Chinese nationals from March 2014 to March 2015, were in California. Although Florida continues to be the top destination for international buyers nationally, California accounts for 16 percent of international sales and the West remains the top preference for Asian buyers.
While 36 percent of foreign buyers in California were from China, the rest reflected NAR’s top five countries of origin, with 11 percent from Canada and 9.1 percent from Mexico. The U.K. and India round out the top five, representing less than 5 percent each of international buyers.
Data from the California Association of Realtors (CAR) shows international buyers are beginning to diversify where they settle. Nearly half purchased a home in the suburbs, while the number opting for a city center or urban area declined to 33 percent. Purchase in small towns also increased slightly.
Two-thirds purchased single-family detached homes and 23 percent selected a condominium or a town home.
Described as “more affluent than the average California home buyer,” CAR says overseas buyers spent a median of $490,000 on a home in the state compared to the statewide median of $447,000 for all buyers. Chinese buyers typically spend even more than most foreign buyers, averaging $831,800 nationally for a home purchase.
Education remains a prime reason for a purchase in the U.S,, particularly for upscale Chinese buyers. Other motivating factors included investment and tax purposes, being near family and friends, and already owning a business in the U.S.
The biggest damper for transactions seems to be lack of inventory. Commitment levels to buildings under construction have been high and most new towers are designed to appeal to international as well as domestic buyers.