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Originally published May 18, 2013 at 5:30 PM | Page modified May 20, 2013 at 2:50 PM

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Corrected version

China’s wealthy paying cash for Eastside luxury homes

Eastside real-estate brokers say they’ve noticed a wave of affluent mainland-Chinese buyers for luxury homes in Medina, Clyde Hill and other millionaire rows in West Bellevue. Data and public records show they’re right. It’s part of a cash-buyer phenomenon sweeping the home market.

Seattle Times business reporter

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Real-estate agent Joseph Ho climbed the gilded staircase of a Hunts Point mansion listed for almost $5 million, shooting video on his iPad and narrating in Chinese.

Buyers from China have inquired about the 5,540-square-foot house. Ho made sure to capture a blue-sky fresco in the formal dining room — “It’ll remind them of Caesar’s Palace in Las Vegas” — and a yacht-ready dock on Cozy Cove.

“Water features are important for Chinese feng shui,” Ho said. “When you have 1.4 billion Chinese, many of whom are millionaires, somebody will like it.”

China’s superrich, who have historically been drawn to San Francisco, Los Angeles and Vancouver, B.C., are investing in Seattle-area real estate in growing numbers, buying multimillion-dollar homes, rent-producing properties and land for commercial development.

In the process, they are accelerating the real-estate market’s recovery, sometimes edging out other buyers with all-cash offers, and deepening ties between Seattle and China.

While exact numbers are hard to obtain, local real-estate agents, bankers and China experts say there’s been a definite increase over the past year of rich Chinese nationals shopping for homes here, mostly on the Eastside.

Citi Private Bank, for instance, reports it’s seen about a 30 percent increase over the past 12 months in the volume of mortgages involving buyers from Asia in the Seattle area.

The buyers have several motives: Some want a safe place to invest and diversify their fortunes. Others want their children to start school or university studies here. And some want to launch businesses here.

There are at least a few who are buying property without setting foot on it.

“We’ve had several projects come in here where the person purchasing from China bought it without ever seeing the property,” said Robert Grumbach, who oversees development for the city of Medina, home to Microsoft Chairman Bill Gates.

One of Ho’s clients in China bought a Hunts Point mansion last year for almost $7 million — and decided to tear it down to build a new home. The client, who thought he could get it built in three months, was shocked to learn it would take two to three years.

Though some may buy based on just a video, Ho says, it’s more common for the rich buyer from China to hop on a plane to Seattle as part of a U.S. tour.

The buyers have cash to spend and are eager to close a deal, said Ho, of Prudential Northwest Realty Associates in Bellevue.

“They want to negotiate, but if you don’t engage, they’re gone” to San Francisco, Malibu or other West Coast cities, he said.

Warming up to Seattle

While San Francisco has long been a destination for Chinese investors, tourists and students, Seattle’s star has been rising.

The Chinese began paying more attention after President Hu Jintao visited in 2006 as part of his first state visit to the United States, said Mark Wen, president of the Washington State China Chamber of Commerce.

Direct flight service starting in 2008 made traveling from China quicker.

And then former Washington Gov. Gary Locke, the first Chinese-American U.S. governor, became the first Chinese American to serve as U.S. Commerce secretary in 2009. Locke became ambassador to China in 2011.

In addition, a recent Chinese romantic comedy, “Finding Mr. Right” — or titled “Beijing Meets Seattle” in Chinese — is giving Seattle a media splash in China.

“We’re not the end of the Earth anymore,” said Joe Borich, president of the Washington State China Relations Council.

Circumstances in China also are driving wealthy Chinese to look abroad.

“It’s only natural that they want to be part of a better environment — clean water, clean air, less density of people,” said attorney Leo Peng, who manages the Beijing office of law firm Garvey Schubert Barer.

Moreover, investment opportunities in China are limited. Some wealthy families also may want to protect their assets by stashing some abroad.

“This is pretty much identical to what happened to Vancouver (British Columbia) in 1997,” Wen said. That year, the British transferred control of capitalistic Hong Kong to communist China. “Vancouver became a haven for people moving money out of Hong Kong.”

Two other recent trends contributed to the current wave of superrich China buyers coming to the U.S.: The rise of China’s currency against the U.S. dollar and the run-up in China’s property values that made many millionaires, said Tom Chang, who oversees the Pacific Northwest for California-based East-West Bank, the largest Chinese-American bank in the United States.

In 2011, China had more than 1.4 million millionaires, ranking it third globally, and 648 households with more than $100 million in wealth, according to a study by Boston Consulting Group.

Some of these Chinese investors are obtaining investor visas from Canada and the United States that allow them to move their families here in exchange for investing in job-creating projects. In 2012, about 80 percent of such investor visas issued by the U.S. government were to Chinese nationals.

To be sure, buyers from around the globe are shopping for homes in the U.S. market: International sales totaled $82.5 billion in 2012, up from $66.4 billion in 2011 and $53.4 billion the year before that, according to the National Association of Realtors.

Signs of a trend

In King County, a Seattle Times analysis of property-tax payers with foreign billing addresses found the largest number are from Canada, China (including Hong Kong) and Japan.

That analysis, covering property-tax records from 2013 and 2007, vastly understates the true number of international buyers because it doesn’t capture foreign buyers who have moved here temporarily for work or education, or those who rely on local property managers to handle their tax payments.

But the data offer one way of seeing the rising interest:

• There are at least 519 owners with Canadian mailing addresses, up 14 percent from 2007.

• While the number of Hong Kong addresses rose 25 percent from 2007 to 50, the number from mainland China doubled to 18, the analysis found.

Recent real-estate transactions are another window into the phenomenon.

At the Olive 8 condominium tower in downtown Seattle, several buyers are from China, according to the developer’s spokeswoman.

On Mercer Island, former Sonics basketball player Kevin Durant sold his home in February for more than $2.4 million in cash to a Chinese-American couple and a Chinese national who plans to visit occasionally, according to their agent, Marguerite Knutson, a Windermere broker in Seattle.

Knutson spent two months going to open houses on the Eastside before closing that deal. Time after time, she said, homes were snapped up by Chinese investors paying all cash.

One rambler in Newport Hills, for which she was the selling agent, was listed at $440,000 and got 11 offers, ultimately selling for $500,000 in cash to a buyer from China.

Knutson said that for would-be buyers who require a mortgage, “it’s tough to compete against people with a bag of cash.”

But for sellers, the demand from investor buyers from China should be welcome; Knutson estimates it is responsible for “at least half of the recovery in prices on the Eastside.”

The buyers of Durant’s house are partners with another Chinese national in building a 400-bed student dorm at Shoreline Community College, Knutson said. They plan to break ground next year.

Other local real-estate agents also say they’ve noticed the surge in interest from foreign buyers.

“We’ve had buyers out of China, South America, Europe and Canada,” said Dean Jones, owner of Realogics Sotheby’s International Realty in Seattle.

“Now that the tides have turned, they’re coming off the sidelines,” he said, “at a time with historically low inventory.”

Chang, the East-West banker, said some of the Canadian buyers here are Chinese nationals who got visas to Canada but decided Vancouver’s real-estate market was too pricey.

“We did two seminars (last summer) for tourists, Canadian Chinese, who came down to look at real estate as an alternative investment,” Chang said. The prospective buyers toured condos in downtown Bellevue and million-dollar homes around that city.

International buyers who want to buy homes in the U.S. market can have trouble getting loans from U.S. banks, experts say, because of cultural barriers and not having an established credit history here.

Complicating matters, China restricts individuals from taking more than $50,000 out of the country per year.

Citi Private Bank has helped Asian clients buy real estate in their own name or through a foreign corporation or through a trust, said Ida Liu, who oversees the Asian Clients Group in North America.

“Our team in Asia can underwrite the mortgage for a house in the U.S.,” she said. “It’s really seamless.”

Peng, who lived in Seattle and now practices law in Beijing, said some of the affluent Chinese nationals buying houses in the U.S. made their money in real estate and intend to develop apartments, offices and shopping malls here.

“This is just the beginning of a huge wave of investment,” he said.

Seattle Times computer-assisted reporting specialist Justin Mayo contributed to this report.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com On Twitter @sbhatt

This story, published May 18, 2013, was updated May 20 to include a broker’s company affiliation.

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