Realtor Says Foreigners Buy for the Long Haul
Ed Carroll, who founded Hollywoodland Realty Co., 41 years ago, has seen radical changes in the real estate market in most of Los Angeles and parts of the San Gabriel Valley.
“Nowadays, I eat mostly at Thai, Chinese, Korean, Iranian and Japanese restaurants and, invariably, I take along an interpreter from a pool of multilingual agents on our staff,” Carroll said. “That should give you a clue to some of the changes.”
As recently as a year ago, Carroll’s list of buyers showed about 30% Chinese, 30% Korean, 20% Iranian and 20% Japanese, with a scattering of Israeli and Filipino investors, and no Americans.
“I’ve been tempted to put out a sign in front of my office that says: ‘English, still spoken here,’ ” he adds with a chuckle. “It would be nice to meet up with an old-fashioned American buyer. But, hey, who’s complaining . . . business is booming!”
There’s been a steady flow of fresh new money, and much of it is in the pockets of foreigners, Carroll said. “In the 41 years that I have been doing business in real estate, new buyers keep crossing the borders and, more and more, the influx of new investors keeps driving up the price of commercial and residential real estate.
“The Japanese investors, for instance, are so accustomed to the phenomenal cost of real estate in Japan, that our prices seem low to them. Also, Americans buy mostly on speculation, while foreigners tend to hang on to their properties for the long-haul appreciation factor.
“What most of us Americans fail to realize is that the high price today is what we wish we could have bought it for tomorrow,” added Carroll, who is also a professional umpire in international tennis circles.
There are other factors, as well, he stated. “The foreigner has a great deal of faith in our real estate market, in its stability and in its appreciation value. Foreigners are confident that values will rise, and they continue to pay whatever it takes to get the properties they want.”
Asked to sketch the profile of the Asian buyer, Carroll said they invest wisely but overpay if that’s what it takes to get the property they want. “That is not to say that they don’t try to get the best possible price, but they are frugal and save their money. They work hard and eat well, invest wisely, and hang on to properties.
“The Iranians are the toughest negotiators of all. It is an aspect of their culture to bargain, and they enjoy it, but once they’ve agreed, they pay the price and there’s no problem.
“A recent bargaining session went from 2 p.m. until 10 p.m., no sale, and continued the next day for several more hours until the deal was concluded.”
‘Domino Effect’
One of the more significant changes brought about by foreign buyers, Carroll explained, is what he refers to as the “domino effect” that has created the higher property values that the average American buyer won’t touch.
“When a buyer overpays, this kicks up the price of all comparable properties, affecting entire neighborhoods, and resulting in higher rents, as well,” he observed.
To illustrate the domino process in the Larchmont area, in the vicinity of his realty office, Carroll said the average corner, north of Beverly Boulevard on Larchmont Boulevard, is selling for $50 to $100 a foot, while in the 1970s, it sold for $12.50 to $18 a foot.
Will the trend continue?
Having the Cash
“There is no doubt that Southland real estate values will continue to show at least a 5% to 6% steady annual increase, both in the commercial and residential sectors,” Carroll predicts. “And quite frankly, appraisals mean little these days.
“Those who are entering the country have the cash to spend. I have sometimes had to refer an investor to a bank before signing a contract because the buyer arrived with a satchel full of currency.”
Carroll says it is useless to send out the traditional advertising flyers for listings of properties owned by foreigners. “What they are looking for is not to sell but to acquire, and they have actually priced properties out of the market.”
Some of this feverish acquisition of commercial real estate, Carroll said, has resulted in a saturation of new satellite shopping centers, a favorite with the newcomer.
“They have appeared on practically every available commercial corner,” Carroll said. “Fortunately, the city of Los Angeles has recognized that many of these centers have become neighborhood gathering places, attracting loiterers, drug users and other problem types.”
Moratorium on Malls
He said Los Angeles has declared a moratorium on permits for this type of construction, “and further restrictions are in the making. Also, the city now prohibits any existing gas stations from being demolished.”
“The domino action with dramatic escalation in land prices, has made it economically unfeasible to build these satellite centers. It stands to reason that the combined cost of land and the structure cannot derive enough income from renters to compensate for the investment. So, we may see some of this kind of investment leveling off,” he said..
“The whole thing goes back to ‘if it costs more to bake a loaf of bread than you can sell it for, then don’t bake it.’ ”
There is another serious factor that could slow things up considerably, the realtor cautioned, and that is increases in interest rates that could have a dramatic impact on the appreciation factor.
What seems a little disconcerting to Carroll is that once the property is bought, it will not be for sale again. “Not for a very long time. There is no recycling in the foreign market.”
“When I close a deal it makes me feel as if I am sealing the doom of the resale possibility of that property, and I know I am tightening the real estate market.”
Carroll’s real estate contracts are negotiated through two Hollywoodland Realty offices--the Beachwood Drive office in Hollywood, handling only residential properties, and the main office on Larchmont Boulevard, dealing primarily with commercial properties.
The Hollywoodland Realty Co. at 2700 N. Beachwood Drive, occupies the original model home of Woodruff’s Hollywoodland tract developed in the early 1920s.
“In Woodruff’s time, Hollywood Boulevard was looked upon as the Great White Way of the West, and the 36 corners on Hollywood Boulevard between Vine Street and Highland Avenue, running through the heart of the business section of the screen capital, registered enormous gains,” Carroll said.
“The 1919-20 assessment of the 36 corners compared to the 1928-29 assessment roll showed an average annual increase in value of the 36 corners of 331.9%, or $310,647 in 1920 compared to $5,978,580 in 1929,” the realtor noted.
