Chinese Homebuyers Are Moving into Seattle
December 17, 2014
Quick quiz: Whats the most expensive housing market in North America? If you answered Beverly Hills, San Francisco or Manhattan, thank you for playing. Its actually Vancouver, British Columbia, where the median income is a relatively modest $71,000 Canadian and plain-Jane, single-family houses in good neighborhoods sell for more than $1 million.
In recent years, mainland Chinese have been buying Coal Harbour condos and Shaughnessy megamansions, and the consensus is that these rich immigrants are the main reason for Vancouvers skyrocketing housing values.
Could Seattle be next? Lets ask Zillow, the Seattle-based online real estate database.
Chinese buyers have eclipsed Canadians as the number one group of foreign property investors in the United States, says Amy Bohutinsky, chief marketing officer at Zillow. And the demand is there for Seattle.
On the day we talk in September, Bohutinsky has her research department run an internet protocol, and it finds lots of eyes in China looking at homes here. We did an IP of where they are searching right now, Bohutinsky explains. The number two destination in the U.S. is Bellevue, and the number five destination is Seattle.
On a minor arterial in Medina, a man from Shanghai and his grown daughter are touring a five-bedroom, five-bath home billed as a European villa. As they pass under crystal chandeliers and pad along intricately inlaid hardwood floors, I wait for the oohs and aahs that never come. That is, until they head through the French doors into what I would consider a so-so backyard: fig trees, lawn, shrubbery. They think its pretty exciting, that shrubbery, glowing green on a partly cloudy afternoon.
Rather shyly, the man and his daughter agree to be interviewed. Im tense because Ive been trying to meet actual house hunters from China and for weeks real estate agents and developers have steered me clear of them.
The house hunter wears neat black jeans and a windbreaker. He is fit and has close-cropped hair and smiling eyes. His daughter is in denim shorts, a striped T-shirt and a hoodie. They look like regular Americans only the fathers man bag suggests they may be overseas buyers who can afford to look at the $4.5 million house.
With the help of a real estate agent who speaks Mandarin, Jack Chen says he and his daughter are on a monthlong trip scouting for a home that they will eventually make their permanent residence. I have friends in Vancouver, Chen says, but they told me to look in Seattle because it is the best city on the West Coast.
At first he didnt get it. Vancouver is prettier and the living style is more attractive, he asserts.
But Seattle is growing on him, especially Medina, which he considers a bargain compared to what he could get in Vancouver bargains being relative, as Medinas median home value is $1,721,000. The lots are large, your neighbors are not so close and it is possible to buy waterfront on a lake, Chen explains. Then he mentions that there are opportunities for high-tech entrepreneurs in Seattle, which leads me to ask what he does for a living. The real estate agent refuses to translate, explaining that in China, such a question is rude.
Rude reporters aside, greater Seattle is attractive to Chinese urbanites because it offers some things that cant be bought in Beijing or shanghaied in Shanghai at any price: clean air and the room to breathe it as well as land that you actually own.
Here in Washington, we have a fee-simple system, says real estate broker Joseph Ho, director of new markets development for Berkshire Hathaway HomeServices Northwest. That means you own the land forever; you pass it down to your children. In China, you purchase a land lease and after a certain amount of time, usually 75 years, the land goes back to the government.
Economic uncertainty and unrest in China are other reasons wealthy families are looking to move money and sometimes their children out of China. I have clients who are looking at every attractive option to park their money outside of China, says real estate agent Mary Pong. [Its] also a way to get their children out of China for an education.
Statistics from the University of Washington confirm that trend. There are more students from China at the UW than ever before. And those numbers may have gotten a boost because, believe it or not, Seattle is trending as a sexy city among Chinas college-age kids.
Our city is lovingly portrayed in a movie called Beijing Meets Seattle (also known as Finding Mr. Right), in which a pregnant woman from China flies to Seattle in search of true love. (As with most films set in Seattle, it was filmed almost entirely in Vancouver.) The 2013 film is one of Chinas top-grossing movies of all time, which may also explain why Chinese tourists, especially young women, were the top foreign travel group in Seattle in 2014.
Ok, lets get back on track. Hit movies and real estate agents impressions are one thing. But you still have to ask yourself: Is this really happening? Where are the black-and-white statistics on Chinese buyers in Bellevue and Mercer Island and Queen Anne? Well, there arent any official numbers. The Northwest Multiple Listing Service does not track demographics on who is buying in greater Seattle and neither does the Seattle-King County Association of Realtors. However, the National Association of Realtors does collect demographics, and it estimates that during the 12 months ending in March 2014, buyers from China purchased $22 billion of real estate in the United States.
It isnt easy to quantify how many of those billions were spent in the Seattle area, but just my unscientific search of recent sales on Redfin in a neighborhood I figured would appeal to global house hunters revealed that on the fabled peninsula of Hunts Point, powerhouse Seattle names such as Nordstrom, McCaw and Ballmer now have neighbors named Zhao, Huang, Tsang and Liu (representing both Chinese-Americans, most likely, as well as offshore investors), who spent a collective $24 million on real estate.
And for every luxury sale, agents say they are selling many more homes in the upper-middle-class range to buyers from China. I have clients who are considering Seattle because in California they have been priced out, Pong says. They are looking at condos and homes in Seattle, close to downtown. If they have kids, they are looking on the Eastside in a good school district.
The Northwest Multiple Listing Service ran some sales statistics for this story and found those neighborhoods close in to Seattle and Bellevue have appreciated a lot recently, especially West Bellevue, which is up 20 percent over a six-month period ending in September 2014 compared to the same period a year prior. Pending sales of homes around western Washington surged more than 13 percent in September compared to a year ago.
Thats good news if you already own real estate here. But its disheartening for garden-variety Northwesterners who tell tales of losing house after house to buyers from China who bid up the asking price and pay, sometimes literally, with bags of cash. That frustration can be compounded by real and exaggerated tales of charming old houses flattened for McMansions or, perhaps worse, standing vacant for extended periods of time eroding values and the soul of a neighborhood.
While many international buyers, including those from China, intend to live in the homes they buy, there are examples where they never got around to it. And then there are global investors, some of them from China, who buy American property to diversify their portfolios, not because they need another house.
Vancouver, which has been a top spot for buyers from China for decades, is experiencing a problem with vacant homes. According to a blog called Beautiful Empty Homes of Vancouver, global buyers bought homes as investments, never intending to move in. The blog documents dozens of vacant properties, some of them grand old homes in tony neighborhoods, boarded up and covered in graffiti.
Dont own a home and dont care? Renters can also feel the impact when a city is sought after by global citizens. One example: Zillow says the median rent in Bellevue is $1,995 higher than Seattle metros median rent of $1,599. According to Chris Salomone, Bellevues director of planning, this is due in part to some big plays investors from China have made on land zoned for high-rise apartments in Bellevue. Asian investors have bought parcels downtown in the urban core, Salomone says. They are overpaying for it. The fact that they are overpaying translates into inflated land costs and construction costs, and when the building is finished, the owner has to increase the rent.
But Chinese investors are also building market-rate housing and creating jobs for locals under the EB-5 visa program. The visa gives foreign citizens a way to get a green card and immigrate to the United States in exchange for a capital investment of $500,000 to $1 million in an American development that creates 10 permanent jobs. Such projects are underway right now from Tukwila to Monroe to Everett to downtown Seattle.
According to Kevin Stamper, executive director of the Seattle Regional Center for the EB-5 visa program, 85 percent of applicants are from China. Some of those investors come from Vancouver because Canada canceled its foreign investment visa this year, chucking more than 60,000 applications. That would explain, as much as anything can, a very strange sight on a recent afternoon in Seattles Belltown neighborhood.
On Fourth Avenue in the shadow of the Cinerama, men in suits, cute children, the mayor of Seattle and actor Tom Skerritt stand shoulder to shoulder, wearing bright yellow and white ceremonial scarves called khatas and shoveling sand on the sidewalk. Four Tibetan monks usher a well-dressed crowd into Dean Transmissions, a dimly lit one-story garage, all peeling paint and cracked concrete, where they chant and ring bells at a table covered in colorful silk.
We pray for no obstacles for the building, explains one of the monks, who had driven down from Vancouver. The building he is referring to is Potala Tower, a $190 million apartment house and hotel that will spring up 41 stories on the site of the old garage. The project was conceived by local developer Lobsang Dargey, a former monk from rural Tibet. It is funded by Chinese families seeking a piece of the American dream through EB-5 visas.
Back in bellevue, a 40-something Shanghai business owner is well on his way to launching that dream. Frank Gong already has a temporary green card because he is investing in an EB-5 visa project. And that isnt the only claim he has staked in the Pacific Northwest. On this day, hes walking around the outside of a tasteful, gabled new home in Bellevue with his real estate broker, Joseph Ho. Gong will sign closing papers on the $1.9 million house the following day.
This house is four times bigger than my apartment in Shanghai! Gong gushes. The first thing Gong is going to do is enclose the yard so that his youngest daughter can have that dog she has always pined for. He and his wife scouted for property during three trips across America, but eventually narrowed their choices down to either Boston or Seattle. Seattle won out because it has nonstop flights arriving from Shanghai. They chose Bellevue for their two daughters because there is a good elementary school and a middle school within walking distance of the house. But the big reason for the Shanghai-to-Seattle move isnt what you might imagine. Gong does not want to be Chinese or American. He aspires to be a global citizen and wants his daughters to have the same opportunity.
The earth is really like a village, Gong says in slow and careful English. I believe in the future we will understand each other better and better. There will be no big wars.
Gong perfected his English watching American movies subtitled in Mandarin. This is ironic because he believes prejudice springs from watching too many movies. My friends say, Dont go to America. There are a lot of guns. Everyone has a gun. I say, You watch too many Hollywood movies. Then he tells a story about buying lumber in Ohio and being asked by a farmer where he was from. Everyone in China has long hair, the farmer said, a bit tongue in cheek, pantomiming a braided queue down his back. Gong responded that the man watched too many old Westerns. Now we are civilized! Gong told him.
Gong made money with a company that makes hardwood flooring and sells it around the world. Before he heads back to China, hes going to scout warehouses from which he could open a different kind of business in America.
And one other thing Gong is going to do before he heads back to Shanghai. He vows to spend the night in his Bellevue house, even though there is not a stick of furniture in it. Im going to sleep here on the floor, Gong says. Im going to roll around on the carpet and say to myself, This is mine!
WHO’S BETTING ON CHINA?
Zillow Inc., Seattle
Workers in China can indulge in the same guilty pleasure as Americans: surfing for dream properties at Zillow.com. In September, the Seattle-based real estate database launched its first international partnership with Chinas Leju Holdings: The result is basically Zillow in Mandarin.
For us, it is an opportunity to get a new set of buyers, says Amy Bohutinsky, Zillows chief marketing officer. We know the Chinese are already using our site in English, so that will expand.
Lochwood-Lozier Custom Homes, Redmond
We have a brand, says President Todd Lozier. That is important to the Chinese. Lozier has built a reputation creating custom homes for Eastside executives. Today, many of the companys design/builds are bespoke homes for Chinese buyers. Lozier describes these projects in Clyde Hill and Medina as a combination of feng shui flow and American style. They arent looking for a Chinese house, Lozier notes, saying his clients want homes that fit into the neighborhood.
China is a top focus for us right now, says Dean Jones, president and CEO of the Seattle area offices of Realogics Sothebys International Realty. Jones has traveled to China several times to raise awareness of the value Seattle offers compared to other West Coast cities. Realogics is creating an Asia Desk in its Kirkland office, complete with tearoom and staffed with Mandarin speakers who can help clients from China with travel arrangements and finding a school for their children. Jones predicts this is just the beginning of an influx of buyers from China. What is really surprising, he notes, is that China hadnt discovered Seattle earlier.