Why Chinese People Buy So Many Homes in Palo Alto

It's not just because it’s nice: Foreign home purchases by China's wealthy tell us a lot about the country’s economy.
Palo Alto's proximity to Stanford University, pictured above, is among the reasons it has become a very attractive destination for Chinese home buyers. (nappa/Flickr)

The rise of the Chinese consumer on the global stage has had a tremendous effect on world markets, shaking up everything from the price of milk powder to impressionist paintings. Now, the impact is being felt all the way in Palo Alto, the Silicon Valley town next to Stanford University.

Over the past two years, Chinese buyers have been snapping up property in the city, driving up prices and possibly contributing to an emerging bubble. Chinese nationals have tripled their share of home purchases in Palo Alto since 2011, now accounting for around 15 percent of transactions in the city according to Ken Deleon, founder of Deleon Realty, a local firm that has invested heavily in catering to Chinese buyers.

“If we have seven offers for a home here, three of them will be Mainland Chinese buyers with all cash,” Kim Heng, the Chinese-born head of Asian outreach at Deleon Realty, guessed. “We’ve never seen so much money in all the years we’ve been in the real estate business.”

Palo Alto, in many ways, is the ideal city for attracting Chinese buyers, due to its strength in three crucial areas: education, investment and immigration possibilities. Palo Alto’s public schools consistently rank among the best in the state, if not the country, and the city borders Stanford University, one of the American universities that is best-known in China. High—and rising— property values also make Palo Alto homes an attractive investment, especially for those now stymied by restrictions on multiple-home purchases in China. Finally, Palo Alto’s location in the heart of Silicon Valley, near companies like Google, Facebook and LinkedIn, offers enticing employment possibilities and, possibly, opportunities to obtain a green card. The prestige of the city—and the San Francisco Bay Area as a whole—isn’t lost on status-conscious Chinese consumers, either.

“With Stanford and all the venture capitalists nearby, the environment nurtures the entrepreneurial spirit,” said Kim Heng. “With that environment, Chinese people feel like the property values will never decrease.”

According to real estate tracker trulia.com, median home prices in Palo Alto have gone up 16.8 percent in the last 12 months, with the price per square foot jumping 23.4 percent in that time to $1,107. Local realtors have attributed that rise partly to the impact of Chinese buyers who are using cash to buy houses a continent away, often sight unseen.

A brochure from Deleon Realty showing the Great Wall of China, the Golden Gate Bridge, and Stanford University's Hoover Tower. (Deleon Realty)

Lan Liu Bowling, a Taiwanese-born broker in Palo Alto, has used her fluency in Mandarin to act as a conduit for these Chinese purchasers.

“I just sold a house yesterday where there were four people from China interested, and none of them had seen the house,” Bowling said. “There has been an impact on market values because they’re all coming with cash and they know that in order to beat the other four, you need to bid it up.”

Many Chinese buyers looking for homes in Palo Alto come from the elite of Chinese society, often serving in the leadership of the country’s largest corporations. Capital controls normally restrict the movement of large sums of RMB, China’s currency, out of the country, so prospective buyers use Hong Kong branches of their companies to transfer funds from the mainland to the territory and then into American accounts. Among those with access to these channels of wealth and power, the cost of the home is often the least of their concerns when buying into Palo Alto, where average prices approach $2 million.

“I am so shocked at the amount of money these people have,” Bowling remarked. “To me $3 million is a lot of money, but to them it’s almost like pocket change. It just doesn’t put any kind of financial burden on them.”

For many Chinese buyers, China’s political situation represents another reason to purchase homes abroad. The assets of wealthy Chinese people rest on shaky foundations: a change in the balance of power or an untimely corruption crackdown could spell disaster. According to Patrick Chovanec, Chief Strategist at Silvercrest Asset Management and former professor at Tsinghua University, these vulnerabilities have been driving wealthy Chinese to invest abroad.

Matt Sheehan is a freelance writer living in Beijing.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus


How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.


Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.


The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.


Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.


Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses


Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in China

Just In