According to Forbes magazine, the United States was the most popular destination for Chinese homebuyers, who spent over $14 billion on US properties in 2016. However, given the shifting monetary policies of the Chinese government, how will Chinese investors be affected?
Recently, the Chinese government tightened their money outflow policy even further. Starting January 1, 2017, the Chinese government issued a new policy stating that any individual transferring money overseas will need to state the purpose of the funds to be used, and these funds cannot be used for home purchases or stock investments. Although the exchange policy of $50,000 per person per year stays the same, as of July 1, 2017, the new policy adds that the exchange amount per person per day cannot exceed 50,000 RMB ($7,000). Individuals are required to report their use for any amount of money they send overseas over $10,000.
These serious policies have inevitably impacted Bay Area real estate. We see more Chinese buyers breaking their traditional all-cash buying habits and finding ways to leverage their limited overseas funds. This tightening has made it more difficult for Chinese buyers to pull money out of China all at once.
The effect of this burdensome system is clearly evidenced by less cash offers from Chinese nationals for American real estate since these buyers have more limited access to available cash. Although this has had a significant impact on the purchases of lower priced investment properties, we have not seen a material reduction in demand from affluent Chinese buyers interested in high-end properties.
More purchases have been made through financing due to the difficulties in moving money out of China. The upside of this policy is that buyers can leverage their money to buy more expensive homes than they would have with cash. The challenge is to find them lenders who will lend to international buyers with favorable terms, especially when their income is coming from overseas.
A terrific benefit of working with experienced agents is that they can offer clients greater expertise in every aspect of the real estate industry. This includes referring clients to the correct lenders after discussing their specific financial situations. At DeLeon Realty, a lot of our current clients’ income is located overseas. Plus, many of our clients do not fit within the traditional model of W-2 income from two or more years in the same career. We take great pride in working with international buyers, and one of our greatest strengths is that we are able to provide our clients with the appropriate lenders. Less experienced agents might not know how to handle these situations, but we see them as opportunities and offer proactive solutions.
Since we work with such a wide variety of lenders, we are always able to match our clients with the one who best fits their needs. As an example, we work closely with a local community bank that helps clients who don’t possess a W-2, yet have large assets (typically 35-40 percent down). The bank can still provide them with a loan that is very compelling and attractive. As another example, we help clients who are trading up their homes by directing them to the few lenders who will not count the debt from their current home. That way, our clients can afford their new home before selling their current home.
By leading our clients to the correct lenders, we assist them with one of their biggest obstacles, and we are happy to help with every other facet of their purchase. The solutions we put together not only help Chinese buyers, but international buyers as a whole.
Where there is a will, there is a way. By being creative and going above and beyond for our clients, we are able to help affluent buyers from all over the world pursue their dreams of owning a home in the Bay Area.