Quick quiz: What’s the most expensive housing market in North America? If you answered Beverly Hills, San Francisco or Manhattan, thank you for playing.
It’s actually Vancouver, British Columbia, a city where the median income is a relatively modest $71,000 and plain Jane single-family houses in good neighborhoods sell for more than $1 million.
In recent years, mainland Chinese have been buying Coal Harbour condos and Shaughnessy megamansions, and the general consensus is that these rich immigrants are the main reason for Vancouver’s skyrocketing housing values. Could Seattle be next? Let’s ask Zillow.
“Chinese buyers have eclipsed Canadians as the number-one group of foreign property investors in the U.S.,” says Amy Bohutinsky, chief marketing officer at Zillow, the Seattle-based real estate website. “And the demand is there for Seattle.” On the day we talk in September, Bohutinsky has her research department run an Internet protocol, and it finds lots of eyes in China looking at homes here. “We did an IP of where they are searching right now,” Bohutinsky says, “and the number-two destination in the U.S. is Bellevue, and the number-five destination is Seattle.”
On a minor arterial in Medina, a man from Shanghai and his grown daughter are touring a five-bedroom, five-bath home billed as a “European villa.” As they pass under crystal chandeliers and pad along intricately inlaid hardwood floors, I wait for the oohs and aahs that never come. That is, until they head through the French doors into what I would consider a so-so backyard: fig trees, lawn, shrubbery. They think it’s pretty exciting, that shrubbery, glowing green on a partly cloudy afternoon.
Rather shyly, the man and his daughter agree to be interviewed. I’m tense because I’ve been trying to meet actual house hunters from China, and for weeks real estate agents and developers have steered me clear of them.
The house hunter wears neat black jeans and a windbreaker. He is fit and has close-cropped hair and smiling eyes. His daughter is in denim shorts, a striped T-shirt and a hoody. They look like regular Americans—only the father’s man bag suggests that they are overseas buyers who can afford to look at the $4.5 million house.
Pacific Northwest real estate brochures, such as this one from Realogics Sotheby’s International Realty, tout the rise of “gateway” cities like Seattle for mainland Chinese buyers
With the help of a real estate agent who speaks Mandarin, Jack Chen says that he and his daughter are on a monthlong trip scouting for a home that they will eventually make their permanent residence. “I have friends in Vancouver,” Chen says, “but they told me to look in Seattle, because it is the best city on the West Coast.” At first he didn’t get it. “Vancouver is prettier, and the living style is more attractive.”
However, the Seattle area is growing on him, especially Medina, which he considers a bargain compared to what he could get in Vancouver (bargains being relative: Medina’s median home value is $1,721,000). “The lots are large, your neighbors are not so close, and it is possible to buy waterfront on a lake,” Chen explains. Then he mentions that there are opportunities for high-tech entrepreneurs in Seattle, which leads me to ask what he does for a living. The real estate agent refuses to translate, explaining that in China, such a question is very rude.
Rude reporters aside, greater Seattle is attractive to Chinese urbanites because it offers some things that can’t be bought in Beijing or Shanghai at any price: clean air and the room to breathe it—as well as land that you actually own.
“Here in Washington, we have a fee-simple system,” says real estate broker Joseph Ho, director of new markets development for Berkshire Hathaway HomeServices Northwest. “That means you own the land forever, you pass it down to your children. In China, you purchase a land lease and after a certain amount of time, usually 75 years, the land goes back to the government.”
From left: Mayor Ed Murray, Potala Tower developer and former Tibetan monk Lobsang Dargey with daughter Luca, actor and Dargey friend Tom Skerritt with daughter Emi and others at the groundbreaking for Potala, a 41-story hotel and condo development, in Belltown
Economic uncertainty and unrest in China are other reasons wealthy families are looking to move money—and sometimes their children—out of the country. “I have clients who are looking at every attractive option to park their money outside of China,” says real estate agent Mary Pong, “also a way to get their children out of China for an education.”
Statistics from the University of Washington confirm that trend. There are more students from China at the UW than ever before. And those numbers may have gotten a boost because, believe it or not, Seattle is trending as a sexy city among China’s college-age kids.
Our city is lovingly portrayed in a movie called Beijing Meets Seattle (also known as Finding Mr. Right) in which a pregnant woman from China flies to Seattle in search of true love. (Ironically, it was filmed almost entirely in Vancouver.) The 2013 film is one of China’s top-grossing films of all time, which may also explain why Chinese tourists, especially young women, were the top foreign travel group in Seattle in 2014.
OK, let’s get back on track. Hit movies and real estate agents’ impressions are one thing. But you still have to ask yourself: Is this really happening? Where are the black-and-white statistics on Chinese buyers in Bellevue and Mercer Island and Queen Anne?
In an old Belltown garage, Tibetan monks perform a ceremony to clear obstacles for the Potala Tower project; photo: chustine minoda
Well, there aren’t any official numbers. The Northwest Multiple Listing Service does not track demographics on who is buying in greater Seattle and neither does the Seattle–King County Association of Realtors. However, the National Association of Realtors does collect demographics, and it estimates that over the 12 months ending in March 2014, buyers from China purchased $22 billion of real estate in the U.S.
It isn’t easy to quantify how many of those billions were spent in our area, but just my unscientific search of recent sales on Redfin in a neighborhood I figured would appeal to global house hunters revealed that on the fabled peninsula of Hunts Point, powerhouse Seattle names such as Nordstrom, McCaw and Ballmer now have neighbors named Zhao, Huang, Tsang and Liu (most likely representing both Chinese-Americans and offshore investors), who spent a collective $24 million on real estate.
And for every luxury sale, Realtors say they are selling many more homes in the upper-middle-class range to buyers from China. “I have clients who are considering Seattle, because in California they have been priced out,” Pong says. “They are looking at condos and homes in Seattle, close to downtown. If they have kids, they are looking on the Eastside in a good school district.”
The Northwest Multiple Listing Service ran some sales statistics for this story and found those neighborhoods—close in to Seattle and Bellevue—have appreciated a lot recently, especially West Bellevue, which is up 20 percent over a six-month period ending in September 2014 compared to the same period a year ago. Pending sales of homes around western Washington surged more than 13 percent in September compared to a year ago.
That’s good news if you already own real estate here. But it’s disheartening for garden-variety Northwesterners who tell tales of losing house after house to buyers from China who bid up the asking price and pay (sometimes literally) with bags of cash. That frustration can be compounded by real and exaggerated tales of charming old houses flattened for McMansions or, perhaps worse, standing vacant for extended periods of time—eroding values and the soul of a neighborhood.
While many international buyers, including those from China, intend to live in the homes they buy, there are examples where they never got around to it. And then there are global investors, some of them from China, who buy American property to diversify their portfolios, not because they need another house.
Vancouver, which has been a top spot for buyers from China for decades, is experiencing a problem with vacant homes. According to a blog called Beautiful Empty Homes of Vancouver, global buyers bought homes as investments, never intending to move in. The blog documents dozens of vacant properties, some of them grand old homes in tony neighborhoods, boarded up and covered in graffiti.
Don’t own a home and don’t care? Renters can also feel the impact when a city is sought after by global citizens. One example: Zillow says the median rent in Bellevue is $1,995—higher than Seattle metro’s median rent of $1,599. According to Chris Salomone, Bellevue’s director of planning, that’s due in part to some big plays investors from China have made on land zoned for high-rise apartments in Bellevue. “Asian investors have bought parcels downtown in the urban core,” Salomone says. “They are overpaying for it. The fact that they are overpaying translates into inflated land costs and construction costs, and when the building is finished, the owner has to increase the rent.”
But Chinese investors are also building market-rate housing and creating jobs for locals under the EB-5 visa program. The visa gives foreign citizens a way to get a green card and immigrate to the United States in exchange for a capital investment of $500,000–$1,000,000 in an American development that creates 10 permanent jobs. Such projects are under way right now from Tukwila to Monroe to Everett to downtown Seattle.
Will Seattle become another Vancouver, where foreign owners allow vacant houses to fall into disrepair? That problem is chronicled on the Tumblr site Beautiful Empty Homes of Vancouver; photo: Courtesy of beautifulemptyhomes.tumblr.com
According to Kevin Stamper, executive director of the Seattle Regional Center, which operates an EB-5 visa program, 85 percent of applicants are from China. Some of those investors come from Vancouver, because Canada cancelled its foreign investment visa this year, chucking more than 60,000 applications. That would explain, as much as anything can, a very strange sight on a recent afternoon in Belltown.
On Fourth Avenue in the shadow of the Cinerama, men in suits, cute children, the mayor of Seattle and actor Tom Skerritt stand shoulder to shoulder, wearing bright yellow and white ceremonial scarves called khatas, and shoveling sand on the sidewalk.
Four Tibetan monks usher a well-dressed crowd into Dean Transmissions, a dimly lit one-story garage, all peeling paint and cracked concrete, where they chant and ring bells at a table covered in colorful silk.
“We pray for no obstacles for the building,” explains one of the monks who had driven down from Vancouver. The building he is referring to is Potala Tower, a $190 million apartment house and hotel that will spring 41 stories up on the site of the garage. The project was conceived by local developer Lobsang Dargey, a former monk from rural Tibet. It is funded by Chinese families who want to get a piece of the American dream.
Back in Bellevue, a 40-something Shanghai business owner is well on the way to launching that dream. Frank Gong already has a temporary green card because he is investing in an EB-5 visa project. And that isn’t the only claim he has staked in the Pacific Northwest. On this day, he’s walking around the outside of a tasteful, gabled new home in Bellevue with his real estate broker Joseph Ho. Gong will sign closing papers on the $1.9 million house the following day.
“This house is four times bigger than my apartment in Shanghai!” Gong enthuses. The first thing he is going to do is enclose the yard so that his youngest daughter can have that dog she has always pined for.
Gong and his wife scouted for property during three trips across America, but eventually narrowed their choices down to either Boston or Seattle. Seattle won out because it has nonstop flights arriving from Shanghai. They chose Bellevue for their two daughters because there is a good elementary school and a middle school within walking distance of the house. But the big reason for the Shanghai-to-Seattle move isn’t what you might imagine. Gong does not want to be Chinese or American. He aspires to be a global citizen and wants his daughters to have the same opportunity.
“The earth is really like a village,” Gong says in slow and careful English. “I believe in the future we will understand each other better and better. There will be no big wars.” Gong perfected his English watching American movies subtitled in Mandarin. Which is ironic, because he believes prejudice springs from watching too many movies.
“My friends say, ‘Don’t go to America. There are a lot of guns. Everyone has a gun.’ I say, ‘You watch too many Hollywood movies.’” Then he tells a story about buying lumber in Ohio and being asked by a farmer where he was from. “Everyone in China has long hair,” the farmer said, a bit tongue in cheek, pantomiming a braided queue down his back. Gong responded that the man watched too many old westerns. “Now we are civilized!” Gong told him.
Gong made his money from a company he created that makes hardwood floors and sells them around the world. Before he heads back to China, he’s going to scout warehouses from which he could open a different kind of business in America.
And one other thing Gong is going to do before he heads back to Shanghai: He vows to spend the night in his Bellevue house, even though there is not a stick of furniture in it. “I’m going to sleep here on the floor,” Gong says. “I’m going to roll around on the carpet and say to myself, ‘This is mine!’”
Who’s betting on China?
Seattle businesses are retooling to catch the wave of affluence from the Far East
Now workers in China can indulge in the same guilty pleasure as Americans on the job: surfing for dream properties on Zillow. In September, the Seattle-based real estate database launched its first international partnership with China’s Leju Holdings: The result is basically Zillow in Mandarin. “For us, it is an opportunity for Zillow to get a new set of buyers,” says Amy Bohutinsky, Zillow chief marketing officer. “We know Chinese [house hunters] are already using our site in English, so that will expand.”
Lochwood-Lozier Custom Homes
“We have a brand,” says firm president Todd Lozier. “That is important to the Chinese.” Lozier has built a reputation creating custom homes for Eastside executives, but today, many of the company’s design/builds are bespoke homes for Chinese buyers. Lozier describes these projects, which are in Clyde Hill and Medina, as a combination of feng shui flow and American style. “They aren’t looking for a ‘Chinese’ house,” Lozier says, explaining that his clients want homes that fit into the neighborhood.
“China is a top focus for us right now,” says Dean Jones, CEO of the Seattle-area offices of Realogics Sotheby’s International Realty. Jones has traveled to China several times recently to raise awareness of the value Seattle offers, compared to other West Coast cities. Realogics launched an “Asia Desk” in its Kirkland office in January, complete with tearoom and staffed with Mandarin, Cantonese and Korean speakers who can help foreign clients with everything from travel arrangements to finding a school for their children. Jones predicts this is just the beginning of an influx of buyers from China. “What is really surprising is that China hadn’t discovered Seattle earlier.”