Thursday, November 10, 2011

Chinese investors buying New York property

Chinese investors have been aggressively buying up Manhattan New York property in the past year.  I have been interviewed by CNN (Foreigners scoop up U.S. homes), New York Times (China's Wealthy Buying Condo Apartments) and Bloomberg on the topic and thought I'd do a summary of the trend in this blog post.

Overall, there is fear of a double dip in the US economy and the fear is reinforced by current news about the European debt crisis.  China's property market is beginning to slow and it seems there are few safe havens for investment.  Manhattan, New York property may be one of these few safe havens.  Chinese investors observed New York's price stability from the prior recession and view now as a time to enter the New York market while prices are recovering.

Key reasons behind the surge of Chinese investors buying in Manhattan are (i) property prices at bubble levels in China and Hong Kong, (ii) recently imposed government controls in China to manage property price increases.  Wealthy Chinese investors started by investing in Hong Kong but now, prices in Hong Kong are higher than in Manhattan.  In China, a majority of residential properties remain vacant after purchase signaling an over supply at least in terms of demand for rental vs supply.

The weak US dollar is less of a driver because the USD Index has been trading at the 75 point range for about 2 years.  Since property purchase takes about 3 months (vs stock purchase which takes the click of a mouse), I don't think property investors are driven by the weak USD.  This is nevertheless a plus though for the foreign property investor. 

Having represented wealthy clients from Asian countries including China, Hong Kong, Taiwan, Malaysia and Singapore, the reasons for buying in New York fall into several categories.

A key reason is as a long term investment.  This may take the form of a vacation home or a property that is rented out.  A second reason is for the benefit of children who may be pursuing higher education in New York, perhaps at Columbia or New York University.  A U.S. higher education at a top university is still regarded as the gold standard globally.  Investors may also see having a home in New York as a hub in the US if they need to be in the US frequently even if not specifically in New York.  A third reason is the Chinese investor may look to expand business to the U.S. and having property here is a starting point in terms of establishing presence in the US. 

Our Chinese clients prefer new buildings with very good amenities in prime locations.  Light and brightness are very important as this is consistent with Feng Shui principles. 

While almost all our investor buyers plan on holding the property for the long term and for diversification, I do set the expectation that property prices in New York increase in a conservative and stable manner.  This is unlike in Asia where prices are more volatile, able to appreciate (or depreciate) by 30% a year.  Reason is that the investor pool in New York is about 20% of the buyer pool.  It is much more speculative in Asia which explains the higher volatility.

The demand from foreign buyers strengthen demand for New York real estate.  However, I do not expect the New York market to be like a London where foreigners comprise up to 50% of high end property transactions.  To the Chinese investors, New York understands the important of the Chinese buyer segment and welcomes them with open arms. 

Weimin Tan is Managing Director of Castle Avenue Partners, focused on foreign buyers interested in Manhattan, New York property as an investment. He is a top Chinese broker in Manhattan and is frequently interviewed by the media on this topic. He has represented clients from Hong Kong, China, Malaysia, Singapore, Europe, Middle East and from within the U.S. Weimin can be reached at

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