While extolling the virtues of American consumers and praising the US economy, Warren Buffett has started seeking the help - and funds - of Chinese oligarchs to sell houses from his real estate brokerage HomeServices. According to Bloomberg's Berkshire's real estate brokerage, HomeServices - currently the second-largest U.S. residential real estate brokerage - acquired as part of Buffett acquisition of an energy business, "is expanding its global reach with a push to attract wealthy Chinese citizens to purchase homes in the U.S", in the process diverting "hot" Chinese money to the US (see Vancouver and Toronto for the outcome).
As Bloomberg reports, HomeServices has been expanding under Buffett by opening new locations, forming a 2012 venture to expand licensing operations and then working to capitalize on demand from non-U.S. buyers. The unit hired Realogy’s Peter Turtzo in 2015 to push into international markets and recruited Mitchell Lewis from Christie’s International Real Estate in September to build operations in Europe, the Middle East and Africa.
As a result, on April 17 Buffett's HomeServices announced an agreement to advertise its U.S. homes on Juwai.com, which attracts about 2 million visitors a month. The portal hosts sites on both sides of China’s “great firewall,” meaning consumers can access the information inside the nation from more than 400 cities and also from more than 160 other countries, according to a statement Monday.
“The Chinese have overtaken all nationalities besides Americans as the leading buyers of property in the U.S.,” Gino Blefari, chief executive officer of Irvine, California-based Berkshire Hathaway HomeServices, said in the statement. The Juwai.com accord and other efforts overseas “make it much easier for Chinese real estate buyers to find and shop our property listings.”
It stands to reason that when one runs out of prospective domestic buyers, the next logical step is to approach those who have been engaging in unprecedented money laundering on a global scale in the form of "real estate purchases" which are nothing more than parking funds offshore (and far away from China's banks) while leaving the newly purchased house unoccupied.
HomeServices owns 38 realty companies with more than 29,000 agents, according to Berkshire’s most recent annual report. It also has a network of more than 375 franchisees with over 46,000 agents.
In an amusing twist, Buffett acknowledged in 2013 that when Berkshire bought the energy business in 2000, he “barely noticed HomeServices, which then owned only a few real estate brokerage companies.” Since then, the energy unit’s profit from the operation has climbed, rising 22% last year to $127 million.
Predictably, the billionaire Berkshire Chairman has been eager to capitalize on the Berkshire brand and Buffett name, which are both popular in China. Coca-Cola Co., which counts the billionaire as its top shareholder, recently announced a plan for his face to appear on cans of Cherry Coke in the country.
Kerry Donovan, vice president of marketing for Berkshire Hathaway HomeServices, is counting on new sales from listings and banner ads on Juwai.com. “This is a huge differentiator for us,” Donovan said in the statement.
It was not immediately clear if and how Berkshire assures that the funds used by wealthy Chinese buyers are not of the "hot money" variety, meant to be parked away from China's perilous financial system and in the process raising prevailing prices to nosebleed levels in any given MSA, as has been the case in recent years with both the Vancouver and, more recently, Toronto housing markets. As a reminder, the US National Association of Realtors remains exempt from Anti Money-Laundering provisions, quite happy to take the money of any and every global buyer, regardless of where the funding came from.
It was also not clear if inviting Chinese capital to compete with far more humble domestic sources of funds is what the US economy needs at this moment, at a time when even the NAR admits the average home is becoming increasingly unaffordable for the typical American.