In a recent article for Yangcheng Wanbao (羊城晚报), a significant media outlet reaching over 14 million readers in Guangzhou, the third largest Chinese city, Realogics Sotheby’s International Realty (RSIR) Owner & CEO Dean Jones offers expert insight in the Overseas Study/Immigration Section (留学移民) on the relationship between good school systems and Chinese homebuyers in the Puget Sound region.
More and more Chinese buyers are buying houses in good school districts for various reasons: investment, education, and permanent residency. Data shows that last year, inquiries by Chinese buyers about listings in the United States had increased by 1,426-percent since 2014. About 74.8-percent of the Chinese real estate buyers in the U.S. were related to education. In Massachusetts, where top universities such as Harvard and Princeton are located [sic]*, the rate is even higher at 90.5-percent.
According to the investigation, at present, Chinese buyers of overseas real estate are mostly high-net worth individuals. Insiders predict that there will be more buyers of middle-class to join the bounty of international property purchasing.
Chinese Buyers Scramble to Buy American Houses in Good School Districts with All Cash
Last month, Zhang Xiaomei “scrambled” to buy a house in a good school district in Seattle, closing for $550,000. In September next year, her 16-year-old son will attend high school in the United States.
“In February, I returned to Seattle only to find that the scramble panic had exploded. Often, a new listing that was released on Wednesday would already be sold by the next Monday. The most exasperating experience I had was getting an appointment for Saturday on Thursday, and Friday afternoon at 3:00 p.m., before being suddenly informed by the seller that they had received an elevated offer by a buyer who was ready to make a deal. The house was listed at $490,000 and I was told that the offer was for $520,000, and that unless we were willing to bid higher than that, they were going to cancel the appointment.” Recalling her experience, Zhang Xiaomei was still dumbstruck.
Zhang Xiaomei just received her green card last year, after a 10-year application process. She said openly that she met fellow Chinese whenever she visited houses. “As each of us encountered more Chinese, I became less optimistic because I knew that those rich people would not only pay the full amount in cash, but may also be willing to bid a much higher price than we can afford.”
According to Juwai.com, an international listings portal website in Chinese, inquiries by Chinese buyers about listings in the United States on the basis of education increased by 1,426-percent when comparing 2014 to 2015. Data also showed that about 74.8-percent of the Chinese real estate buyers in the U.S. are drawn by education. In Massachusetts, where some of the nation’s top universities such as Harvard and Princeton are located, [sic], the rate is even higher, at 90.5-percent.
Dean Jones, CEO of Realogics Sotheby’s International Realty (RSIR) in Seattle revealed about 90-percent of his Chinese customers use cash to buy their U.S. property. “Compared with domestic buyers, this is indeed a competitive advantage.”
Double-Digit Increase in Chinese Buyers from May to July
Seattle real estate agent Anna Riley has been focused on Asian buyers in the area, she said. Recently, half of the properties she has sold in good school districts have been sold to Chinese buyers. “In the past two years, I’ve sold about 90 houses, of which 42 were sold to buyers from Hong Kong or Mainland China. The main attraction of these houses were that they were close to the best schools or universities.”
Riley told this News reporter that Chinese buyers with school-aged children had begun to move to Seattle so their children could have access to the best public school and a first-class university (University of Washington). “In my experience over the past five years, Chinese buyers from Asia have doubled, and now a very good Asian food market has been set up here as this demand surges.”
Eric Chen, broker at real estate agency Long and Foster’s, also revealed that although it is not easily quantified, they have also seen an increase in the number of Chinese clients. “From May to July, Chinese buyers seeking properties for their children who are admitted by U.S. universities have seen double-digit growth. This is the season in which colleges enrolls international students. Chinese buyers have rushed in to have a new home ready for them to move into before the college year starts.”
Jones observed, “In Bellevue, Chinese buyers accounted for 30 to 50-percent of all luxury buyers, and this rate increases in areas where home prices are higher and fewer local residents can afford to buy. Schools in these areas have now set up specific English as a Second Language (ESL) courses for overseas students and the school PTA also plays an active role in welcoming newcomers.”
Jones’ brokerage recently served a Chinese couple whose five-year-old boy applied for more than one of the region’s private schools. “This kind of family will usually make a transaction after receiving confirmation of school admission,” Jones said.
Cathy Yu, business development manager for the home builder Lennar, reported that international buyers (especially Chinese buyers) in recent years have increasingly been customers of their development projects and that there is an upward trend. “We see more and more Chinese buyers for our projects for the following reasons: investment, education, vacation homes and permanent residency. Most of them are wealthy individuals but we believe that there will be more buyers from a rising middle class.”
“The United States has the world’s best universities,” said Veronica Robertson, strategic marketing director of builder Taylor Morrison. “In addition to good schools, many other excellent services in the U.S. such as its outstanding healthcare system, a stable monetary system and government, and advanced community facilities are all attractive factors for Chinese buyers.”
Robertson added, “We have some development projects in which foreign buyers, and in particular Chinese buyers, account for a majority.”
U.S. Real Estate Developers and Brokers Advertise in Mandarin
This year in Houston, U.S. developer Beazer launched Bayside Crossing residences starting at $210,000 per unit. The community is close to the famous University of Houston and LaPorte High School but here, the price is more affordable than in California.
Of course, housing prices in good school districts in different regions vary greatly. For example, in Irvine, California, the average home price is now around $600,000. Around 40-percent of Irvine residents are ethnically Chinese or Korean, taking children’s education very seriously. Not only does the United States have good school districts, but sometimes the entire town has been built to accommodate quality educational resources. Irvine itself is built around the University of California. For this reason, the Irvine Unified School District has long been a hit among Asian parents and parents of young overseas students.
“American schools encourage entrepreneurial thinking. Student achievement and performance are critical criteria,” Anna Riley explained. The United States provides many opportunities as the U.S. economy is now very stable and performing outstandingly well in relation to most other developed countries, which is a huge attraction to Chinese buyers.
“On the West Coast, prices in California are more expensive and competition for jobs is more intense,” said Dean Jones. He believes that the popularity of American houses in good school districts has contributed fundamentally to where students want to settle after graduation. “Chinese families want their children to succeed, so they usually think further ahead, and it’s not limited to education.” Jones said that with an increasing number of Chinese buyers, schools are mass advertising to promote themselves in Mandarin: “this is a very important channel. The quality of primary and secondary schools can certainly drive the demand for real estate in the region.”
Quality Real Estate in Good School Districts Costs 50% More Than Typical Houses
Cathy Yu told this News reporter that this year, a Chinese client of hers bought a new Lennar house near UC Berkeley, because her son had been admitted to the university. “The client wanted a house next to the university, not just to accommodate her son at school but also for the anticipated appreciation potential.”
“A lot of communities have computed a walking index, to tell you the distance to local schools. The shorter the distance, the more popular. Houses near famous primary schools will be very expensive. Real estate agents will usually provide school test scores and ratings to prove the quality of the school,” Riley said.
Veronica Robertson said that in the United States, in addition to location and the school district, local employment is a factor in the prices of homes. “The most expensive home price in the best school district is 50% or more than that found in the average school district.”
Jones reports that Mercer Island has a preferred school system for both academics and sports, and is progressively becoming recognized by Chinese buyers. Locals pay property tax of around one-percent, but generally speaking pay no extra cost to attend school. Similarly, the city of Bellevue is extremely popular among Chinese buyers because there are several top-ranked public schools in the area.
Jones said, “Home prices are indeed rising faster in preferred school districts like Mercer Island. The average price is now $1.1 million, with a 10% annual growth rate, far exceeding communities with lower-quality schools.”
A study of Realtor.com shows that buyers are willing to pay extra for a top-ranked school district. Because top schools are more popular with buyers, homes in these school districts tend to have a higher appreciation value, performing better against inflation. In fact, Realtor.com research shows that the home prices in highest-ranked school districts are on average 49-percent higher than the nation’s median price.
Chinese Buyers are Mostly Small Business Owners
“Local residents in America, whether homeowners or renters, have access to a local public school. Renting is a big of trouble, because people usually rent for short times (usually 1 or 2 years) before they move somewhere else. You may lose your preferred school. Houses in excellent school districts are more expensive,” Riley advised.
Good school districts and quality residential homes mutually promote each other. Better school districts promote good communities, and high-quality housing in a good school district may lead to the establishment of new schools. Yu declared that “school quality is a decisive factor for companies planning development.”
Veronica Robertson told this News reporter that the school district is one of the most important considerations by companies scouting locations for new residential projects. “A good school district is the most distinguishing factor in the U.S. real estate market.”
“We are seeing more ultra high-net worth Chinese and middle-class families buying houses in good school districts. Most of them want to send their children to the United States for education,” Yu said.
Riley reported that many Chinese buyers she has worked with are small business owners averaging 40 years of age. It is most common that the mother stays in the United States to accompany the children while the father remains in China working. “To get the best experience, the most important thing is to get along with the locals. Most Chinese say they like the lifestyle here and that people are friendly. They have often converted their visiting friends into new homebuyers, so that many of the neighbors are old friends who already know each other.”
Dean Jones said his firm mainly serves families looking for quality schools. “Now that more and more Chinese middle class families are joining the bounty of overseas homebuyers, their children may not yet have reached school age but they are already planning for their children’s futures. Some families have purchased homes in good school districts when their children were still infants – one or two years old.”
Jones admitted that he also witnesses Chinese investors looking for good returns. “They buy houses in good school districts then rent them to Chinese families in rising markets.”
Riley advised buyers to find a qualified agent in the area to acquire knowledge of schools, listings and the housing market. “Many Chinese buyers tend to work with Chinese speaking agents, which is understandable, however this does not necessarily help you make the ‘best buy.'”
Eric Chen also warns that buyers need to understand that procedures for purchasing are unique, therefore it is essential to consult a qualified real estate broker.”
*While the Commonwealth of Massachusetts indeed hosts several leading universities, Princeton University is in New Jersey.