In Vancouver, 33% of sales are to Chinese investors (National Bank)
Buying a home in the US or Canada has been an effective way for foreign residents to launder some money and get their wealth out of harm’s way. In the trophy markets on the US West Coast and in the Canadian cities of Vancouver and Toronto, rumors of a massive influx of Chinese money have swirled with growing intensity for years.
The Chinese economic elite are worried about a devaluation of the yuan. They’re worried about getting rolled up by their own government. They’re worried about markets collapsing. They’re worried about pollution. They’re worried about a million things. They have one foot out the door. If push comes to shove, they’re ready to make the move.
So capital flight from China has turned into a tsunami. And this money has to go somewhere.
The meme is this: These desperate buyers prefer a higher price because it’s more efficient for them to get their money out. This pumps up prices. Which impresses other Chinese investors, and they flock in ever greater numbers to those markets. American-Chinese businesses have sprung up to cater to them with special packages that take care of everything, including travel arrangements.
The real estate industry, benefiting from higher prices and higher unit sales, has largely downplayed this trend. Realtors and sellers love moneyed buyers and are not inclined to ask too many questions.
Estimates of the magnitude have ranged all over the place. Thick opacity covers much of the industry in this respect, and there is no city-by-city data.
In San Francisco, one of the hot spots for Chinese buyers, it has been estimated that the percentage is around 3% to 5%, so not huge. But prices are set at the margins. These prices then cascade through the market via the multiplier effect of comparable sales in the area, which is used to determine future prices.
The National Association of Realtors comes up with annual estimates of foreign buyers. As we reported last year, it found that in the 12-month period through March 2015, buyers from China had plowed $28.6 billion into US residential real estate, surpassing Canadians as top foreign homebuyers for the first time.
This $28.6 billion is interesting. It’s a survey-based guess from an organization with an agenda. And it is a national average. But there are only a small number of markets where Chinese buyers are active in large numbers, so a national average, even if accurate, obscures local trends. And buyers can hide behind shell companies, so the beneficial owners might never be known.
In August, we reported on RealtyTrac’s much juicier, and darker, version of what is going on with Chinese buyers in West Coast markets [Foreign “Smart Money” Frets about Turmoil at Home, Flees, Plows into US Housing Bubble 2, Thinks it’s a “Safe Haven”].
There are other reports and estimates, but reliable city-by-city data is nowhere to be found. For whatever reason.
Now another estimate, this time for Vancouver, the hottest housing market in Canada, which itself is currently one of the biggest housing bubbles in the world. Peter Routledge, a financial analyst at the National Bank of Canada, authored the eye-popping note, which in turn was reported by Bloomberg.
Foreign buyers are a hot topic in Vancouver, where home prices have soared to levels that are nearly as ludicrous as those in San Francisco. According to the Real Estate Board of Greater Vancouver, the “benchmark price” for all types of homes in February soared 22.2% year-over-year as home sales jumped 36%.
Who is buying all these homes, at these prices? No one knows.
But according to Routledge’s study, in 2015, Chinese investors plowed C$12.7 billion into Vancouver homes, out of C$38.5 billion in total sales. That’s 33%!
In Toronto, Chinese investors accounted for C$9 billion of the C$63 billion in total sales, or 14%!
And in San Francisco? He didn’t check. But we wouldn’t be surprised if the number came out fairly high as well. These numbers are far higher than industry soothsayers would like us to believe.
He cautioned, however, that these “back of the envelope calculations” were, as Bloomberg rephrased his note, a hypothetical approach to gauge capital flows. To get the data, he’d extrapolated from a Financial Times survey of 77 high-end buyers and data from the US National Association of Realtors. This way of approximating what’s going on in the market, he said, pointed to the need for reliable data.
The new Canadian government, bowing to pressures to do something about the distortions caused by the influx of Chinese money, announced on Tuesday in its 2016 Budget that it would earmark C$500,000 to figure out how to track foreign buyers:
Households rely on housing market data to make informed decisions in buying and selling their homes, while governments depend on data to design effective housing policies. Currently it is not possible to fully understand the role of foreign homebuyers in Canada’s housing market since a comprehensive and reliable data set on the number of homes sold to foreign homebuyers does.
But Philip Cross, a former chief economic analyst at Statistics Canada, the agency charged to do this, told Bloomberg that the C$500,000 could only pay for five researchers for one year, and would “not be enough to even plan a potential survey or data collection method.”
So perhaps, it’s just another gesture designed from get-go to not lift the veil of obfuscation.
Canada Mortgage & Housing Corp., the government housing agency, is also trying to figure out how many foreign buyers ply the Canadian housing market.
In the US, the Treasury Department is launching a pilot program to identify and track foreign buyers that hide behind shell corporations. But it is limited to only high-end properties, and only to two markets, Manhattan and Miami-Dade, and only to buyers hiding behind shell corporations. So no real answers either.
Like San Francisco and other trophy cities, Vancouver is struggling with an affordability crisis for locals. To get a grip on the problem, the city commissioned a report last year, and the results were just presented to the City Council. Read… The Vacant Condos in Vancouver
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“But prices are set at the margins. These prices then cascade through the market via the multiplier effect of comparable sales in the area, which is used to determine future prices.” Sure sounds as if this fundamental “pricing” phenomenon is taken from the sub-prime playbook. Back in 2003 the typical median- priced house in San Diego was around $300000, and then the “pricing at the margin” took that price all the way to $500,000. The return journey to a little over $300,000 a few years later (2010) depressed the purchasing power of over-indebted consumers. Sluggish demand and massive unemployment were the end products of repricing at the margin. Begs the question as to the crucial differentiation between “value and price”. This philosophical issue was at the heart of debates in classical economics in the 19th century. Back then there was the debate over use value and exchange value. Add the twentieth-century twist of Thorstein Veblen of sign value more commonly known as status value and pricing at the margin in real estate can cause major fluctuations in prices far from the old-fashioned preoccupation with use value. Today we can add another pricing factor: safe haven diversification. The capital outflows from China ( perhaps 100 million potential safe haven investors) are driving Australian, Canadian, and the glamor American real estate urban markets into the stratosphere! Where this will end depends on factors outside the normal realm of economics, and self-regulating markets may not work smoothly or expeditiously once the political “sledgehammer” of capital controls is used to stymy the free movement of capital known in Latin American as “capital flight. currency devaluation and galloping inflation or even worse hyperinflation”.
Hi from Oz. To me, the author’s words ‘Prices are set at the margin’ says it all. In my 50+ years of house trading experience the last house sale price in a suburb typically sets the base for the next sale. So buyers willing to pay over the odds for any property will push up the the price for the next buyer in the whole suburb (or city, or region). However, this also works in reverse, but first people have to stop paying over the odds. The $64,000 question is ‘what will cause these foreign buyers to do this’?
Housing markets across the world have laid waste to the efficient market hypothesis.
When the bubble inflates a collective insanity takes hold.
Markets are irrational and have been since Tulip Mania in 1600’s Holland.
Do not look for rational explanations, the prospect of easy money turns human beings into gibbering idiots.
Stocks, house prices, [yet another asset type] are going up in value.
I have heard of someone who has made lots of money, I want in.
I am making money, I need to borrow money to carry on investing and make more money.
Gibber, gibber, gibber ………………………………
The bubbles burst; I am going to be ruined.
No more gibbering, till next time.
Tulip bulbs ….. gibber
South sea company …. gibber
UK Railways (1800s) …. gibber
The new internet (pre 1999) …. gibber
Sub-prime ….. gibber
Property …. gibber
Apple …. gibber
Social media …. gibber
Emerging markets … gibber
Easy money ….. gibber, gibber, gibber
Much more appealing than working for a living.
Given the slide in the Canadian dollar ( and the risk of a major devaluation of the yuan) Vancouver real estate prices may not seem so daunting to Chinese eyes. Then there are Chinese bankruptcy laws which allow for the personal assets of business owners to be seized and be held personally responsible for loans made to their business.
If we are to believe reports of trouble in the Middle Kingdom and a rising number of non performing loans owed to Chinese banks and shadow banks then there maybe more Chinese businessmen ready to pay any price to get their money out of China while they still can.
A lot of that money is being borrowed, secured against chinese assets, is being use to buy foreign assets on which the chines lender has no recourse.
This is a huge vote of no confidence in the chinese economy. Where people have high priced assets, they simply can not sell for that price, but can re finance to that price.
When we bought our house in the SE suburbs of Melbourne there was one oriental family living in our little neighbourhood area.
Fast forward to 2014 – 2015. A big increase in the number of houses bought by Chinese.
We now have a better mix in our area with a number of Chinese living in the area. Just on our street there are four Chinese families that I know of.
I told my wife that we were going to have to move, not because of the influx of foreigners, but because our car doesn’t match the neighbours’ anymore: Mercs, Jags, and BMW’s.
Unlike other areas in Melbourne such as Glen Waverley and Mount Waverley we don’t have the ‘high value’ public schools that caused a huge concentration of Chinese there and in turn the huge increase in house prices.
We do have a number of private schools, but those cost a fortune: one charges just under A$25,000 a year for high school and the other just under A$29,000.
(Yep that is per year!!!)
Elementary school fees run from around A$14,000 to $24,000 a year. Catholic schools charge around A$2000 a year for elementary school fees.
As I have posted before, buying in one of the ‘good public school’ areas results in the savings of those high costs for private schools. Instead of paying private tuition, the ‘value’ goes into the real estate.
A normal A$600,000 house in Melbourne gets magically changed into a A$1.5 or $2 million house as a result.
“I told my wife that we were going to have to move, not because of the influx of foreigners, but because our car doesn’t match the neighbours’ anymore: Mercs, Jags, and BMW’s.”
Wonderful. Reminds me of the joke about the man whose wife said she wanted to live in a more expensive part of London. So the landlord put the rent up.
Your situation could be alleviated by buying a second-hand armoured tank and parking it in the driveway.
In a Modern urban first world economy, Banks, are like Toilets, a necessity.
In the city’s in America, Australia, and New Zealand, (And Possibly Canada) cars are the same as banks and toilets, due to the way the city’s are designed with no expedient public transport.
Buy a late model used Corolla, Your wife will love it, the ergonomics will be almost perfect for her, unless she is a giant. Then remember they spend more on Maintenance than you spent on your Corolla in TCO every time you walk up to it.
A Jaguar, is ponced up Ford Mondaeo, with inbuilt india unreliability. A fancy skin, a fancy badge, and a huge price tag.
A BMW is a vehicle with built in electronic component failure time /usage frame’s, that must be replaced with a NEW genuine component and individual computer code. Enforced planned obsolescence/failure through proprietary electronics.
I swore by BMW until they started doing that. Now I wont go near one.
Which leaves VW/Skoda, Toyota as the only urban Vehicles (Toilets) really worth buying.
Currently VW is again a dirty word in the US.
Which leaves, Corolla.
You must decide, is you car a life aid/tool, or a Status Symbol/Sex aid.
Nah, I’ll stick with my Mazda and the better half with her TOYOTA COROLLA.
Best car ever made – the Corolla – runs forever, seldom needs repairs, good fuel economy, parts are reasonably cheap, and you don’t need to go to some specialist place to get it fixed, if necessary.
Those others are just ‘tax on wheels’. Another area where we people downunder get the shaft…….
Yep, ANZAC region, Roads, Road users, and Vehicle owners, are treated by the Governments, as a revenue source.
There is a big story here being missed. By Governments and the MSM probably deliberately.
WHY do all these chinese, with a little money, and half a brain, want out (At least financially) of china.
A million pages of positive spin, and pro china propaganda, a day, can not bury, this one fact on the ground.
We need to learn from China’s mistakes and remember the old economics.
Today’s nonsense economics does not allow China to make the necessary reforms.
Western savings rates have approached zero due to the welfare state safety net.
Western consumers can spend nearly everything they earn.
China has high savings rates because there is almost no welfare state and they need to save for a rainy day.
Chinese consumption is impacted by high inequality, low wages and no welfare state.
The wealthy Chinese are out blowing top end property bubbles in major cities around the world.
This does nothing for China.
Using the old economics …….
High taxes on the wealthy to provide a welfare state for those lower down the scale would have boosted China’s economy.
Re-distribution would have kept the wealth within China and boosted
Free public services to maximise spending into the economy.
Those that would now be on unemployment benefits would still carry on consuming at a lower level.
With the new economics, the prosperity of China’s boom has been passed onto the global elite outside China.
It has further inflated global asset bubbles in top end property, fine art and classic cars.
As the boom fades the Chinese workers return to their farms and the world has some more oligarchs looking for new places to feed.
Adios China, a Neo-Liberal catastrophe.
Lesson: Leave the profits of your nation’s hard work with the rich and as soon as the sh*t hits the fan they will f*** off with the money.
I can’t see China as being ‘advanced’ enough for Neo-Liberal economics to operate. And the last thing the Party needs is to make the poorer strata feel aggrieved and threaten its existence, which is what being neo-liberal means. As for a catastrophe, Yes eventually, but it will be because of plummeting resources, not finances.
The money sent o/s can always be made up again at home. Possibly the Chinese authorities don’t really care because it gives the nation footholds all over the World. Maybe we haven’t understood really why this is happening. We are only seeing what we want to see.
“And the last thing the Party needs is to make the poorer strata feel aggrieved and threaten its existence, which is what being neo-liberal means. As for a catastrophe, Yes eventually, but it will be because of plummeting resources, not finances.”
China invented Paper money and bonds.
If you look at most chines implosions and civil wars There have been many. Before and after Genghis Khan, at the bottom of them, is excessive money printing. Many of them, caused things in the west, like silver crises, and recession/depressions in the past.
china. Always destroys itself from within, CCP china think’s it is different, it isnt, as it hasnt learnt, that Excessive money printing, and financial manipulation, leads to implosion and serious civil unrest/war.
The question is, how much damage will they do to the west, this time, as the deflate, or implode.
Like in Vancouver B.C. the Chinese have been acquiring residential properties in Cupertino, California for decades now. Buying for investment and good schools seems to be paying off. Meanwhile, new Chinese money continues to flow into other Silicon Valley communities which will further increase home prices. As long as there are a limited number of homes available for purchase in the upscale markets in the San Francisco Bay Area this juggernaut will continue. Apple, Google and the other wunderkinds aren’t going away anytime soon either.
Why are foreigners allowed to own property in YOUR own country? To me, only citizens should have the “right” to own real estate in their country.
These Chinese should be forced to deal with China and not run like cowards. Let them stand and fight, like we White Men did in 1776.
It just forces the real citizens of a nation pay more for their own homes.
Ask The Donald. I’m gonna make up a sound bite for him: “those damn Chinese are buying up all our homes. I’m gonna confiscate it all and send them back to Bejing”
This is really an excellent idea.
Centurion – my sentiments exactly! A lot of this money is bribe money, corrupt money, and yet our countries allow them to come over here and price us out. It’s really unbelievable. I blame our governments for allowing this crap to go on.
I you can sell a piece of cardbox junk for millions of dollars to a foreign investor and build it for half that price, I think we have the perfect niche, keep building and sell to the chinese while making a handsome profit. After, have the people leaving in the city vote on the way to tax those assets to pay for local services. Seems win win to me.
memento mori – it’s not “win win” at all. It absolutely destroys your cities. Think it through!
I’m renting in a lux high-rise condo in downtown Seattle, two blocks from the sprawling Amazon campus. It is interesting hang out in the common areas of the building because you get real sense of who your neighbors are.
There are two distinct subsets of the population residing in this building … 1). young 30-40 something RSU-rich software engineering geeks who have cashed in on Amazons unrelenting 500-P/E stock rocket, and 2). Chinese nationals.
Backpack-wearing tech nerds speaking in code and Chinese speaking in Mandarin dominate the halls of this place.
I’m not sure what the statistics show, but when riding the elevator in this building it could not be more obvious that the Chinese buyers are migrating south from Vancouver BC, where real-estate must be considered a relative bargain here by comparison.
We are renting a 1500-sq/ft condo from an ex-Amazon software dev who bought the place 6-months ago for 1.7 million. Yes, totally insane, but if this place was say, in Yaletown in DT Vancouver, it would easily fetch 2.5 million. Even more insane!
Not sure where real-estate prices are ultimately headed in this city, but seems to me so long as Amazon continues to defy gravity and the laws which govern common sense and economics, and the Chinese are free to continue laundering funds through the purchase of 1500 sq ft safe-deposit boxes with views, the Seattle real-estate bubble will only continue to grow.
Ah yes, a myopic view from inside boomtown.
Oh BTW, Seattle (and San Francisco) were the original West Coast boomtowns, born in the shadows of the Gold Rushes of the 19th century.
Eventually, they all went back home, those Gold Rushers, disappointed that the exorbitant prices they were charged took all their hard-earned gold.
This high-tech gold rush, headed by the chosen company Amazon (really a line of credit, not a business model) can keep going as long as the printing presses keep feeding it…… as the favored one.
When Amazon is all done, and out of favor, all you Techbros will return to your flatland living, disappointed and fleeced.
Us natives will return to our earthen digs and wait for the next wave.
Unfortunately, I think you’re going to be waiting a long time. I don’t know how long Amazons going to keep it up, but it’s been far longer than I ever would’ve guessed, and I think it’s probably going to be a long time further.
I just see this as natural market forces at work. Of course, as human beings we feel for locals who are priced out of the local market. But we are born into this world without expectations of rights or “fairness”, and to think otherwise is delusional. Good luck to everyone.
Brian Richards – oh, come on! “We are born into this world without expectations of rights or ‘fairness'”? How easily do you think foreigners could buy out Shanghai? Not likely, because it wouldn’t be allowed. Try buying land in Thailand, Cambodia, Vietnam. The Chinese are printing money, and we’re allowing this money to price our locals out. This is criminal.
“Good luck to everyone”? If you happened to be born at the right time and had already bought a home (which, compared to prices today, was probably bought for next to nothing), you did indeed luck out. People have done nothing to these homes, and yet somehow they’re now worth double, triple? And you’re saying “good luck” to the ones who weren’t born at the right time, who were too young when the bubble started, almost as if, “Sorry, but you’re now a loser. Don’t expect any help because we live in a world without expectations of rights or fairness”? Yeah, right! What a world.
I can tell you that the Chinese are not buying real estate in fly-over country. They like the high ticket areas. Reminds me of the Japanese back in the late 1980’s….buying real estate in California. We know how that ended.
I don’t know if the Chinese are buying in fly over country but they are definitely there. I was recently in Baton Rouge, Louisiana and there is an oriental nail place in every strip mall, a Chinese restaurant, and a coin operated laundry. These are the staple businesses of Chinese immigrants in America. They own and operate other businesses in the mall as well. I think they may even out number Latinos there.
There’s still lots of America that the Chinese aren’t even aware of. I like living in the old-style communities where you can still buy your towels at the JC Penny store and buy a house for 100k. There are lots of these places in fly-over land.
Let the Chinese elites buy up the coastal cities. Their money comes from us in the first place, so now it’s home again, paying builders and taxes and housekeepers. When the s*** hits the fan, they’ll go home and we can repatriate their holdings. That way, we get some of the money we spent on Chinese junk back. And if the s*** doesn’t hit the fan, the Chinese will have a vested interest to help pay to move our coastal cities when the oceans rise from global warming.
Print Yuan and buy the Western world. Seems like a winning strategy.
“Western savings rates have approached zero due to the welfare state safety net.”
Private savings are near zero because the Fed (and other Central Banks) ,by edict, have set interest rates to zero or negative. Offer a 5% savings rate, or better yet, get the Fed the hell out of the way and let savers and investors sort out the price of money (interest).
But the criminals that benefit from money/credit creation (the theft of future income of your kids and grandkids) will keep this dirty deal going until the nation is dead.
As to Chinese nationals purchasing residential real estate, it should be illegal. It does nothing but price local citizens out of their own market by bringing in dirty money from offshore. If politicians weren’t benefiting from this theft of a nation’s birthright, it would be stopped before tomorrow morning.
Takes two hands to clap. The criminals who performed “the theft of future income of your kids and grandkids” and the parents who allowed “the theft of future income of your kids and grandkids” to happen.
Power of love in full bloom. LOL.
Why should it be illegal? Canadians buy in the US. US citizens buy in Costa Rica. It happens worldwide. Here in Texas we have high County, City and school tax on property, so the pricier the better (no state income tax). A family of 4 in a million dollar home is actually getting screwed compared to a family of 4 in a 100K home. Same services but 10X the property taxes. But more money for the local tax entities.
As far as being priced out locally….what do you think urban or niche gentrification has done to the poor or the folks who have lived there 30 years? What about cities like Aspen? None of the worker bees who keep that city staffed can afford to live in Aspen. And those wealthy home owners are not Chinese.
Real Estate is always summed up in 3 words….Location, location, location. The Chinese are hedging their investments. Do you blame them? It’s an investment. Haven’t Americans had “your home is your best investment” crammed down our gullet forever?
The dirty money question….now that is another can of worms. If the Government really wanted to crack down on it they would have done so decades ago. But then they would have to fess up to their own filthy shenanigans, both personally and as a Gov. entity. And we know that will never happen.
It actually bodes well for us that foreigners are parking their money here as the safe bet.
Kam – thank you for your good post.
No. It might not seem so but the cart is before the horse in your comment.
First we have low wages and high unemployment etc, then the welfare bill rises to compensate. Not the other way round.
What is generally not understood is that the Federal government is not constrained in its ability to pay whatever the costs of welfare become. No taxation or borrowing is required or indeed used. GDP rises to cover the expense as recipients participate in the economy due to having more spending power.
Right now there is $Trillions worth of space to spend into. The government has to get into infrastructure and services, or whatever it wants, to make jobs available.
Saving rates may be a little misleading because many people have 401k’s and other IRA type plans as well as pensions. Retirement savings is still savings, just more specific and less accessible.
‘savings’ for ‘who’ exactly ??
It’s not your savings if it gets ‘corzined’….am I right ?!
i was going to say the same thing, the bail-in is coming.
“The Chinese are worried…about a million things.”
And so they plough all their money in one more asset to bring it to
bubalicious levels till it pops! Smart, Hmmmmm.
If they are paying cash as has been reported…what is the downside? They can ride what ever boom/bust/boom there is. They are not tied to job fuctuations (I did that typo on purpose) here. If it gets that bad in China (which it sounds like it will) then they can come live here in their paid off house in a nice area.
Food for thought….why would Germans buy negative bonds. It means they won’t lose too much of their capital. The Germans/Austrians are the most conservative people I deal with. One of my customers/company owners lends money to other small companies for under 2.5% and all involved see it as win/win. They have also changed some of the tax repercussions on company dividends. If you don’t take your dividend personally but keep it in your company then there is a new tax hit. He said he had to take it and spend it on house upgrades he didn’t want to do because of this new tax. Cheaper to spend it than to reinvest in your own company.
Handwriting on the wall….spend it or we will tax you.
China is printing as much Yuan as possible as fast as they can and going out and buying up the world with that worthless paper and everyone is all too willing to sell it to them.
get it while you can.
“500, 000 wouldn’t even begin to plan how to conduct the survey”
Former Stats Can official.
The take away- don’t expect cost effective anything from government.
Woodward and Bernstein weren’t paid six figures to follow Watergate to the top
A survey of one hundred big ticket properties would give a reasonable idea, within 10 %, of how many buyers are foreign. As in Watergate- follow the money. There aren’t real estate laws about the sources of money but there are banking laws. The conveyance won’t be done with a bag of cash- it will have to come from a financial institution.
When I saw that momentous amount in the budget, I did not know if I should laugh hysterically or grind my teeth in anger. But, as someone noted, it does not require any new money: what it need is realtors tracking the nationality of the buyer, and the history of the property as probably all of them are later flipped. Either that or go to jail.
Nice, who knew Canadian politicians are as corrupt as American politicians.
I would add that the Chinese are also worried about the crackdown on corruption in China. The only thing they do not have to worry about is the western governments tracking their financial activities.
So how do I List my house in China? Only half kidding. If I can get some of these absurd prices here in Portland Oregon, I’d move in a flash. Our housing prices are already ridiculous, I imagine some of those buyers are Chinese, but I can’t prove it. Considering the rate at which some high end homes get snapped up at ridiculous prices it’s beginning to seem similar to Vancouver.
I’ve heard anecdotally that Chinese buyers will group together to buy a single condo in places like Vancouver. They nominate a single person to front the deal (or it filters through a series of intermediaries) then they share this as the common “escape outlet” that Wolf talks about.
In a world where money is free, nothing has value anymore.
I would not be surprised.
I always wondered where these Chinese people get all their money.
50 years ago the country was poor.
Now by selling $2 trinkets and jeans they are full of billionaires?
But joining together to buy an asset is not silly.
I just wish the Chinese government would really crack down on their capital outflow.
It is killing us here in New Zealand.
They do, its called using your brain, something western society has been taugh,t not to do, by the corporates.
That way, many who can not afford to own 1 house can still get the capital gain of 1 house, on their investment percentage.
I try to sell this concept to young Europeans. They dont want to know, they are all going to save for their own deposit, alone.
Houses are increasing in value PA, by more than the Average Salary Per Annum. Unless you have a combined income, over 150K PA,you will never catch the deposit minimum, In anything reasonable. It is simply what has happens to urban Markets, where there is good wage work.
For the corporates, 3 generations, in 3 Overpriced Homes ,with 2 or 3 High Interest Mortgages, is way better.
Than 3 generations, in 1 freehold home, with 1 investment property, and 1 small Low interest Mortgage. Europeans and Americans have fallen for this, most Asians, havent.
Think about the Total disposable. Think about the Interest paid on those three mortgages. Think About the Interest, Geriatric/Child care, the Asians dont pay. This is why many Asians, simply have more.
“So capital flight from China has turned into a tsunami. And this money has to go somewhere.”
Maybe. Since you don’t have hard numbers it could just as well be space aliens buying up the real estate!
See a review below for the book “They walked like men” by Clifford D Simak (Written in 1962).
“Money was worthless; it had no value! It couldn’t buy housing, clothing, or food. Someone with enormous quantities of cash was buying houses and tearing them down, buying stores and closing them.”
Basically aliens take over Earth by buying up all the real estate!!
Science fiction or science fact?
There are plenty of articles on WS that discuss China’s capital flight problem with charts and numbers. So if you want to know, check them out.
This article was about housing in the US and Canada, and how many were being bought by Chinese investors. The article also lamented the fact that we don’t have hard numbers on this, though we have estimates, and I gave you some of the estimates.
Let me remind you that “estimates” are NOT “science fiction” – the main difference being that science fiction is fun to read, and estimates are not.
I live in North Vancouver the day you know a house has gone on the market here is the day a for sale sign goes up with a “sold” sign! Every sale is unconditional no inspections, not a care in the world if its made of paper mache or bubble wrap! Tin shacks are being sold for over $1.9m. Chinese real estates agents shadow sell using offshore clients who have no intention of buying the house and each shadow will earn them a commission and their clients a nice $200K tax-free dollars, this also keeps pushing the prices up and up. One chinese investor buying a tear down in our street didnt even bother checking what the house had sold for right next door to the one he was buying and because of that paid $800 K over the asking price! The standard rebuild or cash funnel for house sales like these are that once sold the entire block gets dug up and a house, that looks like it could hold 4 families, get put up as close to the fenceline as possible, all the trees are ripped up and a concrete monstrosity goes in its place….Sometimes someone actually moves in other times it just sits there empty with no intention of anyone actually inhabiting the house…a parked money chinese dollhouse! One less family to contribute to a community! There will be no chance that the kids I see walking past my house on their way to and from school will ever be able to buy and bring their kids up in the neighbourhood where all their memories as kids were spent and that is the sad reality that many people are already realizing its a done deal, the flood gates have been opened. The time to do something to curb the rise for our next generation by our keystone corrupt cop politicians has been and gone meanwhile the zombie style frenzied buying will continue where it stops nobody knows!
Every housing bubble is the same.
I’ve seen two in the UK and the crazy price stories pour out of London until they don’t.
Then the prices drop and it’s a slow painful process until the market corrects.
Though correcting in today’s crazy zero interest rate world does tend to be a bit less painless.
Housing bubble – collective insanity and then everyone gets back to reality all in one go. it is then they discover that housing is not a liquid asset.
Hopefully, a large Chinese entrepreneur will make a series of bids to buy up a large percentage of corporate-owned office properties the US government is leasing. Then of course, jack up the rates sky high.
B/C that’s what they’ve been doing to residential properties, so I’d like to see them take it to the next level.
The Chinese like “housing” and the relationship that housing plays to the Chinese must not be underestimated. This is where almost 75% of the country’s household wealth is stored and it is deeply interwoven with shadow banking. In China most apartments are sold with internal walls and electrical outlets in place but everything else, including doors, flooring, and bathroom fixtures need to be built-out by the owner after purchase.
Cheap housing is something you won’t find in China. Its housing market is among the most expensive in the world when compared to per capita income. For example, the average price of housing in New York City is around $200 per square foot with an average family income of $72,000 per year. By comparison, the average cost of housing in Shanghai for the year 2007 was nearly $108 a sq. ft. against an average family income of $7,316. More about China’s housing market in the article below.
i own a nice 48000 sf lot in washington dc, good neighborhood. 1st 2.4 million takes it.
i’m in the phonebook.