There’s at least one industry China is outsourcing to the US: luxury real estate. Recent trends indicate that the Big Apple beats big cities worldwide as affluent Chinese buyers’ second home of choice.
Properties like the Time Warner Center, the Laureate on the Upper West Side, and 15 Union Square West, with their streamlined glass constructions, resemble those found in Shanghai, Beijing, and Guangzhou. “They [Chinese buyers] gravitate toward high-end quality,” Shlomi Reuveni of Brown Harris Stevens Select, a luxury residential real estate agency, says, “and the collective attributes of the buildings, aesthetics, design and the commitment to quality, give an image of everlasting value.”
Chinese find New York real estate attractive for several other reasons, particularly, making even more money. “Socially, economically, and politically it is a safe haven that is a solid place to invest your money,” Reuveni adds.
Part of the ability to profit off of New York real estate comes from its relative affordability. According to the Knight Frank/Citi Private Bank 2010 Wealth Report, luxury properties in New York run about $1,500 per square foot. Comparable real estate goes for $2,000 per square foot in Hong Kong, $3,600 in London, and $4,300 in Monaco.
Neil Palmer of Christie’s International Real Estate agrees. “They focus on yes, I might want it for my own occupation, but they always ask where the investment rationale is for buying the property,” he says. Many buyers do in fact keep their properties for personal use.
Manhattan condominiums are being used by Chinese buyers as pieds-à-terre and housing for children studying in the city. Such properties cost anywhere from $500,000 to over $10 million. Pamela Liebman, the chief executive of the Corcoran Group, says the average purchase is a one-bedroom apartment for about $1.45 million. While most sales fall at the lower end of the luxury scale, Liebman cited one example of a parent spending $20 million on an apartment for a daughter at college.
Foreign buyers clearly share some American sensibilities – amenities like swimming pools, fitness centers, and concierge services are found in the most sought-after buildings. But there is one national pastime wealthy Chinese investors spurn: taking out mortgages.
Despite the large sticker prices on Manhattan condos, brokers estimate that 50 to 75 percent of transactions by Chinese in New York are paid in cash. Culturally, Asians are loan-averse, thinking that coming to the table with less than the asking price will reflect negatively on them, said Wei Min Tan, a principal of Castle Avenue Partners.
American brokers are hoping to acclimate prospective buyers to banking and mortgage procedures in the United States. While living above one’s means is attractive in the United States, it remains to be seen whether this cultural rite will be lost in translation.
photo credit: luxuryhub, 15 union sq west