Bubble watching is an evergreen media pastime. China “bears” are reporting that the Chinese buying frenzy that drove up prices in Hong Kong is over. Mainland Chinese are having liquidity problems due to tightening credit conditions in China. They’re selling off houses in Hong Kong to get cash. The question we’re hearing is: will wealthy Chinese start selling in the Bay Area?
Not very likely.
Reason #1: Chinese homeowners do not take US buying and selling decisions lightly.
Chinese nationals are not likely to sell off their Bay Area properties anytime soon, says Julie Tsai Law, one of our agents with numerous international clients who own properties in Hong Kong, London and the US. Overseas buyers do a lot of due diligence before deciding to come here, due to high property taxes and lower rate investment return in the US, compared to other overseas markets.
Reason #2: Short term speculation is rampant in Hong Kong.
In Hong Kong, many Chinese people buy and speculate. Pockets with concentrated speculative buyers like the compounds in Hong Kong are impacted by the slowdown in neighboring China. By contrast, the Bay Area has a large variety of buyers, many of whom eventually intend to live in the property eventually.
Reason #3: International investors buy here as a long term investment.
Most Chinese people buy in Palo Alto and nearby cities with intention to eventually occupy, so they are looking at long term investment potential, not short term speculation. The Bay Area market retains its long term investment appeal compared to other major markets across the globe, according to Chris DeSavino, the Western regional director for the commercial real estate business within JPMorgan Real Estate Banking. “Real estate cycles tend to be more severe here than in most markets.” DeSavino recently told The Registry. “San Francisco is more volatile peak-to-trough, it has a strong upward trend through the cycle. “Long-term investors have done very well over multiple cycles.”
Photo credit: Flickr / Steve Webel
