The popular West Coast cities of San Francisco, Los Angeles and Vancouver have long been the most direct routes to New World prosperity for Asian immigrants and their families. Now that generations of Chinese buyers have transitioned to life in North America, their experience and trend spotting is bringing to bear more practical considerations of economic fundamentals, financial and educational opportunities, and overall quality of life. So it’s no surprise that relative affordability, propensity for capital appreciation and even a recently imposed 15-percent foreign homebuyer tax in Vancouver, are boosting interest in alternative markets like Seattle—the next international gateway city on the rise.
Matthew Moore, President of the Americas for Juwai.com, a popular residential real estate search portal in China, noted significant changes: “Juwai.com buying enquiries to Seattle increased by 143 percent in August 2016, compared to one year earlier. Meanwhile buying enquiries to Vancouver dropped by 81 percent during the same period, with all of that drop concentrated in the premium end of the market.”
The forested mountains and deep blue waters of Puget Sound, together with high-quality schools, a vibrant and diversified economy, and absence of a state income tax (unlike California) have drawn a gathering surge of Chinese buyers to the Greater Seattle region in recent years. Somewhat overlooked by past generations of immigrants in comparison with Vancouver BC and San Francisco, the Pacific Northwest has so far avoided the trap of high growth fueled by non-resident real estate investment. Yet, industry experts believe that’s coming and likely part of the draw. To the trained eye, Seattle, and especially Bellevue, is looking more and more like Vancouver, albeit about twenty years its junior.
A Canadian and former resident of Vancouver, Dean Jones, President and CEO of Seattle-based Realogics Sotheby’s International Realty, sees familiar signs. His company actively promotes local properties to immigrating Chinese and other Asian buyers with the deployment of an exclusive WeChat portal and establishment of their Asia Services Group, a collective of real estate advisors specialized in the language and logistics of foreign buyers. Jones is also on the Board of Directors for the Washington State China Relations Council and says the region is bracing for a wave of foreign direct investment.
“History may be repeating itself south of the Canadian border,” said Jones referring to Vancouver’s global arrival over the past two decades. “Savvy investors recognize the opportunity as do other stakeholders from Chinese developers to Chinese airlines—everyone agrees the Seattle area is fundamentally well-positioned. Fortunately, overseas demand is on top of our domestic housing drivers like job growth, increased population and wealth generation. The Pacific Northwest already leads the nation with median home price increases and rent growth.”
Unlike Vancouver, the housing market in Puget Sound region is not buoyed by immigration or foreign direct investment. Instead it has steadily lured productive capital investment in its own knowledge-intensive local businesses. Home to Microsoft, Amazon, and Expedia, and now with a large contingent of staff for Google, Facebook and a recently announced expansion by Apple and China-based Alibaba, Seattle has steadily augmented its high-tech eminence since the 1980s. These high-paying jobs draw a growing and well-paid workforce.
According to the Department of Licensing, for August 2016 there were 18,420 out-of-state drivers who obtained a Washington driver’s license. That’s an increase of 8 percent for the trailing 12-month period over the prior year led by inbound residents from California, Oregon and Texas, which accounted for more than a third of the relocations. During month of August 2016 there were 416 persons newly registered from Asia (102 from China), of which 83 percent reside in King County. Census data indicates Asians are the fastest-growing demographic in the region, most notably on the Eastside.
With growing influence, Seattle’s own cultural stature has risen, best demonstrated with a high-profile visit by China’s President Xi Jinping in 2015. Foreign direct investment is streaming in from China at unprecedented volumes and the immigration pipeline is seemingly boundless.
Also Bellevue is the only place in the world with the Global Innovation Exchange, or GIX, a pioneering partnership between the University of Washington, Beijing-based Tsinghua University and Microsoft to build a one-of-a-kind high-tech education program and custom facility.
The region has positioned itself as an attainable place for Chinese families to enjoy life and build household wealth in a self-sustaining twenty-first century economy. By most accounts, Mainland Chinese buyers, together with existing Chinese residents now account for 30 to 50 percent of the luxury home sales in many popular Eastside neighborhoods. The distinctive Bellevue neighborhood of Newport Shores, comprising waterfront estates and Venice-like canals, experienced zero home sales over $3 million in 2011, 2012 or 2013; however, there were three in 2014 and eight in 2015 – all but two of these luxury homes were sold to buyers who hold title in a Chinese surname. Not surprisingly, the top sale of 2015 was a waterfront manse on the north end of Mercer Island for $13.8 million—and despite being acquired in a trust, it is broadly known to be owned by a Chinese national. More recently, Jones confirms his broker’s top pending sales in August 2016 were a $5.49 million waterfront home in Juanita and a $4.85 million equestrian estate in Bridle Trails – both will set neighborhood price records and each were sold to a Chinese buyer.
“Luxury in the Pacific Northwest is still a relative bargain,” observes Jones. “In a global market, a record price can be quickly rendered a great value, especially when compared with West Coast peer cities.”
These emerging trends have attracted some of the world’s top real estate developers to build high-profile residential and mixed use projects, which can be seen from a casual stroll through downtown Bellevue or Seattle, as notices of future development appear on block after block and tower cranes reach skyward. Chinese developers like Vanke, Plus Investments, Great Eagle and Create World are taking massive stakes in new construction while many of the most valuable commercial office towers, such as the 76-story Columbia Tower, are being acquired by investment funds based in Hong Kong and Mainland China. On a more individual basis, many new developments are financed using the USCIS EB-5 immigration visa, whereby foreign families, mostly Chinese, can invest a minimum of $500,000 in qualified projects and earn future US citizenship. So in short, Chinese developers are now using individual Chinese immigration funds to build projects, in part for other recent Chinese immigrants already living in the US and others who are planning on emigrating from China.
Before reforms in 2014, Canada’s immigrant investor could simply buy in, depositing a threshold amount in government funds and then convert overseas assets into Canadian real estate. In many cases, this proceeded with little attention to the actual resale value or maintenance requirements of the assets purchased. Vancouver became a “hedge city,” as it was coined by Vancouver urban planner Andy Yan—a safety deposit box for global wealth in the form of residential real estate and a strategic windbreak from potential crisis at home.  This transformation continued after the Canadian visa reforms, as Chinese President Xi Jinping’s anti-corruption campaign gathered steam in China. Yet the knowledge of this overseas bid on property perversely drove prices to levels beyond those supported by Vancouver’s local economy or the ability of local Canadian buyers to keep up.
For years, the BC government denied that overseas buyers were setting the price on local property, attributing the skyrocketing price increases to the domestic economy. The government was not convinced of the relationship until two years after the Canadian investor visa program had been terminated in its prior form, returning 60,000 applications (mostly Chinese). When the realization finally dawned in the summer of 2016, BC Premier Christy Clark acted summarily and without notice or comment to enact a 15-percent property transfer tax on non-resident foreign buyers in Metropolitan Vancouver, which took effect on August 2, 2016.
The act caught the Canadian real estate industry and their clients wrong-footed, resulting in abrogation of contracts, surrenders of earnest money, and a sudden, steep drop in sales volumes across the region. According to reports by Real Estate Board of Greater Vancouver, home sales of detached houses plunged by 44.6 percent year-over-year in August  and while still higher year-over-year, average detached home prices fell 16.7 percent from July, the sharpest monthly decline in 39 years.  New listings were also down 18.1 percent from July.  In Richmond, Vancouver, and Burnaby, the number of sales fell a bit more steeply against the long-term trend: by 50 percent, according to real estate insider Steve Saretsky. 
Meanwhile, prices elsewhere in British Columbia continued to rise, up by 19.2 percent in Victoria during the same month year-over-year,  confirming that the plunge in Vancouver indeed resulted from the tax.
“It’s too early to tell if this is going to be a sustained market correction or just cause for pause,” said Brad Henderson, President and CEO of Sotheby’s International Realty Canada. “Clearly buyers, both domestic and international, are playing wait and see. The new tax is less likely to change the demand long term, but rather get priced into the market over time. Alternative markets, like Victoria, Toronto and even Seattle will benefit in the interim.”
Juwai.com’s Moore concurs, saying that “Buying enquiries to Toronto also increased by 143 percent in August and it was the single highest-ranked month in the past three years.”
The manner in which the BC government’s tax on foreigners was enacted could not be replicated in the Puget Sound region. As Realogics Sotheby’s International Realty reported at the time in a broadly distributed WeChat article: “In Washington State, our state and municipal governments do not impose any property tax or transfer tax expressly aimed at foreign buyers. No similar bills have been put forward by the Washington State Legislature, and policy makers have remained silent on any proposals to that end. So for the foreseeable future, the only impact on Seattle and Bellevue real estate of the new tax in Vancouver is to increase the comparative affordability to foreign buyers of our real estate in relation to similar properties in this neighboring market.”  Furthermore, the level of non-resident real estate investment that led to the outcome in Vancouver has not occurred in Seattle or Bellevue. Immigrants to this region comprise individuals: students, workers, and their families moving here for a better life.
Indeed, Seattle’s quality of life compares favorably to the other West Coast gateways, especially when the cost of living is taken into account. Among the least affordable major international markets (according to Demographia, comparing the “median multiple” used by the World Bank and the UN), Vancouver ranks third worldwide among the least affordable cities in the world. San Francisco places seventh, and Los Angeles ties with San Diego for ninth least affordable. In contrast, Seattle comes in at 22nd, more affordable than any of these cities, more affordable than Toronto, New York, Miami, and Boston as well.  A recent report by Realogics Sotheby’s International Realty compares the Seattle/Bellevue metro area in-depth with Vancouver BC and San Francisco, explaining how the stronger fundamentals here contrast with the market disconnects seen in those competing gateways.  In August 2016, the median home price of a detached home in the Seattle/Bellevue metro area was $670,000, an increase of 9.8 percent year-over-year. By comparison, median prices in San Francisco at $1,106,400  and in Vancouver at $1,214,250  were higher than Seattle by 65.1 percent and 81.2 percent, respectively.
In a series of articles published earlier this year, Seattle’s local architecture and real estate author Charles Mudede has asserted that Seattle will find no third way to avoid the affordability challenges in Vancouver and San Francisco.  Arguably, Vancouver’s conundrum results from a lack of the industrial base that has nourished Seattle’s success. Meanwhile, San Francisco’s brand of gentrification has been fed by a kind of “NIMBY-ism” that has been historically uncharacteristic of Seattle, a city whose residents have shown time and again that they can and will do whatever is needed to advance their shared quality of life. All this bodes well for home values in the Puget Sound region.
“It’s not just a matter of attainability or even lifestyle but prospects for appreciation,” adds Jones. “The sustained increases of home values in targeted Pacific Rim cities are due in no small part to the foreign demand that’s now taking root in Seattle.”
Hong Kong, Sydney, San Francisco, Vancouver and Seattle share something else in common – geography. Seattle’s physical topography constrains future development, forcing physical growth and prices upward. King County has seen steady price appreciation of real estate at a compound annual growth rate of 7.17 percent since 2011. Over the same period, the number of high-end sales in King County for both single-family residences (at $1 million and higher) and for condominiums (at $500,000 and up) rose by 33.3 percent and 31.5 percent, respectively.  It is understandable, according to Elizabeth Harrington, a director withHURUN and publisher of the famous China Rich List, that Seattle has quickly gained favor among wealthy Chinese consumers, joining their top destination markets of Los Angeles, San Francisco, Vancouver BC, and New York City as fifth-ranked in the world.
Now recognized globally, these cultural and natural enticements serve notice that Seattle’s day has in fact arrived. Meanwhile, brokers are ready to introduce prospective new residents to the wealth of opportunities that await them here. As Jones observed, “Global citizenship isn’t a trend – it’s a movement, and global real estate brokerages like Realogics Sotheby’s International Realty are evolving to respond to this emerging demand.”
Realogics Sotheby’s International Realty has addressed these trends through groundbreaking initiatives that include the all-Mandarin Seattle Luxury Living, which will have an encore printing later the month:
The firm also produced a feature documentary entitled East Meets West, which outlines China’s influence on the real estate market in the Seattle area:
 Jessica Dorfmann, “New Wealth Seeks a “Home”: The Rise of the Hedge City,” Harvard International Review, April 15, 2015.
 Brent Jang and Tamsin McMahon, “Vancouver Home Sales Hit Four Year Low in Wake Of Foreign Buyers Tax,” The Globe and Mail, September 2, 2016.
 Jesse Ferreras, “Vancouver Average Detached Home Prices See Worst Slide in 39 Years,” Huffington Post Canada, September 2, 2016.
 Laura Kane, “Vancouver Real Estate Board Notes 26 Per Cent Drop in August,” Macleans/Canadian Press, September 2, 2016.
 Quoted by Tiffany Crawford, “Greater Vancouver Home Sales Tumble In August Following Foreign Homebuyers Tax,” Vancouver Sun, September 2, 2016.
 Ibid. This was Victoria’s sixth consecutive month with record-setting sales.
 “British Columbia Government Charges 15 Percent to Non-Resident Foreign Buyers in Effort to Curb Skyrocketing Real Estate Prices,” Realogics Sotheby’s International Realty (http://www.rsir.com/blog/2016/08/british-columbia-government-charges-15-percent-to-non-resident-foreign-buyers-in-effort-to-curb-skyrocketing-real-estate-prices/)
 Demographia, 12th Annual Demographia International Housing Affordability Survey: 2016 (http://www.demographia.com/dhi.pdf)
 “Seattle Need Not Fear Vancouver’s Phantom Towers,” Realogics Sotheby’s International Realty (http://www.rsir.com/blog/2016/08/seattle-need-not-fear-vancouvers-phantom-tower/)
 July 2016 data from Zillow (http://www.zillow.com/san-francisco-ca/home-values/).
 In Canadian dollars, $1,577,300.
 Charles Mudede, “Seattle Is Somewhere between Vancouver BC and San Francisco,” The Stranger, February 24, 2016.
 Northwest Multiple Listings Service, Statistical Reviews and Highlights (2011–2015).