12-03-2008 11:25Special Report: Global Financial Crisis
The first Beijing group for bargain hunting in the real estate market will leave for U.S. next month. Reporters learned yesterday that, to date, over 30 people have entered their names for the trip, with about 60% coming from the real estate industry and the rest of them are shopping for houses for their children who will study in the US.
10-day trip in three cities for house shopping
Reporters learned that the group’s trip will last for 10 days. They are expected to leave Beijing on January 15, 2009 and visit San Francisco, Los Angeles and Las Vegas. The itinerary will include house shopping and sightseeing, and the group will depart from Los Angeles and return to Beijing on January 24.
According to Ms. Yang, an executive of the second-hand house section of Soufun.com, the organizer of the house-hunting group to the US, the group’s trip will focus on foreclosure houses affected by the sub-prime crisis in the US, with prices ranging from US $40,000 to US $100,000, which amount to between 250,000 and 700,000 yuan.
US real estate agents lead the house-hunting tour
Reporters noted that three days had been set aside during the trip for house shopping with local US real estate agents acting as guides. The group will visit approximately 20 houses.
The itinerary shows that, on January 16, 2009, the bargain house-hunting group, led by local San Francisco real estate agents, will visit houses for sale in San Francisco .
On January 18, representatives from the Los Angeles real estate industry will talk about the current situation and latest trends in the US real estate market, and will lead the tour of houses in various communities and in different price ranges. If any members of the house-hunting group are interested in a property, they can choose to buy.
On January 22, local real estate agencies will lead the bargain house-hunting group to look at houses in Las Vegas.
As we have learned, the combination of rising housing prices in China and the appreciation of the Renminbi coupled with declining real estate prices in the US and the depreciation of the US dollar, has already become an impetus for Chinese investors to buy properties in the US. Besides, due to the continuous appreciation of the Renminbi, it is more cost effective to shop in the US. At the same time, the US sub-prime crisis has forced the prices of some of the mortgaged houses to drop, increasing the interest of some investors to go house hunting.
According to the organizers, a tour group to the US with around 30 members is normally priced at 15,900 yuan per person, which does not include air tickets, and the price of the bargain house-hunting group is priced at 14,900 yuan per person, cheaper than the regular US tours. In addition, most of the regular Chinese tour groups stay at three-star hotels, while the bargain house-hunting group stays at four-star hotels.
The motive of bargain house hunting
Half of people want to buy houses to live in when they visit their children studying abroad
According to Ms. Yang, to date, there are already 32 people signed up for the US bargain-house-hunting-group. Around 60% of them are from the real estate industry.
In addition, around half of them are making preparations for their children to study in the US. They plan to buy houses when the US housing market is at its low level so that they can keep their children company when they study in the US. "My daughter started school in the US in August this year. I might as well buy a house if it is really cheap and I can visit her by the way," said Mr. Chen, one of the registered members, adding that he will go and take a look first.
A reporter learned from the interview that, except for two or three professional investors, most of the US bargain-house-hunting-group members mainly want to see what the US real estate market has become after being swept by the financial crisis and will buy a house if the price is appropriate.
Good time for bargain house hunting, but short-term returns are not high
Wang Yong, executive director of Hanbroad Consulting, said, from a long-term investment perspective, investing in real estate in the US has the advantages of low risk, stable earnings and high rates of return. He said that, having been affected by the sub-prime mortgage crisis and the financial crisis, US housing prices are lower than before. Now is a good opportunity to invest in the US real estate market if one´s children are preparing to study in the US or if one has a housing need as a result of doing business there.
In addition, since the dollar exchange rate against the yuan has been at a relatively low point recently, it is definitely a good time to buy houses or do some shopping in the US with your Renminbi, Wang said.
Niu Dao, a famous financial and economic commentator, said that the sub-prime mortgage crisis has resulted in foreclosures, and the properties are indeed selling at low prices. If Chinese consumers are in need of buying houses for the purpose of accommodation, now is a good opportunity to invest.
But Niu also pointed out that all investments include risks. Affected by the financial crisis, the US economic prospect is not clear and therefore bargain hunting for and investing in US houses now brings with it a certain level of risk. Niu said conditions in the US and China are different. Houses in the US are mainly used for buyers´ own accommodation and the amount of investment is relatively smaller. Even though consumers can buy houses in the US at low prices now, the possibility of realizing high returns in the short term is relatively small.
Translated by LOTO