Following a recent federal extension on business and tourism visas for Chinese citizens from one to 10 years, Palo Alto could see an even larger boost in Chinese home buyers, according to Kim Heng, director of International Operations at DeLeon Realty.
Silicon Valley is “the land of opportunity” for those who can afford it, Heng said. Palo Alto remains a popular destination among Chinese buyers because of its proximity to China, high-quality educational resources, booming business opportunities and sizable Asian community — nearly 25 percent.
She explains that the city is the most expensive city on the Midpeninsula for home buyers, with home costs appreciating 12 to 15 percent in the past three years alone.
Heng, who was raised in China, said she understands the cultural and financial motivation of her Chinese clients. She regularly promotes upcoming listings to the Chinese community through newspaper ads and radio shows. Additionally, she creates bilingual informational material for her buyers. DeLeon’s “Best of Both Worlds” informational booklet features Mandarin translations on every page, as well as calligraphy text on feng shui.
Many buyers will often put their children in summer camps while they browse homes, Heng said.
“(They) kill two birds for one stone,” she said. “Many of them do an around-the-country tour to get a sense of the geographics of the country … then come back to the Bay Area. (It’s) such a big investment, so they wouldn’t make such a rash purchase decision.”
Many buyers are in search of permanent single-family homes, something unattainable in China, as the country enforces a maximum 70-year lease on homes.
“Chinese people like to plan ahead,” Heng said.
In her experience, buyers will opt to purchase property while their children are young and rent it out until the child has reached middle or high school. At that time, they will return to Palo Alto to live in the home.
Brian Chancellor, a broker for the Sereno Group in Palo Alto, adds that although there are a number of locals who are unhappy about seeing an increase in vacant properties after they are purchased by international buyers, most are often open and welcoming.
“This is a place of diversity,” Chancellor said. “Most people here also embrace it. … It is a community and people want to continue protecting it as a community … people want people not just to purchase houses here but to contribute.”
He adds that many people are moving from Asia for a better quality of life.
“It’s a different place and very fast paced, and they see the value in that,” Chancellor said. “It’s about clean air, clean water … and job and education opportunities.”
Both Heng and Chancellor explained that the number of buyers coming from countries outside of Asia is growing, citing an increase in European, Mexican and Middle Eastern buyers.
“It’s all focused on the growth of Silicon Valley and continuous innovation,” Chancellor said.
Heng added that the recent devaluation of the Chinese yuan is another reason Palo Alto is seeing a steady increase in Chinese buyers.
“(They) will exchange (yuan) to U.S. dollars and then turn it into asset or real estate property. It’s a better investment than keeping it in the bank,” she said.
However, buyers are aware that their return on investment will often not be very high, she added.
“They accept the fact that rental income is not going to cover the price of the house, especially for those who are financing,” she said.
According to statistics compiled by DeLeon staff, many buyers are opting for condos as opposed to larger homes, which have increased significantly in cost. In 2010, the median sale price for a house was about $1.4 million. This number has risen to nearly $2.7 million five years later.
“I think there is a bit of uneasiness in local communities,” Heng said. “The influx of international buyers has impacted the price of the market. It puts upward pressure in the local market. Land is very limited; that’s why we encounter multiple-offer situations. Sometimes they come in with all cash and outbid everyone else.”
Heng credits DeLeon Realty’s popularity among international clients to its ability to be a “one-stop shop” for buyers. Agents will often assist international buyers in organizing finances for international transfer. Because of China’s foreign-currency restriction (maximum of $50,000 conversion annually), many buyers will opt to deposit money in Hong Kong.
“Once their money is out, we find a lender that has a relationship with a loan officer in China,” Heng said. “We help them book their trips. We help them with a visa and itinerary. We help them do homework so they buy with peace of mind.”
Heng travels to the DeLeon office in China frequently to build “guanxi” — or relationships based on general understanding between two parties — which is an integral ideal to her Chinese buyers.
Her goal, she said, “is to expand our successful business model to China (and) be that bridge.”
“China has 1.3 billion people. It is important to build trust.”
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This article appeared in print in the Fall Real Estate 2015 publication.
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Muna Sadek is an editorial intern at the Palo Alto Weekly.
Muna Sadek is an editorial intern at the Palo Alto Weekly.
Muna Sadek is an editorial intern at the Palo Alto Weekly.