According to NAR’s 2014 Profile of International Home Buying Activity, China is the second largest source of international buyers in the United States. Chinese buyers rank first in terms of dollar value of sales because they most often buy high-end luxury homes. The recent drop in Chinese stock markets, however, wiped out an estimated US$3.35 trillion of wealth. Where U.S. luxury real estate professionals are concerned, these turning economic tides might bring a change in clientele.
What’s an NWB?
Have you heard of NWBs? If not, you should make yourself familiar. The world’s fastest growing wealth segment is that of the NWBs—or “new wealth builders”—who hold financial assets between US$100,000 and US$2 million. While high-net-worth individuals (those with more than US$2 million in assets) accounted for US$43 trillion in global wealth last year, the NWB segment accounted for more than US$88 trillion. Translation: NWBs have a total of double the wealth of high-net-worth individuals! China’s NWBs, in particular, are amongst the world’s wealthiest and fastest growing economic group. It is estimated that China’s NWBs will hold double the wealth of American NWBs by the year 2020.
Most importantly, China’s NWBs seem to be fairing the economic storm better than most, and they are consequently in search of investments that protect their wealth, appreciate over time, or provide stable revenue streams. This makes them prime prospects for luxury real estate professionals in the United States.
Chinese NWBs: What They’re Looking For
A recent McKinsey Quarterly report shows that 69 million Chinese citizens possess the wealth to invest in U.S. properties. This figure is expected to reach 220 million by 2022. These numbers will likely yield an uptick in the number of Chinese buyers who invest in luxury homes abroad. In general, Chinese buyers are likely to be looking for these key features in U.S. real estate:
- Great educational institutions. As far as Chinese buyers are concerned, education is king.
- An expanding market with room for new businesses. Chinese buyers are looking to set down roots, and many want to open a business in the U.S. city where they buy a home.
- Long-term ownership. Property laws in China effectively dictate that individuals hold long-term leases on properties, but can never fully own them. Chinese buyers want to own their homes outright so that they can pass them from one generation to the next.
Amongst Chinese buyers in general, NWBs are unique. Here are some things that luxury real estate professionals need to know about them:
- Compared to individuals in the higher income bracket, NWBs are younger, more internet savvy, and more likely to rely on online resources when making investment decisions.
- Chinese buyers take six months to research properties before they begin visiting and making purchasing decisions.
- NWBs are more likely to look for investment opportunities in secondary cities.
- NWBs are likely to only visit properties or work with real estate professionals that were visible online (and behind the Great Firewall of China).
- Chinese prospects prefer to do their research in Chinese, on websites hosted in China.
China’s NWBs seem to be fairing well amidst economic upheaval and will likely be looking to make stable, long-term investments in foreign markets. For luxury real estate professionals, marketing your services and listings on Chinese sites will be paramount for reaching this growing group of international prospects.