Updated June 21, 2012 10:37 p.m. ET
In a nod to Asian buyers, the
building put many of its most luxurious full-floor apartments on the
80th through 88th floors—a clever way to appeal to the Chinese belief
that eight is the luckiest number. Apartment 88 is under contract to a
Chinese buyer for around $50 million.
Fifteen
buyers from Asia have bought roughly $1 million apartments at New
York's 515 E. 72nd St. in the last six months. In downtown Los Angeles,
half of recent buyers for the new Ritz-Carlton Residences, which AEG
developed, hail from Asia. Some buy in bulk: Late last year,
Fang Yi Liu,
a businessman from Shanghai, snapped up 17 apartments for a total
of $14 million in the Artech, a modern glass building resembling a
cruise ship that overlooks the Intracoastal Waterway near Miami.
Interest
is surging even in parts of the country China-based buyers weren't
traditionally interested in. Richard Zhou, a 41-year-old investment
advisor who lives in Shanghai, paid $200,000 for a home in a large golf
community in Fort Myers, Fla., last year. He said he bought in the
community sight-unseen, trusting his friend who had bought a home there a
few months earlier. Mr. Zhou spent two weeks studying the U.S.
real-estate market and quickly decided Florida was a good bet because
"it was highly impacted from the financial crisis," adding that later in
his life he plans to retire there. "Florida is indeed a sunshine state,
the weather is really pleasant, and the air quality is very good. Also,
the food is safe, too."
Buyers from
China and Hong Kong accounted for $9 billion of U.S. home sales in the
12 months ending in March, up 89% from 2010, making them the
second-largest group of foreign buyers of homes in the U.S. behind
Canadians, according to data released earlier this month by the National
Association of Realtors. And many real-estate agents say the those
figures are too low, as they track only sales on the multiple-listing
service and don't reflect private sales. In addition, the data are based
entirely on how real-estate agents classify buyers.
Dolly Lenz,
a luxury-real-estate broker in New York, estimates that half of
her clients now hail from China, more than twice the amount two years
ago.
Pamela Liebman,
chief executive of the Corcoran Group, says that the shopping for
luxury properties by China-based buyers has accelerated dramatically
since the start of 2012 to record-breaking levels. Foreign-investor interest in the
American real-estate market began during the housing crisis, when
plummeting property prices turned the U.S. into an attractive target for
buyers around the world. The yuan has continued to rise—more than 7%
against the dollar since June 2010—as has the number of China's
wealthiest individuals. Meanwhile, in an effort to deflate China's
housing bubble, the government has placed restrictions on multiple
real-estate purchases and recently began to require more equity for
mortgage loans.
"Because it's becoming
more restrictive to invest at home and because Europe is so unstable,
the U.S. property market is becoming incredibly attractive to the
Chinese," says
Patrick O'Neill,
whose eponymous company in Hong Kong helps Asian investors buy
real estate in the U.S. "America offers low interest rates, discounted
prices and a safe harbor for their money." Di
Meng, a native of Changchun who lives in Beijing, is currently
attending the University of Southern California. The 23-year-old says
the volatility of the Chinese government and, consequently, its economy,
pushed him to invest in real estate overseas. Not keen to rent student
housing, he recently paid around $800,000 for a Ritz-Carlton condo in
downtown Los Angeles. "Compared to China, the United States is
relatively stable," he says. "China has a purchase limit policy because
the Chinese government tried to control and cool down the housing market
in China, so if you've already bought a home in China, they do not
support you to buy another."
In the last
six months, 10 to 15 pricey units in One57, a glitzy new high-rise
being built in midtown Manhattan, went into contract with wealthy
Chinese buyers. When completed, the building—which features a Park Hyatt
below the condo units—will be New York's tallest residential building.
HNA Group, one of China's largest conglomerates that recently bought
several commercial properties in New York, signed contracts for two
full-floor apartments and two half-floor units in One57, according to a
person close to the situation. On West 57th Street across from Carnegie
Hall, overlooking Central Park, the building is slated to open in 2013. Real-estate
agents typically divide buyers into four distinct groups: the
super-wealthy buying properties upward of $15 million for personal use;
those buying homes for a few million dollars, also for personal use;
those purchasing investment properties, usually in the $1 million to $2
million range, to lease out; and those buying in bulk, as a commercial
strategy. Steven Loh,
a businessman from Singapore who runs a real-estate advisory
group called Silkrouteasia Capital Partners, is a bulk buyer. He
recently purchased six apartments in Los Angeles's Ritz-Carlton
Residences for about $1 million each and is also facilitating a $60
million transaction with several overseas investors to buy more than 50
condos in another Los Angeles development. Mr.
Loh says he wanted to get a jump on the market before property values
rise. He isn't worried about Americans—he thinks it will be other
Asian-based buyers and businesses who drive up prices, so he is courting
them now to invest in the deals he's striking. "I believe there is a
strong desire among Asian high-net-worth individuals to allocate, say,
10% to 25% of their wealth to U.S. assets," he says. "Asians have a high
propensity and love for acquiring good quality real estate."
Some U.S. real-estate agents say that
the current property craze reminds them of the real-estate shopping
spree by the Japanese in the 1980s, a phenomenon that died with the
collapse of Japan's economy. Unlike those days, buyers now tend to be a
little more cautious, trying to avoid paying above market value and
obsessively calculating rates of return. In addition, while borrowing
drove many of the Japanese investments in prior decades, Chinese buyers
tend to pay in cash. Like many investors
from Asian countries, buyers from China mostly want new construction.
At Lambert Ranch, a gated development so new in Irvine, Calif., that the
leaves on the palm trees haven't yet unfurled, buyers are lining up to
buy homes asking between $900,000 to $1.5 million, says
Mei Zhou,
a Mandarin-speaking real-estate agent in Irvine who uses Skype to
communicate with her clients in Asia. About 50% of Lambert's buyers so
far are foreigners from Asia, say people close to the community. The
development's first 42 available homes sold out in five weeks.
Real-estate
agents say that while Chinese investors primarily target New York, Los
Angeles and San Francisco, they are beginning to expand into cities in
southern Florida as well as outposts such as Seattle and Las Vegas.
That's a sea change from a few years ago, when they were "fearful" of
Florida, says
Steven Lawson,
chief executive of Windham China, a Shanghai-based company that
helps find Chinese buyers property in the U.S. "There was a false
perception in China that Miami is not a supersafe city because a lot of
Chinese watch 'CSI: Miami' or 'Miami Vice' on TV."
Over
the past year, Mr. Lawson says he sold about eight homes in a large
golf community in Fort Myers to Chinese buyers. The houses, which span
about 2,500 square feet and come fully decorated, cost less than
$250,000—a bargain to Beijing and Shanghai residents used to adding
another zero to buy a home of that size. Real-estate
agencies and banks are mobilizing to capitalize on the boom. Mr.
O'Neill says demand for his company's semiannual investment seminar,
which teaches pre-qualified buyers in China about how real-estate buying
works in the U.S. and is held in ballrooms and private clubs, has
doubled over the last six months. Banks in China are ramping up their
services in the arena, too, flying in U.S. real-estate agents to sit on
panels about how to buy property in the U.S. and showcase trophy
properties in New York and Los Angeles in PowerPoint presentations.
With options like
wok kitchens—a separate space with strong ventilation needed for
aromatic cooking—or a guest unit for a grandparent, California's Lambert
Ranch was designed from the start with the Asia-based buyer in mind.
Robert Hidey, Lambert Ranch's architect, who has designed extensively in
China, built the community's main roads on a north-south axis and
ensured the homes had south-facing windows—both pillars of good feng
shui. In addition to creating multigenerational housing options and wok
kitchens, the New Home Co., which developed Lambert Ranch, also buried
gold coins on the property in accordance with feng shui principles. To
avoid having any addresses starting with the number four, unlucky in
China, the development starts its addresses at 50. In
Los Angeles, brokers for the Ritz-Carlton Residences have been inviting
buyers in China to stay for two nights free at the hotel as part of the
Ritz's broader strategy to appeal to Asian buyers, called the "Pacific
Rim Plan." The visit concludes with a Champagne toast in one of the Ritz
residences, although guests must pay their own airfare. "All we do now
is visit China, Hong Kong and Singapore," says
Jim Jacobson,
who runs international sales for the Ritz-Carlton Residences.
"We've realized that's where our market lies." The Ritz-Carlton
Residences range from one-bedroom condos costing around $850,000 to
larger ones priced at $2.5 million to penthouses, which top out at $9.3
million.
Others are simply turning to
Chinese media to market themselves—and their wares.
Jing Chen,
a broker for Corcoran in New York, writes a column in Mandarin
for a popular Chinese website, Sinovision.net. Last year, she wrote a
column about Harlem brownstones gaining in value; eight months later,
she sold three of them to Chinese buyers, each for somewhere between $1
million and $2 million apiece. "The Chinese are like Hollywood celebrities," she says. "Once one Chinese person buys a brownstone, they all want one."
