“America For Sale” or Overemotional Xenophobia?

Is It A Return to ’80s Style Protectionism Or Just A Slow News Day? Both?

housesSeveral American media outlets have reported lately on groups of wealthy Chinese coming to the US to snatch up distressed real estate. Although these stories ring of sensationalism, they are true — however, as with everything, they must be qualified. Here’s BusinessWeek‘s recent take on these mainland “real estate tourists”:

At the end of February, 40 wealthy Chinese embarked on a housing tour of the US. The trip, run by Soufun Holdings, one of China’s largest real estate companies, kicked off in Boston and continued on to San Francisco, Los Angeles and New York. For a fee of US$3,600 apiece, tour group members perused homes in the US$500,000 to US$1 million range.

The trip was so popular that Soufun had to turn away 400 applicants.

“Every day people are calling about it,” said Zhao Xinyu, public relations manager at Soufun’s Beijing office. Based on customer demand, Soufun may expand such trips to include Australia, the UK and Japan.

The popularity of Soufun’s trip has led to speculation that this might signal a new trend in Chinese spending habits, with individuals looking to store more of their wealth overseas.

Before they get too far conjuring up images of hoardes of newly-rich Chinese businesspeople rushing to buy up entire neighborhoods, the story pulls back to reveal that, actually, due to monetary restrictions, individuals in China are legally restricted from taking more than $50,000 out of the country in a given year. Although, as with everything in China, people can get around this restriction, and anyway, Chinese buyers have been purchasing properties in the US for years — they just haven’t been so open about it until it was considered more newsworthy. Since real estate prices started coming down, people all over the world have begun looking at buying property — it’s a good investment, it’s comparatively cheap, and there are plenty of empty houses on the market.

[Rupert Hoogewerf, CEO of the Hurun Report, a web portal that provides information on China’s wealthy] estimates China is home to more than 50,000 people with a net worth of over US$10 million, and more than 800,000 with a net worth of US$1 million. But Chinese law restricts individuals from taking more than US$50,000 out of the country in one year.

According to Hoogewerf, the restrictions mean buyers are predominantly traders, or those with businesses that export overseas. These people have stockpiles of US dollars and the savvy to navigate real estate overseas.

I don’t mean to re-post this story to make it sound like there is more to this story than there actually is. On the contrary, I find stories like this only get press coverage because they appeal to an inherent protectionism that some people feel during economic downtimes. It rings of memories I have of my childhood, during which Japanese investors went on an American buying spree, collecting marquee properties like Rockefeller Center and setting people ablaze with fear that the Japanese were going to “buy the whole country.”

As we all know now, the Japanese didn’t buy the whole country, and we’re not all speaking Japanese now. The China Herald blog goes into this a little bit today — pointing out that, like Hoogewerf says, the vast majority of Chinese investors buying properties in the US are doing so because it’s their job — they’re real estate traders. But these stories connect with people on an emotional level, particularly when so many nationals have lost their jobs or their houses. So it’s low-hanging fruit for media outlets (and not just in the US). But I still think it breeds misinformation among suggestible people and keeps people in the dark to the fact that it’s not just Chinese investors buying distressed American properties. But a story about a group of British people buying property in Las Vegas just doesn’t seem to be newsworthy enough.

I just had to post one more quote, from the Miami Herald (admittedly, an easy target), on this topic — it’s just too great (emphasis mine):

Luo Jie, a [Chinese real estate] tour organizer, agreed: “You can buy a much better home in America for $400,000 or $500,000 than you can buy [in Beijing].”

Luo pulled out a promotional folder written in Mandarin with numerous listings of foreclosed properties in Los Angeles, San Francisco, Boston and New York.

”There are more and more foreclosed properties on the market,” Luo said, adding that his firm, China Swan International Tours, will take an initial tour group within a few weeks.

Nevermind that “Mandarin” is not a written language but a spoken dialect, the portrayal of the tour guide as a ravenous, greedy broker further belabors the point they’re trying to make — be afraid, foreigners are buying America. Like I touched on earlier, it all rings of xenophobia a la the late Reagan years. No, we’re not all going to be speaking Chinese. No, they’re not going to buy up the whole country. They’re bringing money over the Pacific Ocean and leaving it in real estate markets that need it — isn’t that kind of a good thing, in the long run? As one potential buyer, Shen Yue, sees it, both sides benefit from foreign buyers scooping up foreclosed houses in the US:

The way Shen sees it, the Chinese may be a big help to Americans saddled with mortgages they cannot pay. He says there are several hundred thousand Chinese like him who easily can pay up to $500,000 for a house.

“We are a huge market for the USA,” he says.

One response to ““America For Sale” or Overemotional Xenophobia?

  1. Pingback: Topics about Houses-for-sale » Archive » "America For Sale" or Overemotional Xenophobia?

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