This week California governor Jerry Brown wrapped up his trip to China, during which hundreds of business cards will have been exchanged and plenty more California wine poured. Six memoranda of understanding were signed to boost business ties between Chinese firms and the Golden State, and there was provisional agreement for $2 billion of Chinese investment, much of it in the property sector.
But while California is one of the more well-known destinations in the United States for Chinese investors, another city reporting Chinese interest is a much more unexpected candidate: Detroit has suddenly appeared on the radar screen for Chinese homebuyers.
After years of snapping up property in cities like New York and Boston, Chinese investors are now turning their attention to a more challenging property market. CCTV reported last week that Chinese money is now reaching the down-and-out neighbourhoods of Detroit, a place where even most Americans would think twice (or longer still) about investing.
Price is the major attraction. The People’s Daily reported that because of the deterioration in Detroit’s economic fortunes, some properties can be bought for $100 or less. In some extreme cases, houses are on offer for just $1.
But there’s a reason why it’s so cheap to buy a piece of the Motor City. Earlier this month Detroit was placed under the supervision of an emergency manager in an effort to heal its finances and the city is struggling to shoulder more than $14 billion in financial liabilities. It also faces a declining tax base due to a sagging population and the continuing travails of many of its remaining car firms and component manufacturers. In many neigbourhoods the evidence of such a decline is more than apparent: vacant homes, empty blocks, darkened streetlights, street crime and overburdened police officers.
But is one man’s junk another man’s treasure?
A local property agent named Jasmine McMorris caught CCTV’s attention with news that she had purchased over 360 Detroit-area properties in the last two years for an average price of just $2,500. This year, the city native has kept on buying, often picking up properties for as little as $500.
After the segment was aired, “Detroit” quickly became one of the highest trending topics on Sina Weibo as over a million people tweeted about housing prices that were “cheaper than cabbage”.
Not missing a beat, property broker Soufun quickly began promoting a tour for Chinese investors on the frontpage of its website. The response was overwhelming. Soufun told Hangzhou Daily that over a thousand people had signed up to make the trip within two days.
Industry observers say Beijing’s latest policies to dampen down residential property sales may be prompting more investors to look abroad (see Talking Point in issue 184). “Before, most Chinese who bought overseas properties did so, especially in the UK, the US, Canada and Australia, for their children’s education or to emigrate to. But after the central government further tightened real estate policies, more are tending to diversify their investment portfolios,” suggests Maureen Yeo, at property consultancy Knight Frank in Beijing.
But there were also warnings for anyone suddenly enthused by the thought of packing up and heading for Michigan.
“Downtown Detroit’s housing market has been in a slump for a long time,” one weibo user wrote. “It’s a famous ghost town and it’s frightening there”. Nanfang Daily also noted that buying property in the United States incurs costs other than the purchase alone, such as property taxes, inspection and maintenance fees and the expense of refurbishing homes if owners hope to rent them out.
Then there’s the crime…
As another netizen bluntly commented: “Do you have your gun ready? Better get in some practice before you get there. We can sell you a thousand houses. But do you have a lawyer? If your house ends up unused it’ll become a hangout for tramps.”
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