bottom-feeding

Chinese Weibo users are salivating over Detroit’s bankruptcy

July 25, 2013
July 25, 2013

This article has been corrected.

Detroit has long had one of the nation’s worst housing markets. Home values have plummetedVacancies abound. And foreclosure numbers are through the roof. Not that that’s surprising; who’d want to live in a neighborhood with soaring unemployment and the highest rate of violent crime in the US?

The bad news for Detroiters is that the city’s bankruptcy will likely only deepen the decay of its housing market.

That might deter most prospective home buyers. But some look at Detroit’s hard times and see profit.

Specifically, bargain-hunting Chinese investors. Since the bankruptcy was announced on July 18, talk of snapping up Detroit housing for a pittance has picked up on Sina Weibo (link in Chinese), reports Sina Finance. And it appears to be translating into real interest; Caroline Chen, a real estate broker in Troy, Michigan, says she’s received “tons of calls” from people in mainland China.

“I have people calling and saying, ‘I’m serious—I wanna buy 100, 200 properties,'” she tells Quartz, noting that one of her colleagues recently sold 30 properties to a Chinese buyer. “They say ‘We don’t need to see them. Just pick the good ones.'”

China has the most expensive housing on the planet. Plus, capital controls make it difficult to invest large sums in overseas stocks or property. That’s why when a CCTV broadcast aired in March—after the emergency takeover was announced—saying that for the price of a pair of leather shoes, you could buy two Detroit houses, Chinese investors got excited.

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$39 for this three-bed, two-bath at 8234 Normile St.(Realtor.com)

Millions commented on the CCTV post about Detroit on Sina Weibo. As one user put it, “Seven-hundred thousand people, quiet, clean air, no pollution, democracy — what are you waiting for?

This wasn’t just talk. Wei Kefei, an organizer of a Beijing property fair, told the Global Times in March that deals were picking up. “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,” he said. A Mandarin-speaking Detroit broker reported getting 3am phone calls from interested investors (link in Chinese). Detroit mania was enough that China’s Ministry of Foreign Affairs warned citizens about investing risks (link in Chinese). And it had a point; there are slews of hidden costs that buyers take on.

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Foreclosure map of Detroit’s West Side.(Whydontweownthis.com, via Business Insider)

Though Chinese realtors had planned tours of the area in late spring, those were cancelled when most investors didn’t receive visas, says Chen. Therefore, many Detroit home purchases by Chinese investors are sight unseen. “It’s like buying the lotto,” says Chen, explaining that mainland investors see the chance the property will appreciate as worth the dirt-cheap price. “But I’ve been in the Detroit area for 35 years. 35 years ago downtown Detroit was like this, and it’s not getting better.”

That becomes more apparent to those who do visit. Chen says that Chinese investors sometimes pick up and fly to Detroit without notice and call her to say, “Hey, I’m at the airport.” Because Chen is unwilling to risk her safety for a $3 commission on a home sale, she recommends that they hire a taxi to drive them through the areas with dirt-cheap houses. So far, most haven’t called her back. “Once they see the scary area, they give up,” she says.

Correction: This article has been corrected to avoid confusion between “downtown Detroit” and “Downtown Detroit,” which is the name of a neighborhood.

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