By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street
Top residential real estate brokerages in the US have been promoting US homes to investors in China for years. Brokerage firms in Canada, Australia, New Zealand, and other countries have done the same. Commissions are at stake! They have set up units in China and are partnering with Chinese real estate portals, such as Juwai.com.
Warren Buffett’s Berkshire Hathaway HomeServices, a subsidiary of HomeServices – the second largest residential brokerage in the US – entered the fray belatedly a year ago with a marketing agreement with Juwai.com “to syndicate all of its franchisees’ residential listings.”
And not just in the trophy cities on the coasts, but all of Berkshire’s listings, anywhere.
One of the properties it offers on Juwai.com today is this mansion on 8387 Ford Road, Superior Township, Michigan:
Scrolling down the page of any of these listings reveals four red buttons that lead to the crux of these deals for Chinese investors (so-so translations below):
- Top left: Guide on how to buy a house in the US.
- Top right: Guide with maps of school districts and housing around the “top 100” universities.
- Bottom left: Guide for obtaining a US investor immigrant visa EB-5
- Bottom right: Guide on how to apply for study abroad.
And these brokerage firms in the US, Canada, Australia, New Zealand, and other countries are doing expos and conferences in China to lure investors to make the leap. This massive marketing effort in China by these firms has worked like a charm.
Juwai.com predicts, according to the Wall Street Journal, that Chinese investors will plow $1.5 trillion into assets abroad over the next decade, with about half of that going into foreign property.
The exact number of investors in China that have piled into these housing markets is still nebulous, despite some efforts locally to collect data on it. But home prices have soared under this buying pressure of foreign money, and now, after years of denying it, politicians are no longer denying it.
At first, the inflow of Chinese investor money was great and awesome. But then it turned the local markets into full-blown housing bubbles that began threatening local economies. So various levels of governments in Canada, Australia, New Zealand, and elsewhere – but notably not yet in the US – have created policies to tamp down on this incoming flood of money that distorts the market. Here’s a flavor:
- June 2016: The Australian state of New South Wales, where Sydney is, unveiled a 4% tax on foreign home buyers.
- July 2016: The Australian state of Victoria, where Melbourne is, raised its tax on foreign home buyers from 3% to 7%.
- July 2016: The Canadian province of British Columbia, where Vancouver is, introduced a 15% tax on foreign home buyers.
- April 2017: The Canadian Province of Ontario, where Toronto is, announced a laundry list of measures, including a 15% tax on purchases by non-resident foreign investors.
- July 2017: Disappointed with the results, New South Wales doubled its foreign buyers tax to 8%.
- October 2017: New Zealand’s government unveiled plans to block foreigners from buying existing homes.
- February 2018: Disappointed with the results, British Columbia raised its foreign buyers tax from 15% to 20%. It also imposed a levy of 0.5% of the property value (which will increase to 2% in 2019) on homeowners who don’t pay income tax in Canada, thus targeting non-resident investors.
All these measures produced very mixed results. Home prices are now sinking in Toronto and Sydney, but continue to rise in Vancouver and other cities. If there are ways to get around some of these policies, local facilitators will help Chinese investors find those ways.
These governments “are still at the trial-and-error stage,” Aaron Terrazas, senior economist at Zillow, told the Wall Street Journal. “They are trying to figure what works and what doesn’t.”
And there is what Vancouver Mayor Gregor Robertson – who, after 10 years in office, announced that he won’t seek reelection – calls the “waterbed effect of capital flooding wherever taxes are lowest and regulation is weak.” When one area tries to tamp down on the influx of foreign money, the flow simply goes somewhere else. In Canada, this is partly due to the lack of coordination between federal, provincial, and municipal governments, he told The Journal.
“It’s a complex challenge between regulating offshore investment, local real-estate practices and addressing housing supply within cities, all in sync,” he said. “The reality is that interventions take time and aren’t wholly predictable.”
House price bubbles aren’t like stock market bubbles. People don’t have to live in stocks. But they do need to live in homes. When homes get perverted into a global asset class, all kinds of things happen, including that new supply from construction can’t meet the sudden surge of financial demand from investors who might never live on those homes. Just like stock market bubbles, housing bubbles deflate. But unlike stock-market downturns, housing-market downturns wreak havoc on the real economy on a very local basis.
In Australia, foreign buyers accounted for 10% to 15% of homes under construction and account for about 5% of total residential sales. But the share of foreign buyers reached about a quarter of new-built condos in Sydney and Melbourne, according to estimates by the Reserve Bank of Australia.
“Many foreign buyers come from China, seemingly around three-quarters,” explainedRBA’s head of financial stability, Jonathan Kearns, to an Australia-China property conference last November.
The package of policies were starting to have a visible effect by last November: “Purchases of new properties by foreign buyers have eased over the past year, reportedly because of stricter enforcement of Chinese capital controls and tighter access to finance for foreign buyers,” Kearns said.
In terms of new developments, investors in China purchased about $1.5 billion in residential building sites in 2017, amounting to about a third of Australia’s total building sites, according to real-estate company Knight Frank, cited by The Journal.
Among signs that Chinese investors have backed off in Australia, there’s the “waterbed effect,” with foreign money flowing to where there is less regulation: Juwai.com found, according to The Journal, that the US and Canada have lost their spots at the top of the list for Chinese buyer inquiries, replaced by Malaysia and Thailand.
In Toronto, the average selling price of a single-family house plunged 13% in May, or by C$160,000, from the peak in 2017. Sales of homes priced over C$1.5 million collapsed by 63%. But condos are still hanging on. Read… Toronto’s House Price Bubble Not Fun Anymore
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Declare residences “blighted” if unoccupied more than 3 months per year, and then “teak” them.
The reason that the Chinese buy Real Estate is simple. They use it for the carry trade. They cannot take money out of China, except 50,000. Depositing their money in a Chinese Bank, they earn 4-6 per cent. They can then, using that as collateral, borrow at 2 to 3 % in Canada or the US, and purchase real estate. They earn 2-4% and have an asset in North America. They have effectively moved the funds out of China, and are paid to buy real estate here. Until that ends, there will be this inflation in real estate unrelated to the fundamentals of North American markets will continue
Chinese “investors”. Really?
Why does the housing market resemble a laundromat?
Lets see if I have this straight. After having millions of jawbs sent to China, to be performed by Chinese peasants at practically zero wages, the resulting wealth generated is stolen by the Chinese elite, and recycled into housing and other markets outside of China, to outbid those that have lost their jawbs to the Chinese.
Where is the opportunity for Australians and Canadians to loot tens of millions of dollars to compete with the Chinese “investors”?
Well, just skimming the topics that I could respond to here:
Suppose you are China, post-wars, revolutions, vast population to feed. You look around the world and see that some places seem to be well off. Part of that is resources, but a lot of that is high quality education — our US system of ‘free, public education K-12’ (now expanded to 3 – 21 in cases of disabled kids) has plenty of problems, but it is still an epic human achievement.
So imagine a Chinese parent: ‘all your generational eggs’ are in the basket of one, perhaps two kids. Maybe you’ve read Steve Jobs’ bio, in which he relates how his (amazing and remarkable) adoptive parents nearly killed themselves to move a few blocks in order to be in a better public school district. That move, arguably, changed Steve Jobs’ life, and changed the world. And just to reiterate: that was in a *public* school in California. So imagine a Chinese parent, having read Jobs’ biography, wanting the best for their few ‘eggs in the generational basket’.
What can they do for them? One strategy is to get them into the best possible schools, so note that Richter very deliberately highlighted several things:
FWIW, after the Opium Wars and plenty of other atrocities, I have a hunch that the Chinese may enjoy having the tables turned after a few hundred years, and wouldn’t mind doing a bit of ‘looting’ themselves — armed with cash and EB-5 visas. No need to pour any more salt in that wound.
When you have policy makers whose notion of economics is limited to “supply – demand curves”, you have a whole lot of stupid, including EB-5 visas, offshored money, and you also have realtors, bankers, gardeners, Mercedes dealerships, and a whole host of ‘supply chain’ wannabes who are making a ton of money off ‘international home sales’. In addition, most of those sales that I’m aware of are not in the mortgage figures that are sent along to policymakers, do not include ‘cash sales’: IOW, the policy makers know less about the housing market than any smart realtor knows.
And a realtor that I know well, who within 4 miles of me works in a very upscale office in which many of the listings are in Mandarin, and quite a few of the realtors are fluent in Mandarin, Cantonese, and other Chinese dialects. That does not make the Chinese bad; it reveals our own feckless stupidity, and serious problems in our immigration, housing, and taxation policies.
Unfettered, or should I say ‘naked’ capitalism, baby…!
If you want to get a little more insight, try watching “Ode to Joy”, which is contemporary, set in Shanghai, and I’m told is a kind of Chinese ‘Sex and the City’. The ‘princesses’ (successful in business) have studied abroad, have a global perspective, and housing is a driving theme in that popular Chinese drama and it is a key motive for several characters. Watching an episode or two might help broaden your perspective ;-)
Nailed it. I worked in Palo Alto and saw the Chinese buying houses in cash, sight unseen. Palo Alto school district is insane, and is a feeder to Stanford. Number one reason cited on why they were buying? School district.
The Chinese are investors. They’re investing in their children’s future.
No doubt the Chinese escapees from China swanning around in Mercedez Benzes, Porsches and BMWs are enjoying themselves. Nobody alive, however, has any personal memory of opium wars and long ago atrocities. The Chinese do have recent experience and memory of Mao’s insanity, which unfortunately has morphed into their system today, whereby a relatively few control and exploit the many, and the escapees are of the relatively few class of Chinese. It isn’t the woman working the line at an Apple factory saving up a few million bucks to plunk down on a Vancouver house on her 5 bucks for a twelve hour shift pay.
It begs the question, where exactly does this Chinese money come from? What would stop this insanity in it’s tracks is making “investors” trace the money they acquired before it’s permitted to make a splash in the housing market. Surely rich successful Chinese with millions to burn should have no difficulty demonstrating that they put those millions in the bank through some method of saving, for example so many Yaun of profit from every widget sold, or previous house flipping profits in China accumulating into millions, or stawk market profits, or a sold business.
In Canada for example there are laws that take away stuff if they were gotten from the proceeds of crime. So for example, an embezzler manages to embezzle millions and keep it hidden until caught and buys a house with those proceeds, loses the house, plus jail. If a foreign “investor” manages to get his or her load into Canada in a whole chunk, despite China having wink wink currency controls, it’s all money good, no matter how it was gotten, a double standard which leaves Canadians unable to compete for housing with Chinese buyers in their own backyard.
It still begs the question, where exactly, does the Chinese money come from?
I agree that it sure isn’t any fault of the Chinese that they can drive an unlimited number of German cars through holes in the system, and feckless describes policy makers to a tee. There is a danger however of Canada and Australia getting swamped by a class of Chinese that are not what we think they are, and already there are pockets of political power growing from this type of rich Chinese “investor”. The norms of politics in China, the masses’ exploitation at the hands of the CCP, the burgeoning social control using new technology to spy on and shape behavior, the absolute zero tolerance of the CCP to any political opposition, those features will take hold here the more power they accumulate. It’s what they know, as a class.
Globalization is a disaster, no matter where one cares to look.
Where did the money come from?
Maybe they borrowed the money against their small businesses (Sweatshops) in Guandong and added it to their savings (savings rate is roughly 30% of earned income) plus any good luck in the stock market.
Excellent points.
Cambridge Analytica, anyone?
It’s not just the Chinese, and these technologies do not inherently require being used in the ways that they are. The ways in which they are used are determined by people, and when those people are conforming to political ideologies, we get a mess.
‘Feckless’ policies come straight out of simplistic, puritanical views of economics, no matter what political ideologies that spawn them.
Yup — you nailed it: the globalization of labor (hence lowered wages where there’s major jobs offshoring/foreign visa replacement workers/undocumented-illegal replacement workers; the globalization of housing and the globalization of education.
And certain people get screwed while the majority suffer.
Can’t blame the Chinese for holding the enormous supplies of liquid cash reserves of USD (while Americans havent seen a pay rise in 25 years and couldnt buy a tatami mats worth of land in cash), nor for sinking it into real estate after Wall St-City etc has shown themselves to be the worst possible stewards of other people’s money!
I have found the real estate market conundrums in the US and Canada to be very interesting in showing how sticky people and businesses are to location.
The high housing cost crisis is ONLY occurring in a handful of major cities, mainly on the west coast. In fly-over country, housing costs are generally quite reasonable and affordable for people with decent jobs. The challenge has been getting decent jobs in those areas.
So businesses can reduce labor and real estate costs 10% or more by locating in areas where housing is NOT in a cost crisis. Commute times are also generally much lower (a 5 minute delay constitutes a “traffic jam” in our area – and people commuting for more than 30 minutes are generally coming from at least 25 miles away). But they are not doing this – why?
So this current “crisis” is clearly different from the subprime mortgage crisis where money was getting handed out to many people all around the country with no way to pay it back. In this current scenario, the housing bubbles are localized to a handful of major cities that will wreak havoc in those locations, but many areas in the country that were ravaged in 2006-9 will likely not even know that these bubbles are collapsing.
And better yet, once you are stuck in East Kabum(family blog) you are at the mercy of that one employer! Oh, and your spouse probably needed to give up their half-decent job, too, for the dead end of managing the local Dairy Queen.
There’s your “why”.
As much as I make fun of Econ 101, it explains the cost of housing pretty well.
Talent is attracted to the coasts.
Plus local access to capital is still a thing, regardless of what people say. There’s a reason tech sticks to Silicon Valley for the most part, and the only places where it is moving is because VC’s are opening up shop there (Los Angeles, for example).
But there’s plenty of Capital in NYC, but no Silicon Valley East? Is it a lack of good STEM? Real Estate?
Ahem, Silicon Alley to you.
https://en.wikipedia.org/wiki/Silicon_Alley
The only Asians pretty much here in the Central Valley are the Hmong, who came in the aftermath of the fall of Saigon. There’s about 40,000 living in the surrounding area.
https://en.wikipedia.org/wiki/Hmong_Americans
I think the Chinese are into single family homes in the bigger cities, not in rural or secondary cities.
Careful. I am observing rentals going up in Wichita Ks. It’s nearly dubbled in the past five years. It’s anidotal to be sure. (I will have to dig for some stats to see overall trends.) But its starting to cause real pain for local renters who are having a harder time finding afordable rents. (Mostly from gentrifcation I suspect.)
Kansas mostly lost out on the realestate bubble of 2006, so we were spared the worst of the crash in 2008. I fear Kansas may not be so inselated the next time round.
What’s the end game for the Chinese real estate investors? The continuation of the American and related real estate bubbles requires borrowed or created money, which is one of those things that can’t go on forever. How are they going to get their money back out if there is no one with enough money to sell to at a profit? One might be able to predict the outcome of the present peculiar situation if one understood what’s driving it.
I believe a lot of the reason for the Chinese investing overseas is that if these Oligarchs ever need to flee their homeland, it’s secured wealth that the government won’t be able to take from them. IE: It’s a ‘safe’ place for them to store money.
This is correct. Chinese are not simply investing, they have in mind a safe haven should things get too weird in China, not only for their money, but for themselves as well. But they do also invest — my ex-wife’s sister (Chinese citizen) bought five condos in Vancouver back in 2001 while they were still under construction, she did extremely well selling them several years later and still owns two or three in other locations. She moved to Vancouver permanently in 2010.
Are Chinese oligarchs smarter to worry like, in contrast with our oligarchs who don’t seem to be contingency-investing in mansions in China?
Are our oligarchs too over-confident?
We don’t have upwards of 50 million of us that died of starvation, while the living were barely nourished in both food & freedom…
That leaves a mark
Nah, they think they’re going to party with Elon and Jeff on Mars, while continuing to get their skim as half of the Prolz get turned into Soylent Green to feed the other half.
Anecdotally, for many Chinese families (and I don’t mean the super rich, just those who have built up some assets), having a property abroad fulfils quite a few criteria above and beyond a simple investment. It is a hedge against ‘something going wrong’ at home, it is a way of hiding possibly ill-gotten gains, its a potential retirement home, a potential stepping stone for a family member to live in the West and get citizenship, and so on. Many I know are surprisingly relaxed about losing value on property, they see it as a nest egg for the long term, not a quick-flip or investment opportunity.
Who cares what the endgame is? The reality is that RE is used for money laundering and moving funds around, with the end result the substantial rise in housing prices and an end to even remotely affordable housing.
And CBC goes on to issue fake news reports, attempting to provoke sympathy with the wealthy from Dubai and Abu Dhabi who are purchasing houses in Vancouver, BC, without EVER covering the other side of the reality: those Canadians getting screwed out of the market — samo in the USA with the Fake News/NPR.
I have family in Vancouver and agree the housing situation there is insane and makes life difficult for low and middle, and even upper middle, income earners. However, I am puzzled why people get so upset at Chinese and other foreigner buyers. After all, buying property is not illegal and they certainly are not doing anything über wealthy North Americans haven’t done.
The enablers are not sitting offshore but in the town halls and national capitals of the affected cities and countries. Our ostensible representatives in public office have decided they are okay with selling the citizenry down the river and making the global capitalist class their new constituents. Grumbling about greedy, self-interested foreigners who are playing by rules put in place by our governments won’t change a thing.
People ARE upset with the crooked politicians — you are repeating the Wall Street meme, dood!
A sensible government should forbid RE aquisitions by non residents. Full stop
If you want to live in Thailand, you rent a house from a Thai. If you marry a Thai, they can own the house, but you can’t. Thailand knows what would happen if foreigners could buy part of Thailand, soon Thailand would be all but completely owned by foreigners, and out of reach of Thais.
You stated it perfectly — outstanding!!!!!
+1000. But notice the U.S. doesn’t even seem to be slapping a tax on unlike the other countries listed.
That’s why the Chinese will shift their money to the U.S. because we do not tax their RE investments. They are pushing politically to expand the EB-5 Visa but that does not stop them buying RE in absentia.And buying they are doing. Sight unseen.
US system creates excessive credit through mortgages (FIRE sector is what keeps US going).
This credit created purchasing power ends up in China through trade deficit (or export of jobs, whichever way you see it).
There’s no use of trillions of USDs to the chinese, especially with ZIRP and financial repression. So they want to go for real assets, any way trillions of dollars are a worry for China.
Not just the Chinese, at least in New Zealand. Our US oligarchs are doing it too.
The bill to prevent overseas investment in property is currently at the select committee stage and being heavily lobbied against. It would not prevent overseas ownership in new housing. An article from February, 2018 at foxbusiness.com – “Why US Billionaires Want Property in New Zealand” is the basis for my comment above. As the bill hasn’t passed yet, there is still a boom ongoing.
Slim checking in from Tucson. With some oh-so-juicy gossip from my neighborhood. Here goes:
Back in mid-2014, I went to an estate sale that was hosted by the children of an elderly lady who had died, oh, I think it was in 2013. We stopped seeing her around the neighborhood, and the assumption was that she had left her house empty while she was in a nursing home.
After the estate sale came the house sale, and, oh boy, that asking price was way up there. The “for sale” sign stood out in front of the house, creaking in the breeze.
The family went through a couple of real estate agents before they were convinced to lower the house price to one that would actually attract a buyer.
Did it ever. In late 2015, the house was sold to a group of Chinese who appeared to be college students. Don’t know where the money came from, but they bought the house.
After some “lipstick on a pig” renovations — new floor tiles, interior paint job, and other cosmetic foo-foos — the place went back on the market. That was sometime in 2016, and the asking price was even more ridiculous than before. At least $200k above what nearby properties were selling for.
The house sat there, the owners changed real estate agents twice, dropped the price to only slightly ridiculous levels, and the place still didn’t sell. The agency sign came down a few weeks ago.
Looks like the Chinese students, who haven’t been the least bit friendly to the rest of us, are stuck in our neighborhood for the time being.
A lot of Chinese property buyers are not particularly savvy investors, they tend to follow what family contacts do – the concentration of Chinese buyers in certain area is more to do with this lemming effect than anything else – many would certainly make more money if they invested in other areas.
A lot are also relatively young, and haven’t personally experienced a downturn in property values, so they can be quite naïve, assuming values will always go up.
That said, there is a money laundering scam known in Canada in which Chinese students purchase properties with whopping mortgages from banks who turn a blind eye to their apparent lack of assets. The mortgage is then paid down rapidly over a couple of years with money from China exported in small enough chunks that it doesn’t come to the Chinese authorities attention. The property is then sold, with the money re-imported to China as the capital gains from clever property investment.
Not particularly savvy investors? PlutoniunKun, have you been eavesdropping on my conversations with my friend down the street?
She lives across from the Chinese-owned house, and she had a front-row seat at the renovation. Shoddy workmanship, lousy building materials, and obvious problems overlooked with other things were given the proverbial lipstick on a pig treatment. Sheesh, she saw it all.
Neither of us were surprised when this place didn’t sell.
Chinese tax residents continue to be New Zealand’s top foreign property buyers, spurred on by hot demand in January.
New Stats NZ data showed Chinese residents bought 504 properties in the first three months of this year compared to Australian tax residents buying 381, United Kingdom residents 90 and Hong Kong residents 78.
It is the ninth consecutive quarter, dating back to the start of 2016, that Chinese tax residents have purchased the most property among foreign buyers.
Carrie Law, chief executive of Chinese real estate website Juwai.com, said Chinese purchases were up from the 480 last quarter in response to a possible ban on foreign buyers that could come into effect next month.
“We think the proposed ban is one reason that January was the third highest month on record for Chinese demand,” she said.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12067050
The Chinese buy outside China for three reasons:
Irvine in CA has houses for over $2 Million which sell for cash.
1. Bolt Hole
2. Good School district (such as Irvine in CA, and good university UCI)
3. In China a property is only yours for 50 years. The it reverts to the government. Effectively real estate in China is leasehold.
I’m with the “If you are not resident, you cannot buy” + “Empty for some period = Blighted and taken by the city.”
In Michael Moore’s “Which Country to Invade Next,” a teacher in Finland (which rates very high globally) said, ‘All schools in Finland are equally good.’
This ‘i have money and I am buying into a good school district,’ just makes things worse.
Not that they are to blame solely, and we have to do something ourselves to make all schools all equally good.
Well, since we have a capitalist educational system, the first obvious logical step would be to end capitalism.
I saw that recently. The kids of rich parents had to go to the same schools as the rest of them which meant that it was in the interests of the rich parents to make sure that the schools gave quality education. Here is the link for that movie part for Finland-
https://www.youtube.com/watch?v=5OvVPg3y_ug
Basically because they don’t want to invest in bridges to nowhere in China
The Chinese Communist Party owns 100% of all land in China (CCP includes approximately 5% of the population).
If you stay in their favor you may be allowed to build a business or house on that land. At any time they can decide it’s no longer yours. And estimated 100 million people have had their property summarily seized.
How would you react?
So having gifted them our prosperity, we now gift them our Common Law system built over centuries of blood and sacrifice.
This is strictly older anecdotal evidence, but when we sold my mom’s house about 2 1/2 years ago in the SGV in LA, we had a family talk with the realtor, and I asked if the domicile would sell to the usual buyers?, always people from the PRC, who had purchased every last neighborhood home, as mom’s house was less than a mile away from a Buddhist temple, a major draw.
He told us no, that was then and this is now. His main competition was a couple of slick Chinese lady realtors that had the language and cultural advantage over him in a big way, but the PRC had enacted a new law only allowing $50k to be taken out of the country per person, and with a few family members playing along, maybe you could get out $250k, but that doesn’t buy a lot of house in the City of Angles.
He was quite pleased @ how the one-trick-pony realtortrixes went from being a competitor to no fell swoops all of the sudden, ha!
My mom’s next door neighbor was a Chinese movie star agent, of all things. To give you an idea of who the buyers are. Upscale Chinese, not all mega rich types.
….and sure enough my childhood home sold to a Caucasian family with 2 young kids
I trust they’ll enjoy the 13 giant sequoia trees in the backyard my dad planted in the late 60’s, the tallest being about 60 feet now.
I know this is not pertinent to the actual subject of the post (and living in the Vancouver area I really am concerned with it) however I can’t help but notice that the mansion pictured seems to have a substantially sized observatory dome! As a casual amateur astronomer who has to lug his little (but heavy) telescope out into the light polluted yard or pack it up and drive it an hour out of town to look at the sky I look at that (and the large treed and probably reasonably dark lot the house is situated in) and am consumed with envy!
What are the numbers for the US?
As long as the government allows China to peg, fix, their currency to the USD, they will continue to export there broken system, i.e bad debts, laundered money, monopoly cash, to whatever locale they can.
1) no country should allow another country’s resident to buy land when they cannot reciprocate.
2) The US should never allow any resident of another country who fixes their currency to our shores.
Otherwise all the effort, regulations, controls are for naught as we are now simply importing their bad debts
I happened to be sitting in a restaurant in Kathmandu a few weeks ago, next to a young man and woman who were discussing American real estate (a freakishly unlikely situation for me, but life is like that). They were speaking English, though the man seemed to be local; I speculate that they used English because the woman was from elsewhere, probably India. Anyway, they were discussing what to do with some of this man’s excess wealth (not a common topic in Nepal!). The woman was urging him to buy houses in the U.S. But he insisted that must not be practical, because he could not imagine that the U.S. would allow foreigners to own property without tremendous bureaucratic obstacles. I refrained from interrupting their conversation to point out that, in fact, the only requirement is cash, and heck, if you have enough of that you can buy U.S. citizenship, too!
Meanwhile, back in my hoity-toity Seattle-area neighborhood, we receive letters from realtors bragging about how they could sell our house (which we’re not trying to sell) to a cash buyer through Juwai.com.
Good point! Plenty of law firms in the USA specialize in hiding ownership of everything, including real estate and house purchases.
Seattle-based international law firm, David Wright Tremaine, advertises their service of hiding the identity of foreign buyers of Washington state real property — an ideal proposition for possible criminals such as money laundering for cartels, terrorists, etc. According to the Transparency International report (please see link at bottom), the USA has an atrocious record of identifying the beneficial owners of property purchases — ideal for criminal enterprises. (One assumes DavisWright Tremaine is referring to the use of trusts, shell companies, offshore finance center accounts/banks and/or straw buyers.)
At DWT is the former governor and ambassador to China, Gary Locke, who promotes Chinese companies (still PLA-owned) to invest in Washington. The Seattle-based land use law firm which handles major deals and boasts former DWT attorneys, Hillis Clark Martin & Peterson, also has a land use attorney on staff named, T. Ryan Durkan, the sister of Seattle mayor, Jenny Durkan, who believes the identities of the beneficial owners should remain secret and has been publicly vocal about it!
https://www.transparency.org/whatwedo/publication/doors_wide_open_corruption_and_real_estate_in_four_key_markets
There’s a lot of money in ‘law’, and Seattle is a port city on the Pacific Rim. Money has flowed to Seattle as SF and Vancouver prices have escalated.
Instead of whining about Chinese money, Americans ought to be raising holy hell with their federal legislators about EB-5 loopholes, and the dangers implicit in anonymous shell corporations.
Plenty have — but little has resulted as long as the Bankster Party of r-cons and faux crats rule!
Hold on a sec. While there are many legitimate criticisms, there has to be some acknowledgement of the virtues of EB-5’s aims.
Think of it this way. US consumers sends USD to China to buy goods. China reinvests the USD in treasuries, stocks, and real estate. US then “imports” wealthy Chinese who own American assets.
The actual holders of the assets are a mix of Chinese government, business, and individuals. While the US is worried about gutting itself by selling everything to foreigners, it can solve all of that with one stroke of the pen by allowing many wealthy Chinese to immigrate (legally) to the US while giving up Chinese citizenship. Suddenly the same assets which were held by foreigners become American owned. You can charge them a high price for the visa -> residency -> citizenship process, and raise sales/property taxes while lowering income taxes. This broadens the tax base, encourages them to spend locally, helps to support US social programs, and solves the sticky situation of foreign ownership of assets.
There are tailored thoughtful ways to attract desirable immigrants, have them properly compensate Americans for the negative externalities, and direct tax policy in a nuanced way to discourage speculation in real estate.
I watch a tv show titled “House Hunters International” sometimes and I see a lot of American buyers parking their surplus savings in Caribbean or Mexican real estate, one can only imagine how that squeezes local buyers out of the market completely (especially in such low income countries). My own city of Cape Town had the third highest housing inflation in the world in 2016, and the culprit? Surplus European savings pushing up housing prices on the southern most tip of the African continent, aided and abetted by the greed of local estate agents (realtors) lining up for a fat commission.
The point is this: In a world where the movement of capital knows no borders, things like these are bound to happen. Everyone does it, not just the chinese. When local politicians (especially in some emerging markets) see increasing ownership of real estate by foreigners as a “vote of confidence” in the their city, concerns about asset bubbles inflating tend to get pushed aside with alarming regularity.
Re Chinese Investors inflating housing markets, last year, Seattle Mayoral candidate Cary Moon and a member of the city council attempted to put forward a speculation tax on housing from foreign investors, but was beaten back by the county assessor, the city attorney, members of the chinese community and the now present mayor as being illegal and racist.
https://www.thestranger.com/slog/2017/08/24/25374916/this-was-not-at-all-my-request-herbold-and-moon-defend-efforts-to-reduce-housing-speculation
https://www.thestranger.com/slog/2017/08/22/25367678/seattle-doesnt-want-to-tax-foreign-money-or-know-a-damn-thing-about-it
https://www.seattlepi.com/local/politics/article/Connelly-Chinese-American-leaders-call-out-Moon-12184019.php
We have been doing this unto others for generations, and now some are doing it back unto us.
We do it to ourselves as much as anybody. Last month I heard that a friend of my wife sold an investment property they purchased only about five years ago for a $900k profit. The home was in west Oakland, which has some very rough neighborhoods. I can almost guarantee you that house was rented year after year for decades by poor black families who put up with the crime and hassle of living in a bad Oakland neighborhood and never made a nickel in real estate. As soon as gentrification kicks in, the home is purchased for $600 by a well-to-do white lady, who never spent a night in west Oakland and lives in a very nice home in the Oakland hills, who then sells it for 1.5 million dollars five years later. And we’re blaming the Chinese?
Absolutely.
Blaming the Chinese creates cover for all of those who have been doing it here.
A healthy percentage of our President’s business empire was based on selling inflating real estate in markets coveted by foreign buyers.
Just FYI – a house (average quality) in Richmond, BC, bought for about $400k in 2004, sold this year for well over $1.6 million.
I think it was reported that China offered to buy $70 billion from the US.
In housing units, that would be about 50,000 homes @ $1.6 million each. It’s a Confucian tradition to study and to move to good school districts.
Of course, more Americans (50,000 families) would have to go more mediocre school districts.
If reality is ignored, planning is pointless. This is a discussion of the fate of the middle class wealth that was transferred from mid-America (and Europe) to Asia when manufacturing plants (and jobs) were transferred there. This was unleashed thanks to Reagan and Thatcher. Across the world, globalists are hoovering up cash. With the West busy blowing up the Middle East and Africa and with the pivot to Asia; oligarchs need a safe harbor for their flight capital other than the City of London or Caribbean Islands. Cash is flowing into the Left Coast housing.
The funny part is that this is obvious if one reads NC or ZH. The election of Donald Trump, Brexit, PIGS, and the G7 minus 1 are the direct result of the loss of family supporting jobs in the West. Birthing one kid now costs $10,000 in the USA. With the forever wars, homelessness and increased mortality, North America’s coastal ports are hardly safe havens.
The fix is a progressive tax on rich crooks to provide real security with law and order and by supplying the people; jobs, healthcare, food and shelter.
The entire Anglosphere loathes Chinese politics but loves Chinese money. There is a message there.
One big issue left un-discussed is how the Chinese acquired so much money?
A big part of that is because of our trade deficits. Our decline in manufacturing is paying off in other ways that are not good for the common citizen. I suppose that the rich who own real estate property stand to gain, so they do not care about what happens to the common citizen. Our trade deficits become their wealth.
Ian Welsh has a good article on what to do:
http://www.ianwelsh.net/how-to-solve-londons-housing-problems-and-canadas/
Once enough homes are taxed at super high rates and in the case of those who still don’t meet the needs, expropriated, this will stop.
Does anybody remember how the Japanese investor caused real estate bubble turned out?
Here is an article from The New York Time headlined “Japanese scrap $2 billion stake in Rockefeller”
https://www.nytimes.com/1995/09/12/business/japanese-scrap-2-billion-stake-in-rockefeller.html
6 years ago, a house two-doors down sold for $250,000 over asking (this in Silicon Valley). New owners never appeared and I speculated “Chinese buyers”. Two summers later, an Asian family shows up and spends three months hanging out (mother, father, young child, and grandfather). They don’t mix with any of the neighbors, and leave at summer’s end. Four years later, they have not returned again. The house sits maintained, but empty.
By my estimates, the home has appreciated an additional $400,000 since purchase (this IS Silicon Valley). Not a bad investment really, plus they’ve got a bolt-hole at the ready should it become necessary.
On the flip side of this reality, at the engineering/business school-focused campus in my community (Champaign-Urbana), the apartment complexes being built for Chinese students (of which there are thousands) have over-built the rental market and thus made life difficult for smaller rental property owners near campus who don’t offer the amenities that Chinese and other foreign students are looking for. Thus my own apartment in the less development-worthy neighborhood near campus is in effect rent-controlled.
Brought to you by a Department of Whistling Past the Graveyard spokesmen-
https://www.businessinsider.com.au/scott-morrison-australia-house-prices-are-not-a-bubble-2018-6
Australian house prices are ridiculously overpriced and years ago an international survey found that they were priced at three times what they should have been. The trouble is that property has become a bit of a religion in Australia to the extent that it warps the Australian economy and political considerations. The Federal Treasurer Scott Morrison and all the rest refuse to see it as if house prices were more realistic, the drop would make for a lot of angry voters. Scott mentions in this article that maybe there should be less regulations to help, Yeah, that should help. Just ask the people of Grenfell how that worked out for them. Sooner or later its going to get ugly and it won’t be because of Chinese buyers.