The Chinese Connection
It’s no secret that foreign investors have been eager to park their money in U.S. real estate. According to the National Association of Realtors, foreign buyers spent $102.6 billion on U.S. residential properties in 2015, up more than 50% since 2010. And while purchases by buyers from Canada and the United Kingdom fell, they surged from China, nearly tripling to $27.5 billion a year in 2015. A study by the Rosen Consulting Group, a real estate economics rm headquartered in Berkeley, CA, predicted Chinese buyers will spend $50 billion on U.S. real estate by 2025. Boston, as a hotbed of innovation and perfectly positioned for sustained growth in the shift to a digital economy, is expected to draw more than its share of those buyers.
The city’s real estate market is propelled by some truly extraordinary economic fundamentals. The relocation to Boston of Fortune 500 firms such as General Electric and Reebok, the presence of world-class educational, healthcare, and financial institutions, and the continued growth of the innovation sector are among the factors that make the city an attractive place to invest for the Chinese buy- er. According to Barron’s recently published report, Boston is also ranked as the 9th most undervalued U.S. city, with a -7.78% difference of median price to intrinsic value price.
Chinese buyers, who primarily buy high-end condominiums, tend to be either parents purchasing homes for children who study here, or investors looking to move their money to safer havens. There are 59,500 international students in Boston, with the Chinese accounting for 33%, according to the latest Open Doors Report by the Institute of International Education. The city’s famed higher education institutions attract Chinese students from affluent families, willing to pay up for luxury homes with all the bells and whistles. They prefer premium locations such as the Back Bay, Brookline, and the South End, where median listing prices are well past the $1 million mark. Luxury hotel condominiums such as the Ritz-Carlton Hotel and Residences are especially popular among Chinese buyers, partly because of the brand name recognition.
Foreign buyers are expected to make up a quarter of sales at the Four Seasons Hotel and Private Residences at One Dalton Street which, upon completion in 2018, will be one of New England’s tallest and most expensive residential buildings. It will sit atop Boston’s second Four Seasons hotel. Only a handful of cities—including London and Shanghai—can claim more than one. And buyers at Boston’s high-end Millennium Tower have come from Greece, Hong Kong, and the Middle East. But it was recent Chinese immigrant Binyi Chen, who lives with his wife in a modest townhouse in Concord and who made the news. Chen scooped up the largest number of units, buying 16 Millen- nium Tower condominiums on behalf of investors in his home country. He paid a total of $16.6 million, all in cash. The units were immediately listed for rent, starting at $4,100 a month, with the proceeds heading right back to China. And those are only a few of the approximately 8,000 luxury condominiums expected to come to the Boston market over the next three years.
Odds are that the in uence of Chinese investors in the Boston real estate market will increase in the coming years, and both they and the city that has what they want will be the bene ciaries.
Sources: Boston Redevelopment Authority, Boston Globe, Forbes, Barrons.com