China’s government is rolling out a new policy that could deliver a conservatively estimated $109 billion to US real estate markets, both commercial and residential.
This new policy comes after a report on international buyers from the National Association of Realtors, released earlier in June, which revealed that Chinese consumers are already the no. 1 international buyers of U.S. real estate.
China’s new policy is the Qualified Domestic Individual Investor program, or QDII2 for short. (The “2” distinguishes it from an earlier program with a similar name but different purpose.)
The program is simple. It lets just about anyone invest half of their assets just about anywhere in the world.
You probably know that until now, China has had some limits on the amount of capital that individuals could move overseas. Many Chinese have found legitimate ways to invest in US real estate. (Witness the NAR report.)
Even so, many more who would like to buy U.S. property have been prevented from doing so.
To be sure, QDII2 is starting out as just a pilot program in six cities across China, the most notable of which is Shanghai.
That sounds small until you realize that these cities have a combined population of about 50 million, which is nearly 30 percent larger than California’s population. California’s economy is as large as all but 10 countries in the world.
So, the pilot program alone will add the equivalent of an entire newly developed economy’s free capital flows to the world’s markets.
But that’s nothing. QDII2 won’t have its full impact until it is rolled out to all of China.
When predicting the impact this could have, we make two assumptions. The first is that wealthy Chinese, when given the chance, will want to invest a modest percentage of their assets in international real estate. We also assume that the U.S. obtains about the same share of this investment as it has in the past.
Even with such modest initial assumptions, you quickly arrive at eye-popping numbers.
The impact of a nation-wide QDII2 program will be an estimated $109 billion in new funds dedicated to US real estate — not to mention investment in other American asset classes.
The U.S. is the best-placed country to attract new real estate investment in the post-QDII2 world. Some of the key reasons are:
- An immense supply of existing real estate
- Great potential for new construction
- A large and vibrant economy
- Liberal foreign ownership and visa regulations
- An attractive lifestyle
- Some excellent schools and universities
Being forward-thinking, Inman readers will want to know how they can work with these Chinese buyers. After all, a new group of investors with such a large amount of cash will need proper advice and guidance.
I suggest these three simple steps:
1. Improve your marketing message to be sure that you are communicating successfully with international buyers. This evolution means translating at least some materials into Chinese. It also means explaining clearly to this audience why you are a trustworthy and valuable advisor.
2. Focus on things such as longevity, expertise and key transactions in which you have been involved. You might find some useful info in my earlier story about making your website welcoming to foreign buyers.
3. Explain why your locale is attractive for international investors. Remember, buyers from overseas might not be as aware of differences among neighborhoods or even cities. They might be simultaneously be considering property in places as distant as Las Vegas, New York or Miami.
Emphasize important local assets that overseas buyers want. Such things include schools, universities, transit, airports with direct flights to China, luxury shopping and sports and recreational facilities.
Also, be ready to explain local real estate trends. Why is it a good investment for the long-term?
Rewrite your listings descriptions for the international audience. I suggest making them half property description and half tourist brochure. Look for more information in my earlier post on crafting real estate copy for international buyers.
With this simple advice, you could be on your way to earning a share of that $109 billion.
Andrew Taylor is co-CEO of Juwai.com. You can follow him on Twitter or LinkedIn.
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