Research & Statistics

Chinese Nationals Buy Luxury US Real Estate Via Social App WeChat

WeChat1

Affluent Chinese nationals are scrambling to invest their wealth in US real estate. As of last year, Chinese consumers are the biggest foreign buyer of US real estate, and they’re the nationality willing to pay the highest prices for their properties. Chinese nationals are also the largest group of luxury consumers in the world, accounting for 32% of global luxury consumption. But with traditional avenues of engagement such as Google and Facebook being banned in China, how do US real estate professionals tap into this high-volume, high-demand market? Believe it or not, one solution might be found in a smartphone app.

WeChat Connects US Brokers With Chinese Buyers

You’ve likely never heard of WeChat, but this social app currently boasts 650 million predominantly-Chinese users. (That’s more than double the population of the United States of America!) Launched by Chinese internet giant Tencent in 2011, WeChat is a one-stop super-app that enables users to do pretty much anything: watch movies, share photos and videos, play games, chat with friends, call cabs, buy clothing, and offer personal loans.

Not only has WeChat had a profound impact on Chinese internet culture and mobile usage, but it’s now becoming something of a gateway between US real estate professionals and Chinese buyers.

Because a flight from the east coast of China to New York City takes a staggering 15 hours, many Chinese prospects are understandably hesitant to personally visit US properties. Instead, some are choosing to carry out the entire process through WeChat—going from initial contact with a US broker all the way to closing without ever setting foot in the country, let alone the purchased property. Significantly, the real estate being bought and sold via WeChat falls within the luxury bracket; a recent Business Insider article features interviews with US real estate professionals who’ve used the app to sell properties worth up to $5million.

How You Can Attract Chinese Buyers On WeChat

If you’re considering getting a WeChat account to tap into the Chinese market, here is some information to get you started.

  • It’s free! Like Instagram or Twitter, it doesn’t cost anything to create an account on WeChat.
  • Blog to build trust. In order to bridge the great distance between agent and prospect, use your WeChat account as a personal blog. In addition to posting your listings, share personal thoughts and photos from everyday life to reassure prospects that you are a real, trustworthy person. A strong personality on WeChat will lead to sales.
  • Virtual tours. Real estate professionals can share photos, walk-through videos, blueprints and other information to “show” a property via WeChat. Clients may also have locally-based representatives tour properties on their behalf.
  • To make communication easier across a massive time difference, you can leave voice messages via WeChat, which your clients can respond to the next day.
  • All digital. Once a deal reaches its final stages, a legal representative will cement your digital communications as binding and send an electronic version of the contract to the client.

Want to know more about working with the affluent Chinese buyer? Checkout The Institute's upcoming Member webinar, on December 17th at 3 pm Central Standard Time. Members of The Institute can register at www.LuxuryHomeMarketing.com/webinars.


The All-Black Kitchen Makes A Statement In Luxury Homes

2015 design trends move away from the all-white kitchen

Luxury Kitchen - Modern Rustic

 

In addition to being a hub of family and social life within the home, kitchens are an important way for homeowners to make a statement about their property, identity, and taste. As a result of their place at the heart of a home, kitchens are the second most frequently remodeled room in the house—second only to bathrooms. This year, the pendulum has swung away from the popular all-white kitchen and toward the opposite extreme: the black kitchen.

Kitchen Design Goes Over To The Dark Side

In 2015, bright-red cabinets and white tile are being eclipsed by darker colors. The beginning of this trend can be seen in the stunning 2014 Kitchen of the Year, designed by designer Steven Miller for the San Francisco Decorator Showcase, which featured all-black cabinetry, dark tile backsplashes, and a steely grey ceiling. But why the turn toward darker hues? Black kitchens—or ones dominated by other dark shades—make a statement about the home and its owners: bold, strong, sleek, and luxurious. This design idea is particularly fitting for the luxury homeowner who craves a high-end kitchen that leaves a lasting impression.

Here are a few tips for incorporating darker tones into luxury kitchen design:

  • Cabinetry or countertops are perhaps the easiest way to introduce dark tones into the luxury kitchen. If all-black cabinets seem overwhelming, why not balance them out with a white marble countertop or soften the look with distressed or textured wood?
  • To darken the kitchen further, consider bringing in black or dark-colored appliances.
  • Dark wood flooring. If you want to go black but worry that the look will be too overwhelming, dark wood floors are a fantastic way to give the space a warm, rustic feel.
  • Black and green. Perhaps the only look more luscious than an all-black kitchen is a black-and-green kitchen. Apartment Therapy suggests this color combination as a way to make the black kitchen warm, earthy, and even more unique.
  • Look books. The internet is brimming with image-rich resources. Use these to show your clients just how stunning their high-end, on-trend black kitchen could be. (For example, check out this Pinterest board.)

China’s NWBs: Coming to a Luxury Home Near You

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.


Follow the money!

The very wealthy are on the move.  According to New York-based international  law, firm Fragomen, Del Rey, Bernsen & Loewy, which specializes in immigration services, the last ten years have seen the largest inflows and outflows of high net worth individuals (HNWI) relocating in history. In the last decade 11,000 HNWI left Switzerland, 14,000 left Russia, 32,000 left France, 43,000 left India and a huge 76,000 exited China. Many will keep assets and property in their home countries, yet most will buy real estate and set up bank accounts in their new locations, according to Fragomen.

Where did these HNWI move?  Over the same period, 212,000 relocating households and their destinations were identified by Fragomen. About 14,000 HNWI relocated to Canada, 20,000 to Hong Kong, 22,000 to Australia, 42,000 to the USA and an impressive 114,000 to the UK. The remaining 36,000 went elsewhere in the world. 

 


Have you met the HENRYs?

If not, let us introduce you. The HENRYs are High-Earners-Not-Yet-Rich households who represent an increasingly important consumer group with strong spending power today and the potential of becoming wealthy. Not defined by age or occupation, they are identified by income. HENRY’s represent a growing group of homebuyers who, in many cases, can afford high-end homes.

Defined as consumers with combined household incomes between $100,000 and $250,000, HENRYs come in all age groups (no, they are not all young). They are excellent prospects for luxury home purchases, beginning at the entry level of luxury and moving up. About 25 million U. S. households fall into this category. That’s about 20% of total households. More important, HENRYs make up about 90% of the affluent consumer market.

HENRYs

HENRY’s are also a key market segment for luxury Realtors. In almost any spending category, the affluent top 20 percent account for about 40 percent of total consumer spending, as measured by the Bureau of Labor Statistics. While this group may not be buyers and sellers of homes in the double digit millions, they are often buying in the top 10% of the market. And – they may get richer!

Here are a few characteristics of HENRYs which Unity Marketing has identified:

  • They appreciate a high level of service and want to work with pleasant people
  • They respond to stories. What stories are you telling about your listings?
  • They are executives and managers and they don’t leave their smarts at the office. They are careful buyers and their bragging rights come from making a good deal. So, think VALUE and remember that a good deal isn’t always lowest price. 
  • They buy premium products. Is your service premium or standard?

How do you find them? How about using one of your Institute for Luxury Home Marketing member benefits to acquire target lists of HENRYs in the geographic areas you serve. You can select by income, education level, family size and other criteria. Then, farm the list with a market update report, and other information rich materials. HENRYs represent great potential in the high-end market for SLREPs (Successful Luxury Real Estate Professionals)!


Is the 80/20 rule really true?

You’ve heard the statistic – 20% of Realtors do 80% of the business.

MLSIs this true or is it just another sales myth that’s bandied about in the real estate business? A recent blog post by Ted Jones, Chief Economist for Stewart Title reports on a study by the WAV Group that provides some insight to this question.

The research company surveyed about 150 Multiple Listing Services regarding listings and closed transactions for the first half of last year. The accompanying charts show the percentage of agents who had listings in that time period, as well as the percentage with closed transactions.

Certainly some people subscribe to the MLS for reasons other than listing or selling residential properties. This includes commercial Realtors that keep tabs on the residential market, appraisers, or others that use MLS data. However, the 39 percent who had no closings in the first half of 2014 and the 43 percent who had no listings is still remarkably high and indicates that about 40% of MLS subscribers are not listing and selling (for whatever reasons).

Add to this, the fact that another 50% only had from one to ten closings in a six month period, bringing to 89% the total of those who had from zero to ten closings in half a year and you can conclude that the remaining 11% of the agents are doing a high percentage of the business. It’s pretty much the same with listings. Only nine percent of MLS members had ten or more listings in the first half of 2014.

Our conclusion? If we are talking about numbers of transactions, the 80/20 rule may not be far off the mark in real estate.


Golden Visas - Real Estate Investment, Residency & Citizenship

There is an interesting article on WealthX today looking at the current trends in countries offering residency or citizenship to “immigrant investors” and in particular the shift among the Chinese from the US to the EU. The full article is worth a read. Here are some highlights:

  • In recent years 80%-90% of foreign investment visas in the US, Portugal, Canada and Australia are taken up by People’s Republic of China (PRC) nationals, but this is starting to change.
  • The US, UK, Australia and Canada are limiting some of their programs while they deal with the backlog of applications, or make them more expensive.
  • The US’ EB-5 visa requires investment of between US$500,000 and US$1 million in return for a conditional green card. There are just 10,000 of these visas issued annually and a cap on each nationality.
  • This year Canada stopped accepting applications for its immigrant investor program and the federal entrepreneur program, of which around 90 percent of applications were from China.
  • Investor programs for residence, like in Portugal, Spain, Greece, Hungary, UK, Canada, US, Australia, where the investor receives only Permanent Resident (PR) Status, are more popular in China. Under these programs it is legal for them to invest abroad and obtain PR, while applying for immediate citizenship is against the law in China.

Just for fun, here are the details on the Greek program that affords residency to real estate investors: 

Greece


Living the Multinational Lifestyle

RiseThe number of high net worth individuals in the world is increasing. Fewer of them have inherited wealth and more of them are entrepreneurs and business owners. The world has "shrunk." They are increasingly mobile, increasingly multinational, and they're looking for more than just tax shelters.

If you'd like to better understand who's buying where and why, Barclay's recent research report Wealth Insights: The Rise of the Global Citizen? (PDF) provides some interesting insights into the increasingly multinational lifestyles of the affluent.

As Barclay's puts it, "The Rise of the Global Citizen? report aims to explore the mobility of today’s wealthiest individuals, and to assess whether their choices of where to live, work, study, retire, invest and donate wealth are indicative of an increasingly international group. It also looks at key trends in the make-up of high net worth individuals, and how these are impacting mobility, financial planning, identity and philanthropic behaviour."

Check it out. It's worth a read.


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Many markets are seeing very tight hosing inventory right now.  According to NAR, the nationwide median days-on-market is just 78 days.  Generally speaking, prices are up, but year-over-year sales are down, in part due to the lack of available inventory.  

Here are the ten markets with the shortest days-on-market:

Median

Read the full NAR release: Recovery Broadens as More Markets See Price Increases