Seattle is #1 City for Chinese Homebuyers
FutureCast Forum Members Array Top Ten Reasons Why Seattle is So Popular
Seattle is number one in the eyes of mainland Chinese homebuyers exploring overseas investment in real estate. That’s according to Juwai.com, a popular home search site within China, and this finding is tracking with other data points according to local brokers that specialize in international homebuyers.
Above: Juwai.com recently reported that year-to-date 2017, Seattle was a top search market for Mainland Chinese consumers exploring real estate in the U.S.
“Seattle is most certainly on the map with Chinese investment and immigration prospects,” said Dean Jones, President and CEO of Realogics Sotheby’s International Realty and a Founding Member of the FutureCast Forum, which studies market trends affecting the trajectory of Seattle-area real estate.
Jones is also a member of the Washington State China Relations Council, which was host to a high-profile visit from Chinese President Xi Jinping in September 2016. He’s documented that event and many others in an article The Seattle Pivot Begins, which chronicles Seattle’s rise as major destination for Chinese investment and immigration.
To be sure, buyers from Hong Kong and Mainland China have been migrating to North America in spades over the last 20 years, especially since 1997 when Hong Kong was handed over to China and residents and investors sought financial safe harbor in overseas real estate. The most popular markets have long been Vancouver, BC with its close West Coast proximity and Canada’s then-favorable immigration policies. Both San Francisco and Los Angeles were also top cities and remain so, albeit in recent years Seattle’s profile and popularity has risen dramatically. The allure of Seattle was further cemented in August 2016 when the British Columbian government imposed a 15-percent foreign buyer tax in Vancouver’s Lower Mainland, helping redirect Chinese nationals south of the border as captured by a recent news article by CBC News that claims foreign buyers are heading to Seattle at a “frenetic” pace.
Such a preference for Seattle had already been picking up speed organically. An early booster shot came after the 2013 surprise box office hit movie Beijing Meets Seattle (Finding Mr. Right), which glamorized living in Seattle to more than a billion Chinese consumers. As it turns out, this fictional tale isn’t that far from the truth.
According to another survey released by The Hurun Report and a CNBC News article that followed “half of the Chinese millionaires are considering moving overseas, and the U.S. remains their favorite destination. Top considerations include education and living environment. Of the top destination cities in the U.S., Seattle was second only to Los Angeles.
FutureCast Forum members cite the following top ten reasons why Chinese investment and immigration is on the rise in the Seattle metro area:
1. Preferred Climate
While the moderate summer temperatures and wet winters might seem like a disadvantage when compared to Southern California’s sunshine, Chinese buyers actually prefer the climate of the Pacific Northwest. For much of China, especially in southern provinces, the summer heat and humidity can be oppressive. Chinese will seek air-conditioned shelter where it’s available and walk with umbrellas for mobile shade. Visiting Chinese remark on the beauty of the seasons found in the Seattle area and note that the weather is less prone to typhoons or major meteorological events.
2. Stable Government
A primary reason Chinese seek to diversify their investments in the U.S. is to secure financial safe harbor from policy changes in China. Many fear their government could impose new regulations that may compromise its citizen’s wealth preservation or otherwise restrict the flow of capital. Affluent Chinese prefer the government structure in the U.S., which includes constitutional protections from knee-jerk policy making. This offers global wealth both a refuge and a stable dollar, protected from shifting policies and weakening currencies elsewhere. This preference for the U.S. was further advanced when Canadian provincial authorities recently imposed the aforementioned foreign buyer tax as well as a vacant home tax both the cities of Vancouver and Toronto, effectively diverting overseas investment south of the border. As it turns out, the government of Canada has begun exhibiting the very sort of unexpected policy changes that have been driving capital from China.
3. Investment Fundamentals
The Seattle metro area is experiencing an unprecedented economic boom, which is attracting individual and institutional investment from around the globe. In fact, the Urban Land Institute ranked Seattle their top pick for investment prospects according to the 2018 Emerging Trends in Real Estate. So, it’s of little surprise that Chinese investors are among the most active. This includes private individuals, equity funds, and real estate developers. Most experienced this sort of sustained growth during China’s urbanization trends over the past 20 years and enjoyed significant yields in peer markets of Vancouver, San Francisco and Los Angeles as well. Now that Seattle is following suit, it provides a familiar investment trajectory to follow.
4. Convenient Access
As the closest U.S. mainland port to China, it’s understandable that Mainland Chinese carriers like Hainan Airlines and Xiamen Airlines are joining domestic carriers like Delta Airlines, who has made SeaTac International Airport their West Coast global hub with frequent direct flights to Asia. With the rising competition, Chinese are finding quicker and cheaper flights to and from China. These benefits are not just good for leisure, but for business too, helping to open up trade relationships such as within the burgeoning technology corridors between Seattle (Silicon Forest) and Shenzhen (Silicon East). It’s also noted that Seattle is a mere 150 miles drive from Vancouver, BC—historically ground zero for Mainland Chinese investment and immigration.
5. International Tolerance
The Seattle area has long benefited from international trade and is regarded as a diverse and multicultural city with a vibrant Chinatown and International District. This cultural acceptance was furthered during the meteoric rise of Microsoft in the late 1980s and 1990s when thousands of foreign tech workers, mostly from Asia, descended upon the greater Eastside and throughout the Pacific Northwest. As many vested with their economic opportunities and sought citizenship, they raised their families here and became an important part of the resident base. Today, the City of Bellevue, by example, boasts approximately 30 percent of its population being of Asian descent and Chinese nationals are the fastest-growing demographic in the region. The rising demand for Asian grocery stores, cultural venues, and Chinese-owned businesses has drawn investment for ethnic offerings, making life in the Pacific Northwest as convenient and comfortable as a suburban annex of a Chinese city. Recognizing the shift in demographics, many local businesses have included Mandarin-speaking sales professionals or offer marketing literature in Chinese. As a sign of the times, Tiger Oak Media, publisher of Seattle Magazine, has jointly published its all-Chinese Seattle Luxury Living magazine for two consecutive years alongside contributions by Realogics Sotheby’s International Realty. The brokerage firm’s Asia Services Group—a collective of specialized brokers familiar with the language and logistics of working with overseas buyers from Asia—is entering its third year of client service.
6. Robust EB-5 Development
The EB-5 investment program operated by the USCIC offers foreign nationals a pathway to U.S. citizenship by first making an investment, typically $500,000, into a development project within a redevelopment area known as a “regional center.” Seattle has a long and successful track record with EB-5 investment projects, granting both residency and adequate returns (currently, there are 63 authorized regional centers in Washington State). As word spread, this investment program worked much like a self-priming pump with a steady flow of willing Chinese nationals, among other foreign investors, to pursue life in the New World. EB-5 investment is an important source of capital for projects, especially within regional centers where traditional capital stacks may be less aggressive. At the same time, the strong economic fundamentals of the area, coupled with the close proximity to Asia creates a perfect storm opportunity for EB-5 developers and investors alike.
7. Nationally Ranked Education
Education is engrained within the Chinese culture and attending and graduating from prestigious schools and universities is revered. Fortunately, the Seattle / Bellevue area offers many nationally-ranked institutions including elementary schools, high schools and universities. The top high-schools include Tesla STEM High School in Redmond, the International School in Bellevue, the International Community School in Kirkland, Aviation High School in Tukwila and Newport, Roosevelt and Mercer Island High Schools, to name a few. Most offer English as a Second Language (ESL) programs with a high percentage of students being Chinese. Chinese also represent about half of the foreign-born students at the University of Washington (UW), which ranks thirteenth among the Shanghai Ranking of World Universities (the only other higher ranked West Coast universities are located in California). Bellevue’s new Spring District is also home to the Global Innovation Exchange (GIX), which is a partnership between major research universities like the UW and Beijing-based Tsinghua University, and corporations like Microsoft, to develop leaders in innovation. For China’s rising middle class, young parents view Seattle as a proximate, affordable, and optimized market to raise their children in a healthy and viable region of opportunity—especially when compared with other West Coast peer cities that are more costly and tax-burdened, and which offer fewer economic prospects for graduating students entering the workforce.
8. Relative Affordability
Despite the Seattle metro area sporting the U.S.’s fastest-growing median home prices for the past year, Chinese buyers note that similar homes cost between a third more to twice as much (depending on the neighborhood) in other West Coast gateway cities like San Francisco, Los Angeles, or Vancouver, BC. According to recent analysis by the Northwest Multiple Listing Service, the average price of a single family detached home climbed 17.6 percent to US$735,000 from US$625,000 a year earlier. Comparatively speaking, the benchmark price for a detached home in Metro Vancouver costs CN$1,617,000. That’s about two-thirds more expensive when factoring exchange rates. Now consider that a Chinese national who purchases in Vancouver is subject to the 15-percent foreign buyer tax—that makes a similar home in Seattle about half the cost. This value advantage is even greater among waterfront properties, which are relatively abundant in the Seattle area, and are both rare and extremely expensive in Vancouver.
9. No State Income Tax
The fact that Washington State has no income tax is a particular benefit when comparing to rival markets like Canada or California, which imposes some of the highest combined tax rates in North America. Chinese families taking root in the Seattle area enjoy more discretionary spending. Sales representatives of luxury retail stories and auto brokers note that Chinese nationals are top consumers for luxury goods in the U.S., in large part because such products in China come with high tariffs, but not when purchased in the U.S.
10. Natural Beauty & Abundant Resources
The clean and clear skies of the Pacific Northwest reveal its pristine natural environment, which boasts many bodies of water including lakes, Puget Sound, and waterways, not to mention dramatic mountain ranges, lush forests, and open spaces. While China also enjoys many countryside regions of equal beauty, the large cities have become crowded, and oftentimes suffer from air pollution that limits outdoor recreation and natural vistas. Also, with global warming and perennial challenges such as water shortages and wildfires threatening California’s ecology, the Pacific Northwest provides a sustainable and confident comparison.
Not surprisingly, local developers have been eager to get in front of the rising demand from Chinese buyers, both those currently overseas and those already living in the Seattle area. Vancouver-based Burrard Grouphas opened the 389-unit NEXUS condominium tower for sale in downtown Seattle, represented by Realogics Sotheby’s International Realty.
“While it’s still a minority of our buyers, we’re proving to be a very popular building for international clientele,” confirms Michael Cannon, the Sales Director for NEXUS. “For some, they view Seattle as the next Vancouver; and for others, they are planning ahead to make Seattle their home, either as a primary or secondary residence.”
Cannon notes the deposit structure of buying during presales. Requiring five-percent earnest money upon purchase and another five-percent deposit increase on June 30, 2018, this is actually well-suited for Chinese buyers facing capital controls. He says NEXUS is targeting occupancy in the fall of 2019, so that provides the time to organize their funding.
These trends led Cannon to participate in an upcoming event and publication known as the Noah Annual Gala, held in Xiamen, China from November 22 through December 5. Founded in 2005, Noah Holdings Limited (NYSE Listed) is a leading wealth management services provider with a focus on global wealth management and asset allocation for high net worth individuals (HNWIs) and enterprises in China. The event is excepted to draw more than 6,000 clients. While this is an impressive collection of HNWIs, Bain & Company and China Merchants Bank estimates there are more than 1.6 million HNWIs in China, and that this is less than one percent of the total population.
“The potential impact of China’s HWNIs is enormous for the Seattle area,” concludes Jones. “I truly believe this is just the beginning of what will be a long, sustained migration of global wealth ascending upon the Pacific Northwest.”