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Bargains in the slumping US market

By Cao Qian | March 19, 2009, Thursday | Print Edition

YIN Guohua, a 45-year-old lawyer in Beijing, just completed a 10-day, five-city tour of the United States that didn't include the Statue of Liberty, the Golden Gate Bridge or any other popular tourist sites. He was in the US scouring the collapsed housing market to see what bargains might be for the taking.

Yin was one of 30 Chinese, selected from 500 initial applicants, who went on a house-hunting trip to New York, Boston, San Francisco, Los Angeles and Las Vegas that ended on March 5. They viewed homes in the US$300,000-US$500,000 price range, one-third of them in foreclosure.

"What with the subprime mortgage crisis, I assumed it could be a good time to buy a home in the US,'' said Yin, who has practiced real estate law for 15 years. He spoke to Shanghai Daily by phone after returning to Beijing.

"Prices in the US have plunged as much as 30 percent, which has opened up some very good investment opportunities.''

Yin bought no property on the trip, and neither did anyone else in his party. They said they needed longer to make a decision, and the 10-day trip was too fast.

SouFun, the online real estate that organized the trip, said some of the corporate executives, entrepreneurs and property developers in the group have decided to pay a second visit soon, with expectations of buying something this time.

Yin is one of a growing number of wealthy Chinese who are spurning the shaky local stock market and seeking safer assets abroad.

"It's certain that more and more Chinese will invest in real estate in foreign countries,'' said Cai Weimin, an industry veteran who helped arrange similar overseas house-hunting trips for residents of Taiwan Island. "And they tend to prefer houses with existing rental contracts.''

Their choices are often tied into their children's futures, targeting countries where their kids may study and eventually work. Japan, Malaysia and Australia are as popular as the US, Cai said.

SouFun said last week that it is arranging two other property-hunting trips amid strong demand.

"The two groups, one exclusively for developers and the other for individual home buyers, will leave Beijing very soon,'' said Dai Jiangong, president of SouFun Holdings Ltd. "We will probably show those individual home buyers more expensive houses, roughly between US$800,000 and US$1 million.''

Alan Wong, president of Huntington Realty, a California property broker that operates 30 real estate agencies in Shanghai, mainly through franchising, told Shanghai Daily yesterday that his company plans to take about 30 people, all from eastern China, to Los Angeles, Las Vegas, San Francisco and San Diego in early June for an 11-day trip, that costs 24,000 yuan (US$3,513) per person.

The group will be viewing homes with an average price of US$500,000, he said.

"We are receiving warm responses from the market and very likely a second trip will be organized pretty soon,'' Wong said. "Besides, we are planning to invite people from the US, including lawyers and officials, to talk about property purchases as well as some immigration issues.''

Self-use

Such lectures, particularly addressed to the needs of rich Chinese people who want to own property in the US for either self-use or investment purposes, will first be held in Shanghai as early as next month, while more have been arranged in three other cities across the country, he said.

Chinese people are currently allowed to exchange up to US$50,000 worth of yuan each year. Such house purchase deals can usually be completed easily with the help from family members and friends, industry experts said.

While no one seems to have a clear idea when the US housing market will hit bottom, price slumps in the past year have already made property investment there quite attractive to wealthier Chinese.

Prices of US single-family homes plunged 18.5 percent in December from a year earlier, Reuters reported late last month, citing the widely watched Standard & Poor's/Case-Shiller home price index.

The S&P/Case-Shiller composite index of 20 metropolitan areas fell 2.5 percent in December from November, compared with a 2.3 percent decline the previous month.

From the housing market peak in the second quarter of 2006, home prices have plummeted 26.7 percent, according to the composite index.

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