Mei Wu spent several weekends this summer checking out Palo Alto properties, but so far she hasn’t located her dream home.
Wu (who preferred not to use her real name) grew up in Beijing, but moved to Hong Kong two and a half years ago. She says an equivalent 3,000-square-foot house in Hong Kong would sell for $20 million (U.S.), compared to the $3 to $4 million in Palo Alto. That is, if one could even find a house in condo-rich Hong Kong.
Wu, a Chinese citizen, is looking for a vacation home in Palo Alto — preferably Old Palo Alto, Crescent Park or Community Center. And, she likes that “it’s a university town, it’s lively,” it has temperate weather and access to good medical care.
“It has an old town feel, not too big or too small,” she said, and it’s close to shopping.
Wu is by no means alone in her choice of Palo Alto for her real-estate purchase.
Ken DeLeon, of DeLeon Realty, Palo Alto, reports a rising trend in Chinese homebuyers over the last few years, growing from 5 percent of local buyers in 2011 to an expectation of 15 percent this year.
And the tide will keep rising for the next couple of years, he predicts.
“About two years ago I started to see a build-up,” he said, after hearing about it for two years before that. “People were coming, but not buying,” he added.
There are so many coming that DeLeon has purchased a 14-seater Mercedes limo bus in which he, Michael Repka, managing broker and general counsel, and Kim Heng, director of Asian operations, take prospective buyers on tours of various Palo Alto neighborhoods as well as nearby cities, from Woodside to Cupertino, twice a week.
And the impact of the influx will be felt for years to come, he said. Because the Chinese buyers tend to hold onto their properties, there will be even fewer homes on the market in 10 years than there are now, making inventory even lower, he said.
Just what is bringing Chinese buyers in droves, from mainland China, Hong Kong and Taiwan?
Some come because of changing real-estate rules at home, others for expanded investment options for China’s rising middle class and still more for educational opportunities, local Realtors say.
While the U.S. has had pretty consistent property laws since 1776, China is quite another story, DeLeon said. “Everything in China feels so fluid; people don’t have that security.”
Changing rules in China definitely have an impact on local buyers, noted Michelle Chang, an agent with Coldwell Banker, downtown Palo Alto.
“At least two years ago, China(‘s) government has a new policy. A couple can own only one house,” she said.
She came from Taiwan more than 15 years ago to earn her master’s degree in economics at San Jose State University. Fluent in Taiwanese, Mandarin and English, she’s been selling real estate for about 10 years, with most of her clients Chinese.
“Also, a lot of people start their own business, making good money — the money you have to do investment,” she said. Beginning in the mid-1990s Chinese people tended to buy real estate and diversify their investments.
Mainly coming from what DeLeon calls the “Tier One” cities — Shanghai, Beijing and Hong Kong — Chinese buyers are facing even higher prices at home than in Palo Alto and environs.
“For the same amount of money, (they) only can buy an apartment in Hong Kong or Taiwan,” she said.
“They’re coming here because they have money to invest and they want their kids to come here for education. A lot of them buy now, even though their kids are still in kindergarten,” she said.
“A lot of times they are hoping to come when the kids are growing up. When in junior high, they will come,” said Juliana Lee, an agent with Keller Williams Realty, Palo Alto, also a native of Taiwan.
Many are hoping to buy property that will become their children’s legacy, Lee said. She pointed to one client who was seeking “exquisite” property in the $15- to $20-million range. She’s been communicating with him every other week and most recently sent him information on an estate in Los Gatos.
But her more typical client is looking in the $1 to $2.5-million range.
And just what are they looking for?
New construction: “the newer the better,” Chang said.
Jenny Teng’s clients prefer new construction because they lack the skills to deal with older homes, she said. Teng, a Realtor with Alain Pinel, Palo Alto, grew up in Taiwan and has been selling real estate in Palo Alto for 23 years.
“When they grew up, they had to study, study. Women don’t know how to cook; men don’t know to fix up houses. (They’re) not handy,” she said.
And if they cannot find something new, then they’ll consider a tear down, DeLeon added.
“Midtown lots have done amazingly well, approaching $300 per square foot if not in the flood zone. The premium on new construction and lots is growing,” he said.
Chang found fewer thinking of building themselves. “It’s quite a big challenge to do so. They’re business people and travel a lot. How can they do this if they cannot communicate with the building department and don’t know the procedures well?” she posed.
Whether they’re looking for new construction or are willing to build, what they seem to have in common is their ability to pay cash.
“It’s already a big impact for the local market,” Chang said. “Those people are the all-cash buyers. … They can’t get loans.”
Wu, who is looking for that vacation home with Juliana Lee, doesn’t see herself as a “typical” Chinese buyer. Her daughter is already going to school in New York City, so she’s not looking for good schools.
At first she thought she’d buy a condo, but she’s “used to houses.” And she was thinking more along the lines of a 2,000-square-foot house for $2 million, but she’s now set her sights on maybe 2,500 square feet for $3 to $4 million. That’s about $1 million more than her friends are finding in the southern California communities of Newport Beach, Irvine or San Diego, where there are large Chinese communities. While she finds southern California too hot and New York too cold, Palo Alto’s weather seems just right, she said.
So she’ll continue her search — at least for awhile.
“If they’re not beautiful, and I’m not getting excited, I don’t have to move here,” she said.
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