Foreclosure numbers in Detroit are staggering even though the rate has declined
recently. To add insult to injury, the city is now bankrupt, a situation that will no doubt even make the housing slump worse. Detroit has a high unemployment rate and the highest violent crime rate in the US. Detroit is rated as the least healthy
urban housing market in the US. Nevertheless, Chinese investors think this is an American dream where they can purchase properties cheap.
Sina Finance reports that since the bankruptcy on July 18 was announced, the Chinese website Sina Weibo
has been all abuzz about how properties can be picked up for a pittance. Caroline Chen, a real estate broker in Troy, Michigan, claims to have received numerous calls from people in China. Chen says that some people have called and said they want to buy 100 to 200 properties. She said that a colleague recently sold 30 properties to a Chinese buyer. The buyer said we don't need to see the properties just pick the good ones.
In China, housing is very expensive perhaps the highest in the world. There are controls on the export of capital and hence Chinese investors are limited in the amount they can spend on properties overseas. In Detroit a little money can go a long way. One user
exclaimed on Sina Weibo:
“Seven-hundred thousand people, quiet, clean air, no pollution, democracy — what are you waiting for?”
Apparently no jobs and the highest crime rate in the US do not count.
Wei Kefei who organized a Beijing property fair told Global Times that there is more than talk, that deals were indeed picking up the pace:
”Some people did rush to buy houses in Detroit, betting on the US economic recovery, which they believe will boost development in the auto industry,”
However, much of the US auto industry has moved from Detroit and the industry is much more automated than it was when Detroit was the center of the US auto industry.
The Detroit mania seems significant enough that the Chinese Ministry of Foreign Affairs saw fit to warn its citizens about the risks of investing in Detroit and noted that there are many hidden costs that investors may not be considering. In late spring, Chinese realtors had planned tours of the Detroit area but the trip was cancelled when most of the investors were not able to obtain visas in time for the trip.
Many home purchases by Chinese investors are sight unseen. Chen says that mainland investors think that the property is bound to appreciate. However, Chen says that the investment is more like buying a Lotto ticket. Your chances of winning are slim.
Some Chinese investors fly to Detroit without notice and phone Chen from the airport. She recommends that they hire a taxi to drive them through downtown Detroit. She says most of them do not call her back. Once they see the areas where the properties are, they give up.
Since most buyers will be unable to travel to Detroit to see the properties for sale, perhaps realtors dealing with the Chinese can use the top appended video for promotions even though the properties they will be buying are shown in the dismal video posted underneath.