Asian Investors Eye DC Real Estate

By: Jenny Chen

Washington, D.C. – In 2006 the U.S. housing market spiraled to an all time low, throwing roughly four million families into foreclosure. But our loss was another’s gain. Although the housing market is still merely 52% as strong as it was prior to the housing crash, according to the house sales website Trulia, Asian investors are snapping up U.S. real estate. They view the U.S. real estate market as relatively cheap and the U.S. government as relatively stable, says John Lin, president of Capstar Realty in Gaithersburg, MD. This fervent interest in U.S. properties is turning the real estate market in the DC area into much more of a seller’s market as properties in good school districts and booming business areas are sold soon after they go on the market. While Asian investors have always been interested in U.S. real estate, the recent increase in wealth among Asian countries has made it even more common for people to buy U.S. property.

But these Asian buyers are not actually buying homes for them to live in. The majority of Asian buyers are buying homes for vacation or for their children. “Many Chinese no longer want to leave China,” said Lin. “They have connections and benefits in China that they don’t want to leave.”

However, Lin said, the quality of the U.S. education system is still a draw for many Asian parents and many of them buy homes for the future when their children may study in the U.S. As a result, the homes closest to good school districts are among the fastest to go. The Xinyuan Real Estate Company recently announced plans to develop multifamily residential properties in New York and other U.S. cities. This project is intended to serve wealthy Chinese citizens who are interested in investing U.S. apartment properties, according to Bruce Hawley, the Senior Vice President, Senior Underwriting Counsel at the Stewart Title Guaranty Company. Businessman Steven Loh told the Wall Street Journal in June of last year that because the U.S. government is relatively stable, “there is a strong desire among Asian high-net-worth individuals to allocate, say, 10% to 25% of their wealth to U.S. assets.” According to an article from the Wall Street Journal, buyers from China and Hong Kong accounted for $9 billion of U.S. home sales in the 12 months ending in March 2012, up 89% from 2010, making them the second-largest group of foreign buyers of homes in the U.S. behind Canadians.

Asian investors are also buying up commercial real estate – everything from condos to multi-million corporations. Jim Butler, chairman of the Global Hospitality Group, a law firm for hotel owners and lenders, says that Chinese investors especially like hotels because they are generally recognizable brands.

“There’s a Hyatt in Shanghai, there’s a Marriott in Beijing, these names are familiar to them,” he said. Butler also said that Washington, D.C. is on the hot list for investment although the current leading cities are San Francisco and New York.

While much of the Asian investment comes from China, other countries such as India, Japan, and Korea are also showing a lot of interest, Butler said. In a 2011 survey by the National Association of Realtors USA, foreigners purchased close to 4% of homes in the U.S. Of this, Indian buyers accounted for 7%.

According to the latest survey of the Association of Foreign Investors in Real Estate released in January, preferred property types include multi-family, industrial, retail, office, and hotel. Japan’s Aisin Seiki Company, which makes auto parts pour $120 million in investment into a Michigan facility. Aisin also has built three manufacturing facilities in the U.S. in the last decade and is looking for workers, including in Michigan.

Some are worried that all this Asian investment will hurt U.S. buyers. Michael Schumann discuss these fears in an August 2011 TIME article called “Will Asia ‘buy up’ America?” But Butler said that while this new wave of Asian investment is reminiscent of the Japanese real estate shopping spree in the 80’s. “There’s nothing to worry about. It’s a great opportunity for the U.S.” he said.