America’s housing market is heating up while some foreign markets are on fire and trying to cool down. This has created an opening for international buyers in the U.S. market, and SDAR’s president said San Diego needs to tap into that foreign dollar.
“We are just not out there promoting,” said Linda Lee of the Greater San Diego Association of Realtors. “They don’t know San Diego as a city. They don’t really know what we have. What can we do to attract them?”
She suggested nonstop flights from San Diego to Asian cities and promoting San Diego as “a great city with less congestion, less pollution. And kids are going to be safer in San Diego than in LA.” Weather, lifestyle and commercial opportunities are also ways to promote San Diego.
“This is not the only destination. The entire world is looking for Asians to buy in their country,” Lee said.
Lee said programs at San Diego universities would help attract the educational buyers who are looking to send their children to U.S. schools. Boarding schools are also in demand for those buyers.
Realtors looking to tap into that foreign dollar should partner with Realtors who speak the language, Lee said.
“I have told many Realtors this: Instead of not having any action, have part of the pie,” Lee said.
Linda Lee returned this month from a trip to Asia, where she attended a conference in Singapore, which has increased a tax on foreign buyers as part of a new measure to cool the housing market.
Foreign buyers in Singapore have to pay a 15 percent tax on the purchase price. And if Singaporeans wish to buy a second home, they have to pay a 7 percent tax. Foreign buyers buying a second home in Singapore must pay 3 percent tax on top of the 15 percent.
“They are keeping people from buying because the market has appreciated so much, they want to calm the real estate market down,” Lee said.
Hong Kong’s government also imposed a 15 percent tax on property bought by foreigners, Lee said, and raised a special transaction tax. If a property is sold within three years of being purchased, there could be as much as a 20 percent tax on that sale, she said.
Once a property has been held for more than two years in Macau, the seller doesn’t have to pay taxes on appreciation, she said.
“In Beijing, the Chinese government basically said they want the price to come down. They want the price to come down because it’s inflated,” Lee said.
The owners of a Macau real estate group told Lee that appreciation could have been between five and 10 times in the past five years.
“Five to 10 times — that’s huge,” Lee said.
The Chinese bubble is different from America’s bubble because of the amount of cash in the market, Lee said. In 2005 and 2006 the U.S. saw buyers with 100 percent financing.
Lee said she has been told that there’s a minimum down payment of 30 percent in many areas of China. In Hong Kong, Lee said the loan to value is 52 percent, meaning there’s a 48 percent average down payment.
International buyers or recent immigrants who have moved within the past two years bought $82.5 billion worth of real estate between March 2011 and March 2012, a 24 percent increase from the prior year, Lee said, according to the National Association of Realtors.
Some 62 percent of international buyers were cash buyers, Lee said, and 26 percent of them were from Asia. Also, 30 percent of the Chinese buyers bought properties in California.
These international buyers look to California as a place to send their kids to school, Lee said. Other buyers include the investment buyer and the immigrant buyer.
“Why are they buying in the U.S.? For the affordability, for the security and for the opportunity,” Lee said.
When checking where people are searching for properties, Lee said, Realtor.com found that San Diego is the No. 1 searched city in Japan – which she thinks was influenced by the nonstop flights between San Diego and Japan, which began recently.
“If we have more flights, one from Beijing, or Shanghai, we could bring more people here instead of them most likely buying in Los Angeles,” Lee said.
The most searched cities by Chinese buyers are Detroit, L.A., Irvine, Las Vegas and Orlando, Fla. Lee said, according to Realtor.com.
“Detroit is now on everyone’s screen because Detroit does a very good job promoting their real estate outside the U.S.,” Lee said.
At the real estate conference in Singapore, Lee saw people from Florida, L.A. and Kansas promoting their areas. One Kansas university was there recruiting students, and Lee said that booth was very busy.
When she asked why people want to send their kids to that school, Lee was told by the person who put the conference together that, “Well, they are here. By being here, they are going to have students enrolled in their schools.”
America’s top five countries of origin for international buyers are China, India, South Korea, Canada and Taiwan, Lee said. China has more than 127,000 international students in the U.S. and California has more than 94,000 international students. Lee said there are about 250,000 international students in the U.S., and 48 percent of the students have parents who buy a home for them here.
“At least 48 percent of parents will buy, and that number is trending up,” Lee said. “Wherever they end up sending their kids, they’re going to buy real estate.”
Lee moved to San Diego from Taiwan 30 years ago. When she lived in Taiwan, she said her father did reasonably well there with his career, but felt Taiwan was not safe.
“In terms of long-term stability, they worry about China threatening to take over,” Lee said. “And China is a communist country. They always have this fantasy about America.”
She quoted a Chinese saying, “Even the moon is bigger in the U.S.”
“In China, if you look at the history, they are still a communist country. As one person goes up, the other person falls out of favor — you don’t know what will happen,” Lee said.
“The Chinese government, I believe, can use eminent domain to take properties for the best interest of the country or the government. So they don’t feel comfortable. They feel, what if they come in and take their wealth away? And they could.”
There is low inventory in San Diego, but Lee said she thinks any competition is healthy competition. Foreign buyers like to buy in the U.S. because of the transparency of the transaction, she said.
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March 29, 2012 -- George Chamberlin talks to Linda Lee, a broker with Keller Williams San Diego Metro, about China's interest in investing in the U.S. real estate market.
Aug. 22, 2011 - Executive Editor George Chamberlin talks with Robert Kevane, president of the San Diego Association of Realtors, about the real estate market, employment and more.
Aug. 20, 2010 -- Executive Editor George Chamberlin speaks with Mark Marquez, 2010 SDAR president, at the San Diego Association of Realtors' Real Estate Summit.