40 bargain house hunting multimillionaires leave for US

A Chinese house hunting group bound for the US, known as China's first bargain house hunting group to purchase homes in the US, has finally left for the US today.

Most of the members of this multimillionaire group are professionals and all of them have fortunes of over 10 million yuan. The first stop of their 11-day US house hunting tour will be Los Angeles.

Multimillionaires with over 10 million yuan

The first house hunting group consists of a chosen 40 from over 400 applicants. These 40 people come from all over China; most of them are partner clients of soufun.com or high-end individuals chosen from voluntary clients, said an official from soufun.com, the organizer of the tour.

The members come from provinces and municipalities including Shandong, Jiangsu, Dalian, Hangzhou, Shenzhen, Beijing, Chongqing and Shanghai. Most of the members are from Shanghai and Beijing, of which, five are from the Shanghai region.

Soufun.com said in its official news that judging by the application forms filled out the majority of the applicants own assets worth over 10 million yuan. Most of the members are between 35 and 50 years old and are senior executives from the real estate and commercial service industries, retail enterprises or multinational corporations. Two-thirds of the applicants chose investment or homeownership as the purpose for purchasing houses.

The main purpose of the first group is to gather first-hand market information and to get to know the local house purchase procedures and relevant laws and regulations. They will choose residential housing with appreciative prospects of relevantly low price, and have no intentions of considering non-residential properties.

The house hunting group will visit five cities in the US. The first stop will be Los Angeles, followed by Las Vegas, San Francisco, Boston and the final stop, New York. Soufun.com explained that the main reason for such an itinerary is that these 5 cities have comparatively large ethnic Chinese communities and abundant education resources. For instance, Harvard University and the Massachusetts Institute of Technology are located in Boston and UCLA is in Los Angeles.

Almost all of these investors have over one million USD in cash, said Mo Tianquan, President of soufun.com. As a matter of fact, most of these bargain hunters have professional backgrounds. The list of names provided by the sponsor shows that most are working for property companies or investment management companies. Therefore, a close view to the US property market during this downturn would become another important way for them to gain experience for operations in China. In addition, about one-quarter of the first 40 house hunters have US green cards or business visas.

About one-third of these house buyers are willing to purchase properties at lower prices because their children will come to the US to study and they, as guardians of their children, would like to live nearby. As a result, housing stocks to be sold for 300,000-800,000 USD, houses that are auctioned by courts at a price lower than listed on the market, as well as properties that are close to famous schools are becoming the focus of their search.

On a page of usa.soufun.com, a list of properties in five regions has been released to the public.

The latest statistics from the US National Association of Realtors show that in the fourth quarter of last year, sale prices for second-hand single family houses located in urban areas in the US fell 12.4 percent from the previous year, recording the lowest since 2003. It is estimated that in total, 3.67 million houses remained unsold at the end of December last year. The large number of unsold houses will become the investment targets of wealthy Chinese.

Saviors from China?

It is said that the group of wealthy Chinese individuals will be warmly welcomed by the US local governments. Everywhere the group travels, local governments, associations and real estate brokerage firms will provide comprehensive services such as housing information, house purchase procedures and legal assistance to the house hunting group. Local real estate agents have already done research on which housing products are suitable to offer Chinese clients.

Statistics released in the "2008 World Wealth Report" show that the number of Chinese individuals with financial assets over one million USD surpasses that of the UK, ranking fifth in the world. The consumption of wealthy Chinese individuals has accounted for a higher and higher proportion in the world. During the global economic downturn, wealthy Chinese individuals are currently seen assuming a role similar to the Japanese upstarts of the past.

Aside from the US, other countries facing recession are also starting to have high expectations for Chinese capital. Since the news of the house hunting group was released, official institutions in countries such as Spain, Italy, Portugal and Australia, have expressed interest, saying they are willing to host China's house buyers for visits to their countries for house shopping. They even received inquiry phone calls from many countries' consulates in China, said soufun.com

Mo said, for this group of rich Chinese, one million USD is only a portion of their spare cash and the currency issue is not within their consideration. In fact, for most rich Chinese businesspeople, they consider practicality more than investment issues when purchasing houses. Many of these house hunters plan to buy residences in advance for their children who will study abroad in the future, though some of their children might still be in kindergarten.

The opportunity has not come yet

Ren Zhiqiang, Board Chairman of the Huayuan Group, has just returned from the US in early February. He is not that optimistic about the bargain house hunting group's trip to the US. From his point of view, US real estate is far from being cheap enough to invest in.

It is true that house prices in many cities of the US have decreased. Many have tumbled by 30 percent or more, while some have even decreased by over 60 percent. But what may disappoint the house hunting group is that houses that can be bought with one dollar are not worth anything. Most communities where house prices have seen large decreases are not good communities with good schools or good social environments. In the relatively nice communities, house prices have decreased only in comparison to the period when prices were relatively high. Compared with several years ago, current house prices are still at a high level. Ren wrote in his blog.

Ren's point of view not groundless

A Reuters survey on 25 analysts showed that US house prices will not bottom out quickly, and that it will take several years for the housing market to become stable. Also, house prices will decrease another 10 percent this year and in 2010. Therefore the US property market may yet witness a plunge of 35% compared to the highest level in history.

Since US house prices will take time to bottom out and become stable, it is doubtful that now is the best opportunity to launch these investments.

Source: People's Daily Online