A sketch of The Emerald, a 40-foot condominium tower planned at 2nd and Stewart near Pike Place Market in downtown Seattle. Chinese investors helped make the project possible.
Seattleites love to blame outsiders for skyrocketing housing prices.
In the 1990s, it was Californians. Today, it’s Chinese investors and their notorious all-cash offers.
Some Seattle leaders want to tax these foreign investors – or at least know how much of the market they’ve cornered.
Said Cary Moon, mayoral candidate: “It is a fact that speculators are driving up prices and exacerbating Seattle’s housing crisis, but we don’t know the real depth or dynamic of this problem because no one wants to look.”
Moon’s rival, Jenny Durkan, said she would oppose real estate databases or taxes as “discriminatory and illegal.”
Moon and others got the idea to tax foreign investors from Vancouver, B.C., neighbor to the north, where 16 percent of buyers were from abroad, mostly China.
And it worked at first. The percentage of foreign buyers dipped to 4 percent from 16 percent right away.
And then it didn’t: Within a year, foreign investors returned, having figured out a way around the tax.
Not that it mattered much for Canadians. Housing prices didn’t go down in Vancouver, and vacancy didn’t go up. But it did help government, said Stephen Quinn, a host with CBC radio. He called it a “windfall for government.”
“It’s raking in hundreds of millions in property transfer taxes,” Quinn said. But, “it’s not meaning much for people buying a house under $1.5 million.”
Marc Stiles, reporter for the Puget Sound Business Journal, said such a tax would be a “knee-jerk reaction.”
“I’m not sure that taxing foreign buyers is going to necessarily calm the roiling waters of Puget Sound’s red-hot housing market,” Stiles said.
Foreigners tend to buy pricier properties, he said, so taxing them in Seattle would have more impact on the higher-end market.
“I’m not so sure on the lower-end market,” he said.
Examples of high-end buying, he said: In Belltown, at Battery Street and 3rd Avenue, a Taiwanese company is building a 12-story apartment building. And at 2nd and Stewart downtown, where the Caffe D’arte used to be, Chinese and other international investors are building a 40-story building called “The Emerald.”
In the residential arena, realtor Becco Zou, said business started booming for her four years ago – she hasn’t had an off season or much vacation. She said most of her clients are new immigrants who have received green cards set aside for investors and entrepreneurs.
“Seattle is attractive for a couple of reasons,” Zou said. “Number 1, it’s the closest city, flying, to China. And number 2, believe it or not, is the movie, ‘Meeting Mr. Right.’ That’s a movie that came out in 2013 and it shows the beautiful scenery of Seattle.”
Zou, a realtor with Berkshire Hathaway in Bellevue, said her clients contact her six months to a year before moving to Seattle.
“They do a lot of online research,” she said. “I ask them what kind of house are you looking for? They are most focused on the good schools. I will present them the different school options, then do a preparation to move the funds to the U.S.”
She said it’s daunting for foreigners to buy property here. Many don’t speak English, she said, and those all-cash offers are dwindling now that China has made it harder to pull a lot of money out of the country.
Candidate Moon told The Stranger last August that “the flow of Chinese money is looking for the next housing market, and it appears that Seattle and California cities are emerging targets.”
She has since softened her position, emphasizing that she has no problems with families buying luxury homes to move here. She and Lisa Herbold, a city council member, say they are focusing on investors — particularly those who leave homes and units vacant.
Tracking foreign buyers is nearly impossible in King County. There’s no box to check for citizenship.
The Seattle city attorney has said it would be illegal for Seattle to tax real estate sales to foreign investors, as Vancouver has done. And the King County Assessor has refused to collect information on these buyers, saying it could lead to “racial bias” against Asian investors.
Councilmember Herbold said she won’t pursue the tax, given the city attorney’s position, but she would like more disclosure around real estate investments.
“Given that we don’t appear to have the authority to tax properties that are vacant,” Herbold said, “looking at another way of addressing the problem, like more transparency for these types of investments, might be a good way to go.”
Herbold said she’d like to commission a study like Vancouver’s, which found the city had the highest proportion of empty and underused homes in 35 years. She emphasized that she is not trying to single out foreigners. Rather, she believes that disclosure of investors and shell companies would help discourage investors buying properties to sit vacant.
She said she specifically asked for “neutral” information that would disclose who is behind cash transactions and shell companies.
“An important first step is to see whether or not we have a problem with large number of vacancies with high-rise or luxury properties,” she said.
In Canada, officials learned about their high vacancy rate by examining where little energy was being used. They’ve also relied on neighbors to tattle.
But Stiles, the reporter, said he doesn’t believe that Chinese buyers are the only reason the market is so hot.
“It’s simply incredibly strong demand,” he said. “This is the most robust, most dynamic market, both commercially and residentially, that I’ve seen in my many years of writing about real estate. It just keeps getting hotter.”
He doesn’t believe it will stay this way forever.
“When the music stops – and it will stop – prices will drop,” he said. “But because Seattle has reached the premier status among U.S. cities, the drop off won’t be as severe.”
This story was reported by Amy Radil, David Hyde, Amina Al-Sadi and Jeannie Yandel; it was written by Isolde Raftery.