beyondbrics

For a Chinese millionaire, investing is a chore these days. The stock market is in the dumps, house prices have stopped going up, and even gold is in a funk. Perhaps some real estate overseas?

Enter Charles Schumer – China-currency-policy-basher, and US senator for New York State. Under a bipartisan bill, drafted by Schumer and Utah’s Mike Lee, foreigners could be granted a US visa if they buy an American home.

The Wall Street Journal reports:

…the proposed measure would offer visas to any foreigner making a cash investment of at least $500,000 on residential real-estate—a single-family house, condo or townhouse. Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out.

The measure would complement existing visa programs that allow foreigners to enter the U.S. if they invest in new businesses that create jobs.

It evokes visions of a remake of the 1990 smaltz epic Green Card – only this time with Gerard Depardieau replaced by a credit-squeezed Wenzhou factory boss touring the outskirts of Baltimore in search of the perfect family home. Maybe Andy McDowell could play the real estate agent.

The demand would surely be there. In fiscal 2011, the US processed over 1 million visa applications from China – a 34 per cent rise from 2010.

A recent report from Bain & Co suggested that 60 per cent of wealthy Chinese (those with assets worth over $1.5m) are thinking of quitting China, and over a quarter of Chinese worth over $15m have already filled out the forms.

In the places where mainland Chinese citizens have already been able to access the market, the effects have been palpable. Mainland buyers have helped fuel a huge property boom in Hong Kong, and to a certain extent in Taiwan.

But even if the bill was passed, there’s a major obstacle much closer to home for any would-be American dream chasers: the Chinese government. Capital controls mean that wealthy Chinese would struggle to take the minimum $500,000 required out of the country legally, although those who trade with the US might feasibly have access to the cash offshore.

Plus, spending patterns in other property markets suggest that a wave of Chinese buyers would most likely have the effect of pushing up prices at the high-end of the market, jostling with wealthy locals and other overseas buyers – as they have in big cities like London and Vancouver.

So, for those looking to sell large, expensive family homes in desirable locations or city centre penthouses, more Chinese buyers would surely make a difference. But for those desperate to offload in the wrong part of town, good luck.

Related reading:
Comrade, can you spare some FDI?, beyondbrics
Guest post: China’s disappearing Rmb1,100bn bank deposits, beyondbrics
Foreigners’ Sweetener: Buy House, Get a Visa, WSJ.com