Foreign Buyers Reshaping Bay Area Housing Market

Foreign buyers are flocking to places such as San Francisco, Silicon Valley and Los Angeles to invest in U.S. real estate, and this trend is beginning to have an impact on the housing industry.  According to the National Association of Realtors, U.S. home sales by international buyers grew an astounding 54 percent in just the past two years, reaching $82.5 billion in 2012. Interestingly, foreign buyers spend almost twice as much on homes as domestic buyers.

One of the fastest growing groups of foreign buyers has been Chinese investors, who now are second only to Canadian buyers when it comes to purchasing U.S. real estate.  The percentage of Chinese investors has more than doubled since 2007 and now makes up 11 percent of all foreign buyers.

Affluent Chinese residents are facing increasing limitations from their government on purchasing real estate as China battles inflation and faces a potential real estate bubble.  Properties in the U.S., even in more expensive Silicon Valley communities, are considered relatively cheap compared to escalating property values in China’s Guangdong Province, boasting 4 of the top 10 wealthiest cities in China, per a 2011 study.  A surprising number of wealthy Chinese investors are turning their eyes on America and are specifically focused on the best school districts.

That combination of spiraling real estate prices and growing limitations by the Chinese government are prompting many well-heeled citizens to look overseas for places to invest and perhaps relocate.  Given the increase in off-shore buyers, it’s no wonder that the real estate industry is taking notice. A recent story in the Wall Street Journal reported that new home developers are trying to appeal to foreign buyers through the design of their properties.

Given the challenges Asian buyers face in their own countries and the view of the U.S. as a "safe haven" for offshore investors, we suspect the trend of international buyers purchasing Bay Area properties will only grow in the years ahead.

Michael Talis is co-owner of TALIS Real Estate.