The U.S. National Realtors Association recently announced as part of its report that Detroit ranked in the top 5 in terms of inquiries from Chinese buyers interested in U.S. real estate.
This is an awesome revelation and opportunity for Detroit! I co-wrote a piece on the topic with my colleague, Lamar Irby and Bryan Withall, and the Detroit News picked it up! You can read the op ed by clicking here or read the original below:
Detroit breaks the top 5 for inquiries from Chinese Buyers of U.S. Real Estate
By Dan Redford, Bryan Withall, and Lamar Irby
The time may be right for Detroit to roll out the red carpet for Chinese real estate buyers. In the recently published, “2013 Profile of International Home Buying Activity” by the U.S. National Association of Realtors (NAR), Detroit ranked in the top 5 among hottest cities receiving inquiries from Chinese buyers looking to purchase real estate in the U.S. It certainly stood out as the most unlikely in the group, considering the other cities – Los Angeles, Irvine, Las Vegas, and Orlando – have long been established as strongholds for attracting Chinese investors.
How could this be? This recent announcement may not come as a surprise to those that were following Chinese CCTV and social media on the Detroit Real Estate market earlier this year. In March, the China Daily reported that some real estate properties were available in Detroit for $100. On China’s Twitter, Weibo, the term “Detroit Real Estate” was also trending along with “pixie” (English: “leather shoes”), using leather shoes as a metaphor for how cheap Detroit real estate is. The CCTV report alone garnered 1.2 million posts on Weibo, according to “Want China Times.”
The “leather shoes” phenomenon quickly died down in the media, but not before at least some Chinese buyers made purchases. And what is now made clear from the NAR report is that Chinese buyers for the moment have their eyes on Detroit. With increasingly strict purchase restrictions and higher taxes for Chinese citizens in their domestic market, the increasing trend is for Chinese to invest their growing assets abroad.
So, how can Detroit take advantage of this opportunity? While it is unlikely for the cheap $500 home buys to be a boon for the city of Detroit, the last thing Detroit needs is to lure Chinese investors into quick, cheap deals that end up being “less juice than squeeze,” if not financial disasters. Clearly, Detroit has a compelling real estate market and economic story of rebirth to tell. A strategy that highlights good deals in good communities in Metro Detroit could build a pipeline for long term Chinese real estate investment and more.
Success will come down to how well real estate brokers and officials can tell the story of Detroit and ultimately execute purchases. It’s not that Detroit is without merit. For starters, Detroit’s real estate market prices climbed 13.6% year on year from 2011 to 2012. With prices for homes in Detroit well within the median Chinese purchase price of $425,000, this evidence should be taken as an encouraging sign of vibrancy in the Detroit market.
The Chinese should also be invited to be part of the revitalization of Detroit. In the June 7, 2013, Financial Times Life Section cover story, “The Future of the American City,” Detroit was profiled as a “city in the midst of a mini-boom.” The article cited several large investments and businesses recently moving in to the city, such as the high-profile purchases of Quicken Loans CEO Dan Gilbert, as evidence to show that Detroit is indeed gradually rising. Real estate brokers in Detroit should consider translating this article into Chinese and spreading it to the Chinese market.
This can happen. Detroit can build again, and now is the time to welcome the help of our Chinese friends whose interest is already peaked.
Dan Redford graduated from Michigan State University and is the Director of China Operations for FirstPathway Partners, an industry leading EB5 immigration investment fund management company. You can follow him at danredford.com
Bryan Withall is the Managing Director and CEO of Sino Outbound Limited, a financial advisory firm serving Chinese investors, including both institutions and individuals, interested in overseas real estate assets and real estate related investments. For inquiries: email@example.com
Lamar Irby is a Detroit native and serves as the Director of Finance for China ProSol Consulting Services Co., Limited (www.prosolchina.com). He is based in Beijing.