Foreigners will be the biggest group of foreign home buyers in 2020. According to a study done by the research firm Frost and Sullivan, they will outnumber any other group of buyers in North America, Europe and Australia combined. Foreigners are buying more than twice as many homes as the overall population of the US.
Why do Chinese buyers outnumber any other group of buyers? How do they do it? The answer is simple: because Chinese buyers are more discriminating than other buyers.
There is a history of Chinese buyers discriminating against those looking to buy property in a “high pressure” area. They know that buyers with a little money can buy a great house in a low pressure area, whereas those with money cannot buy a great house in a high pressure area. Why not?
In the US, high pressure areas for home buyers include those near beaches, mass transit, parks, universities, colleges, airports, shopping malls, etc. But in China, you have four of the five most populous cities that are experiencing substantial growth. What is their strategy?
It is no secret that those with a lot of money can buy a high pressure property in a low-pressure area. And that strategy works well for them. The Chinese know that buyers with a little money can buy the low-pressure properties in these areas, but they are discriminating against buyers with little money because they do not want to see empty property in their neighborhoods.
When you buy a house in an area like this, you know that it is a good place to live. On the other hand, if you are a buyer with little money, you might think that you can purchasea high-pressure property in a low-pressure area and then pay very little for a property that has a lot of value.
So there is a very simple strategy that Chinese buyers use. When they buy a property, they will be able to take the house off the market quickly so that they will still have a home to sell when the US government starts to adjust the foreign ownership regulations to try to slow down the increase in home prices.
The next time you hear someone trying to convince you that a cheap house is the best house for you, just ask them who they are talking to: Chinese buyers or American buyers? They will probably say both, but the Chinese may be right.