This is What Happened to Sales & Prices of Manhattan Office Buildings as Chinese Buyers are Suddenly “Absent”

The formerly hottest trophy market gets a dose of reality.

The rigorous and broad-based crackdown by the Chinese government on capital flight, and particularly on overseas investments in risky real estate by over-leveraged Chinese conglomerates, is reverberating through the priciest trophy office market in the US.

For the year 2017, sales of large office properties in Manhattan – after a terrible Q3 and a partial recovery in Q4 – fell to just 32 transactions, totaling $11.4 billion, according to CommercialCafé. The annual dollar sales of office buildings was down…

  • 43% from 2016
  • 53% from 2015
  • 31% from 2014
  • 28% from 2013

CommercialCafé explains the phenomenon: “The last three months of the year also seemed to confirm what industry experts had predicted for a while: given the increased scrutiny exerted by Beijing on outbound investments, Chinese buyers are disappearing from the U.S. office limelight.”

In other words, without Chinese conglomerates buying up trophy properties at extravagant prices, it’s getting tough out there:

CommercialCafé, a division of Yardi, used Yardi Matrix data to analyze all Manhattan office transactions recorded by January 1st, 2018, of $5 million or more, and larger than 50,000 square feet. In the case of mixed-use properties, only those with over 50% office space were taken into account.

After the frozen-over Q3 when only 6 large office deals closed totaling a paltry $990 million, Q4 experienced somewhat of a thaw, with 10 large deals, totaling $4.6 billion.

The report blamed “dwindling supply and intense competition for high-quality assets” for the low sales volume. However that may be, the average price per square foot in Q4 dropped to $729, which was down 16% year-over-year, down 40% from the peak in Q1 2016, and the lowest amount since Q1 2014. It’s not exactly a testament of red-hot demand:

 

For the entire year 2017 – which eliminates the quarter to quarter volatility – the average price per square foot came in at $784, below the average of 2016 and 2015, according to CommercialCafé.

Everyone is now missing the Chinese buyers. And their absence was very sudden.

In the second quarter in Manhattan, Chinese entities still accounted for half of the commercial real estate purchases with prices over $10 million. The largest purchase in Q2 and the sixth largest transaction ever in Manhattan was the $2.2 billion purchase in May of 245 Park Avenue by the Chinese conglomerate HNA Group. At $1,282 per square foot, it was “among the highest price per pound for this type of asset.”

It wasn’t all Chinese money though. As I wrote at the time in my report, “What’ll Happen to US Commercial Real Estate as Chinese Money Dries Up?” the purchase of the 45-story tower was funded by a $508 million loan from a consortium of Western banks, including JPMorgan Chase, Natixis, Deutsche Bank, Barclays, and Societe Generale. The rest was funded by HNA’s other lenders, presumably in China.

The HNA purchase of 245 Park Ave, the largest deal of 2017, was the final big bang before the Chinese government successfully put a stop to it with its crackdown on capital flight. CommercialCafé observed:

By comparison, Chinese investors were conspicuously absent from the buyer roster in Q4, which was to be expected, as Beijing increased its scrutiny of offshore real estate investments in 2017. There were only two office deals closed by Asian buyers in the year’s fourth quarter, and neither one of those buyers was from China: Japan-based Unizo Holdings acquired the property at 685 3rd Avenue for $468 million, while Investcorp, headquartered in Bahrain, paid $157 million for the building at 229 W. 36th Street.

Thus, the biggest trophy office market in the US leads as an example of what happens to the dynamics of that market without the ravenous and blind appetite of Chinese buyers trying to buy trophy properties at the fattest prices for reasons of their own and to the greatest delight of the sellers.

Across the US, the blistering seven-year commercial real estate boom, backed by $4.3 trillion in bank loans, is ending. Read…  Commercial Real Estate Suffers First Down-Year since 2009 
 

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  93 comments for “This is What Happened to Sales & Prices of Manhattan Office Buildings as Chinese Buyers are Suddenly “Absent”

  1. d
    Jan 16, 2018 at 1:51 am

    This is all big fish the real pain inflicted by the CCP chinese speculators and Damage to our societies, is in small retail housing.

    • J Bank
      Jan 16, 2018 at 5:36 pm

      Economic warfare, with freshly printed money.

      • d
        Jan 16, 2018 at 11:43 pm

        Economic Warfare YES.

        RMB/CNY is not “Money” in the real world.

        • Mr Cookie
          Jan 17, 2018 at 3:30 pm

          That’s quite silly, isn’t it?

        • d
          Jan 17, 2018 at 6:56 pm

          No.;

          Its just 2 FACTS you don’t like. Or don’t understand.
          ,
          China has been and is still engaging in Economic warfare against the developed Western democratic nations. Whilst Aggressively exploiting and Bullying smaller weaker nations. By among other things, Predatory lending.

          RMB/CNY. The true amount in circulation, and the TRUE Economic statistic that go with it.

          Are all unavailable, those that are released are politically massaged and unverifiable by third parties.

          So RMB/CNY is not money outside china, it is simply the internal chinese exchange mechanism.

          Its not even fully convertible.

          Any Exchange mechanism, that is not fully convertible, or is subject to movement restrictions (Currency Controls) is not Money. It is simply a national exchange mechanism.

          US $, Sterling, CHF, AU $, NZ $, those currencies are money. The restrictions being placed on the movement of the EUR (Particularly in cash) are making it NO LONGER Money.

    • John
      Jan 16, 2018 at 10:53 pm

      Coincidence that the money printing stopped in the final two quarter of 2014, and sales peaked in 2015? We also saw a fall in the prices of oil, steel, milk received by farmers, euros, yen, and Canadian dollars. Nah! Probably nothin’…

      • d
        Jan 16, 2018 at 11:56 pm

        “Coincidence that the money printing stopped in the final two quarter of 2014,”

        The money printing HAS NOT stopped, the easy Exit of it, has.

  2. raxadian
    Jan 16, 2018 at 4:37 am

    Looking at those graphics sales have been going down since 2016. So the lack of Chinese buyers just accelerates things. And is logical, people and companies don’t switch buildings like underwear. Worse, those buildings are not only overpriced but also badly build in some cases.

    • Petunia
      Jan 16, 2018 at 9:13 am

      245 Park Ave was the old Bear Stearns building owned by Olympia & York when I worked there. The building has a prestigious address and location which I think is what the Chinese were really buying. It is also a couple of blocks down Park Ave. from the Waldorf Astoria Hotel which the Chinese also bought. I read that our govt officials are forbidden to stay there now.

      As to the condition of the buildings, the Waldorf is currently under renovation, I believe. And Bear Stearns built a new tower for itself on Madison Ave. nearby, before it’s collapse, which JPM basically got as a gift in its purchase of BS.

      • nick
        Jan 16, 2018 at 5:28 pm

        Is the Chinese hot money just sitting idle?

        A few years back used to work for a west coast company.
        During a bankruptcy, they were “saved” by a Chinese company, purchased for 10s of millions of $ usd.
        A few months later, the Savior turned around and sold the company to another Chinese conglomerate with dubious owners for twice as much.
        Later in the year they absorbed a smaller company with “symbiotic tech” for 50 million. This smaller company had one product out, an app with less then 100 downloads and in its short history of existence, had been owned by many smaller Chinese companies.

        Rounding up all these costs at 200 million. They’ve been doubling losses every year but still kicking around.

        Its true, that compared to 3 years ago, I only see locals looking at houses in that area. But, recently a friend sold one of his homes for 1.5mill to a Chinese DJ with 12 mill in the bank account.

        Sorry for the extended examples, but could it be, that the Chinese, just like us, smell the drop in real estate and are just holding back?
        Just my two examples constitute millions of funds slushing around waiting to be deployed.

        • Petunia
          Jan 16, 2018 at 6:25 pm

          This is total speculation on my part, as a native New Yorker, in respect to Park Ave. The avenue is a series of commercial sky scrappers and residential co-op buildings. The co-op buildings are particularly interesting because they constitute the most segregated RE in the world. It is real old money. If the co-op board doesn’t want you, it doesn’t matter how much money you have or who you are, you are not allowed to buy in. This is real estate essentially unavailable to Chinese buyers.

          The Waldorf is being renovated into hotel rooms and apartments. No doubt some important Chinese buyers will want these. There is nothing that I know of which will restrict the new owners of 245 Park Ave., an office building, from converting it to mixed use. Allowing Chinese buyers entry to Park Ave. Whether the city will allow it, or will be allowed to allow it, is another matter.

  3. Frederick
    Jan 16, 2018 at 6:01 am

    The Chinese are smart enough to see the writing on the wall Bubbly prices and a collapsing dollar is NOT the market they are eager to buy into They’d be better off buying in an emerging market where prices haven’t gone nuts in my opinion if they want to get a nice appreciation long term London is suffering from the same dynamic Weak pound and overpriced inventory That’s changing though and fast Just goes to show even the mega cities of the world are not immune to downturns

    • Objective Function
      Jan 16, 2018 at 9:48 am

      Sorry, emerging markets too, grown arrogant and profligate from a decade-long bender of cheap Chinese debt (mostly funding cheap Chinese goods and infra installed by cheap Chinese tradesmen) are lately wondering where all the easy money has gone. Dude, where’s my ‘One Belt One Road?’

      The hot money hasn’t moved to greener pastures, it’s drying up globally.

    • IdahoPotato
      Jan 16, 2018 at 10:59 am

      These Chinese are now openly mocking the U.S.

      https://www.reuters.com/article/usa-ratings-dagong/update-2-chinas-dagong-lowers-us-sovereign-ratings-to-peru-level-following-tax-cuts-idUSL3N1PB2NL

      Not that there isn’t a kernel of truth in what they’re saying.

      • Bobber
        Jan 16, 2018 at 11:31 am

        I read the article. How is that mocking the U.S.? You can’t expect to balloon your debt without decreasing your credit rating. Seems like a fair article to me.

        • IdahoPotato
          Jan 16, 2018 at 11:50 am

          Fair article, yes. Mocking, yes. Also too. As that legend from Alaska would say.

        • Jan 16, 2018 at 11:53 am

          Yeah that’s really what makes the dollar just curious if one of the US agencies will weigh in, though I doubt it. If China downgrades our rating do they mark their reserves to market? And if the US does pass the debt ceiling bill in order to build the border wall, that rating should go lower. Godless communists control whats’ left of US fiscal responsibility.

        • interesting
          Jan 16, 2018 at 5:25 pm

          Then why peg your currency to the currency of a country you just downgraded? Could it be the lower that pegged currency goes the lower your currency falls as well and what better way to get more downside then to create a headline such as they have done? A stealth devaluation if you will.

          Lastly, China should keep her freaking mouth shut about debt creation…..sheesh, pot meet kettle.

      • JR
        Jan 16, 2018 at 11:40 am

        I don’t see it as “mocking” but rather as the usual magic trick of distraction. Look over there, not over here! If you poke around you see graphs showing Chinese foreign currency reserves “magically” hovering above the critical $3T mark. Various anecdotal stories suggest that the ChiCom outflow crackdown is real and intensifying. For more amusing observations, listen to Jim Chanos on Youtube outline his perspectives on the financial situation in China. And Felix Zulauf suggests that China will need to slow down in 2018 so that later XJP can goose the economy prior to the next “elections”. A very interesting story in progress before our fascinated eyes is unraveling, err unfolding.

        • Michael Fiorillo
          Jan 16, 2018 at 1:38 pm

          Thank you; I don’t think I’ll be putting too much trust in financial statements from the Land of Plastic Rice anytime soon.

          Not that we’re a model for anyone, but Free Market Stalinism hasn’t got much to show us.

      • Nick Kelly
        Jan 16, 2018 at 11:40 am

        Does this mean China wants to swap its US debt for Peru bonds?

        • Jan 16, 2018 at 12:12 pm

          One of Rickards 2018 predictions is for an EM collapse, for no other reason than the IMFs policy on SDR. China built up their gold reserves to distance themselves, but other countries maybe not so lucky. The volume of their US debt relative to the aggregate of all Peru’s bonds is what?

        • safe as milk
          Jan 16, 2018 at 2:43 pm

          i find rikards fascinating but the man is a lawyer not a trader.

    • Maximus Minimus
      Jan 16, 2018 at 2:43 pm

      The Chinese are smart enough to see that this super bubble has gone on for too long. They will need bigger mattresses to store their cash, though.

  4. MC01
    Jan 16, 2018 at 7:14 am

    I am honestly surprised it took this long for the Chinese government to start cracking down on “capital flight”, not so much because of financial considerations but because it’s showing the world the ugly face of China.

    Take HNA Group whose real estate deals helped prople real estate markets all over the world to new dizzying heights. In late November Swiss regulators found them guilty of “providing false information” during the takeover of gategroup (all in lower case) and are presently probing the same group’s takeover of SR Technics, both very large airline service companies headquartered in Kloten. The alleged irregularities are extremely serious and could lead to jail sentences for several HNA board members.
    These “irregularities” chiefly rotate around the true ownership structure of HNA Group, which is so shady there are doubts key people such as chairman Wang Jia really exist and are not merely aliases or even “paper persons”.

    While Swiss regulators are apparently stirring from their long slumber, their colleagues elsewhere are still fast asleep. I hope they are well rested when they wake up because they’ll have an awful lot of work to do.
    Take the case of Hong Kong magnate(?) Li Yonghong, who’s supposedly bought one of Italy’s most prestigious football clubs, Milan AC.
    Nobody even knows his true date of birth and there are serious doubts about his true identity: Chinese authorities suspect he may be one and the same as “Li Bingfeng” a man wanted for questioning in shady real estate deals in Beijing who mysteriously disappeared into thin air.
    Despite Li’s convoluted financial deals (which in the best case scenario hint at Mr Li biting off far more than he can chew) and his patently false claims, Italian and EU regulators are still rolling out the red carpet for him. Like they have done time and time again, only to discover the embarrassing truth.

    While many rightly make a case out of China’s barefaced lack of disregard for intellectual property, it’s just one face of the Celestial Kingdom’s “growing pains”.
    Rest assured the Party in Beijing is acutely and one may say painfully aware of the negative image people like Mr Li project abroad and will use the instruments provided by the new capital controls to at least curb the worst excesses and present a more serious and mature face to the world.
    From a country which aims at being the world leader, and not merely in exporting rebar and wind turbines, I expect nothing less than presenting at least an acceptable image to the outside world.

    • Frederick
      Jan 16, 2018 at 8:02 am

      James Agree 100% We have zero moral high ground to speak from That’s for sure

    • Paulo
      Jan 16, 2018 at 8:32 am

      James,

      The history books, (if we still read in the future), will have a field day as they outline the sheer absurdity of our times.

      And how did it happen, they will ask?

      “Well, folks were so busy trying to pay for stuff they didn’t need, but were convinced they should have and bought on credit, they had no time or energy left to think and really ask questions. It was like a movement; a religion of consumption. When it finally arose that people were losing retirement investments, personal housing, and the ability to even buy good food and pay for heat, why then it was simply too late. The crys and search for scapegoats then entered the political dialogue and Society began to be filled with finger-pointing and hate. Children were getting sick as medical coverage lapsed. Commercial buildings lay vacant with no stores or businesses to fill them. People had no money or credit to buy anything more. After the soldiers moved in to quell the rioting there was no longer any movement or purpose to unite behind, to bring people together. There was only anger and blame. Do you know that people actually forgot how to cook for themselves? They had entire businesses structured around meal deliveries, and even boxed up food with directions on how to prepare and heat. People even stopped driving, as if they were simply too busy or important to convey themselves from one place to another. They hired other drivers or bought robot cars to do it for them. Honest…this is all true.”

      “How did you go bankrupt?”
      Two ways. Gradually, then suddenly.”
      ― Ernest Hemingway, The Sun Also Rises

      “Collapse ahead of the rush”
      John Michael Greer

      “Life moves pretty fast. If you don’t stop and look around once in awhile, you could miss it.”
      — FERRIS BUELLER’S DAY OFF

      (I couldn’t resist the last one….:-) regards

      • Brian
        Jan 16, 2018 at 9:10 am

        Nice summation.

    • Dave
      Jan 16, 2018 at 8:37 am

      Put in those terms, great point. Seems there’s trash all over the world!

    • MC01
      Jan 16, 2018 at 8:38 am

      Imagine if Apple came up with a brand new smartphone and said smartphone were a dismal sales failure.
      Imagine if, instead of trying to find out why said smartphone sat on the shelves instead of flying off it, Apple would merely say the competition’s product is junk and the people who chose it are idiots or worse and kept on moaning like this day in, day out, with the financial and technical press giving them far too much room.
      Imagine if Apple, despite all those incredibly intelligent people working in their financial, R&D and marketing departments, would still be selling the same smartphone they were selling in 2007 while their competitors have moved on to products we may not personally like but which people are ready to pay top dollars for.
      I can assure you despite our present financial asset bubble their shares would be firmly planted in penny stock territory and not be one of the main shakers and movers of the NYSE. If it were still in business.
      Yet I am to believe politics are somewhat different.

      He who has ears to hear, let him hear.

  5. 2banana
    Jan 16, 2018 at 7:29 am

    Now imagine no more obama Wall Street bank bailouts.

    The cheap and easy has fuel NYC Real Estate for the last eight years.

  6. Drango
    Jan 16, 2018 at 8:03 am

    If the Chinese aren’t going to use their gigantic trade surplus to purchase imports from other countries, they should at least be able to afford a few trophy purchases overseas. The fact that even a few billion in “capital outflow” is too much for China to handle says a lot about the condition of their financial system. Too bad, because fleecing a bunch of overpaying Chinese buyers was probably a very profitable line of work to be in.

    • david pape
      Jan 16, 2018 at 8:52 am

      Just ask the Japanese about getting fleeced. They are still trying to recover. But oh what a party it was.

  7. Dodo
    Jan 16, 2018 at 8:41 am

    The Chinese groups are not blind to their over paying for trophy assets, nor is the central government late in clamping down. Anyone who had dealt with such deals know that the chinese banks are not the lenders of the billions paid for these purchases, its chinese tycoons and those with deep connections inside the party getting their money out throuh a sort of shadow banking, all disguised as leverage. The only way to get through the monety laundering checks of the ultimate identity of the buyers’ is to grease the sellers and all parties involved. The germans french and yes, swiss and american business people opetating in china know this only too well. And the yuan had been strengthening for over a year before they clamp down, this is not closing the door after the horse has bolted, it is because those in power had to allow all their cronies to get on the wagon, and a stronger yuan makes it a bigger bang for the yuan.

  8. Gandalf
    Jan 16, 2018 at 8:55 am

    Actually, it’s important to address two points not mentioned in this article:

    1. Why Chinese companies and investors want to take their money and invest it outside of China
    2. Why China wants to prevent this capital outflow.

    The first one is obvious – Western countries are perceived as politically more stable and attractive and safer harbors for money than the autocratic Communist government which can confiscate whatever it wants at will.

    The second one is more complex – China and its banks have been engaged in a massive amount of internal lending and gigantic asset inflation over the last several years as an engine to prop up its economic growth. Making sure that capital is retained inside China is a key pillar to keep that asset inflation bubble going. Here, this article explains better:

    https://www.ft.com/content/1d288888-c613-11e7-b2bb-322b2cb39656

    This of course creates huge speculative bubbles and one can only guess how long this can keep going.

    • JR
      Jan 16, 2018 at 12:00 pm

      That is a great article in the FT! Thanks for posting the link. It is a great summary of the current balancing act in Chinese international finance.

    • Maximus Minimus
      Jan 16, 2018 at 2:57 pm

      And don’t forget that China has capital punishment, and wasn’t shy to use it even with rich and powerful.

    • d
      Jan 16, 2018 at 11:25 pm

      China also has an Italian problem much of the security for many of those loans in china does not exist or is not worth anywhere near the claimed value.

      The lent money is no longer in china.

  9. MASTER OF UNIVERSE
    Jan 16, 2018 at 9:52 am

    Chinese ‘hot’ money laundering was stopped one year ago, and the North American RE irrational spirits have morphed into rational fear for all investors given that peak RE stupidity, and speculation, has ceased to exist.
    Additionally, now that the hot money has evaporated in the New York City Residential RE & Commercial RE, we can expect a full blown market crash followed by another ‘white flight’ out of metro New York City. In my estimation, Park Avenue RE will plummet at least 50% within 2018 because there is virtually no money stream that can take up the slack from the Chinese hot money laundering era of peak NYC RE.

    MOU

  10. michael Engel
    Jan 16, 2018 at 11:01 am

    Chinese NYC RE likely future :
    1) a confiscated/ frozen property like the Iran regime building on 5th ave, after the revolution.
    2) when RR learned about Nakasone Deng illegal flirt, J. Baker kicked them out of their room in the Plaza hotel, in 1985. The money flow was to the NIKKEI and fancy NYC RE. Both investments did not do that well..

  11. Munchkin
    Jan 16, 2018 at 11:05 am

    I think the rules of the game have changed since Obama changed the “1980 Foreign Investment in Real Property Tax Act “, which limited foreign investment in the USA.

    Hence we’re going to see elevated levels of foreign investment in real estate by someone, if not the Chinese for many years to come. All the central bank money has to find a home somewhere.

    So expect a temporary pull-back rather than a crash.

    https://www.zerohedge.com/news/2015-12-20/obama-abruptly-waives-1980-foreign-investment-real-property-tax-act

    • Jan 16, 2018 at 12:19 pm

      They could invest that money in our stock market?

  12. Prairies
    Jan 16, 2018 at 11:55 am

    Vancouver has a little article to shed some light on how the Chinese have been doing business in Vancouver, a lot of stuff I couldn’t get away with as a citizen.

    http://vancouversun.com/opinion/columnists/douglas-todd-explosive-b-c-court-case-details-seven-migration-scams

    • Drango
      Jan 16, 2018 at 12:06 pm

      Interesting article. In China, mortgage fraud is not a crime, and people can talk about it in court without fear of reprisal. These Chinese families will be in for a shock when they are introduced to the western legal system.

    • Anon1970
      Jan 16, 2018 at 12:40 pm

      You don’t have to be a tax specialist to figure out that the oligarchs were gaming the system. My guess is that the Canada Revenue Agency was looking the other way for years under orders from whatever PM was running the government. No one wanted to upset the apple cart. Once upon a time, 126 Dunvegan Road, Toronto was the home of the late John David Eaton, the head of the now bankrupt Eaton department store chain. I wonder who lives there now and how much income they declare on their tax return every year?

      The Feds need to review the property tax rolls and review every tax return linked to a property assessed at more than, say, $5 million. This is not rocket science. Next time the cities of Vancouver and Toronto come begging for money from ottawa, they ought to be told to raise the property tax rate on homes owned by foreign nationals.

    • Drango
      Jan 16, 2018 at 1:53 pm
  13. Jan 16, 2018 at 12:16 pm

    We assume China’s capital controls are working, but it may be the money is finding another hot spot, or the money has dried up. I do not believe, one; that China really wants to enforce capital controls, and two they could achieve that in any case.

  14. Anon1970
    Jan 16, 2018 at 12:29 pm

    So who is left to bail out 666 Fifth Avenue, the office building that Trump’s son-in-law controls?

    • Frederick
      Jan 16, 2018 at 1:47 pm

      Anon 1970 That would be Jared Kushner the good friend of Sheldon Adelson 666 Fifth you say hmmmmm

    • Michael Fiorillo
      Jan 16, 2018 at 2:49 pm

      That would be Satan, LLC.

      • MASTER OF UNIVERSE
        Jan 16, 2018 at 8:04 pm

        Or Beelzebub, LLP.

        MOU

  15. Jon
    Jan 16, 2018 at 1:47 pm

    If this is true: “The rigorous and broad-based crackdown by the Chinese government on capital flight” then do we see prices going down ?
    I don’t see sales going down helping anyone.

    I am in CA and CA is inundated by Chinese investors paying cash for real estate in San Diego, SFO, LA , OC etc etc. The real estate has gone thru the roof with no relief in sight. The locals are priced out big time but I see no downward pressure on prices as inventory is quite low.
    The first sign of downward pressure on prices would be high inventory but in southern calif the inventory is very very low …

    • LAPilot
      Jan 16, 2018 at 3:31 pm

      Not here in SD. Inventory is blooming by the day and prices are falling.

      • Jon
        Jan 16, 2018 at 5:54 pm

        I ma in SD and I don’t see prices falling .. Inventory is pretty slim by historical standards.. I am waiting for the crash..

        • LAPilot
          Jan 16, 2018 at 6:14 pm

          El Cajon is same. Inventory rising and prices falling.

      • Jan 16, 2018 at 8:20 pm

        LAPilot,

        You just made a comment, confusingly, under a different email and screen name but on the same IP address in Sweden, claiming that you live in Seattle and that your rent was cut by $600. I’m just really confused now.

        Here’s the article and your comment under your screen name “Got Popcorn”:
        https://wolfstreet.com/2018/01/15/commercial-real-estate-prices-suffer-first-down-year-since-2009/#comment-119709

        • Gandalf
          Jan 16, 2018 at 10:03 pm

          Wolf, the most likely answer is that he is routing his Internet activities through a VPN with an IP address in Sweden. He could be the same person, or it could be two different people using the same VPN service.

        • Jan 16, 2018 at 10:29 pm

          Says essentially the same thing in both comments (housing in the neighborhood going down), but lives simultaneously in Seattle and Southern Cali and uses the same Swedish IP address. Very confusing :-]

        • Gandalf
          Jan 16, 2018 at 11:05 pm

          Maybe he’s like Charles Lindbergh. Lindbergh had multiple homes, children by four different women at the same time in different countries, and eventually died at his home in Maui. But he doesn’t have to be physically posting from Sweden. He just has to route his internet browsing through a VPN service with a Swedish IP address

        • d
          Jan 16, 2018 at 11:41 pm

          Theres a lot of that around.

    • interesting
      Jan 16, 2018 at 5:38 pm

      Well I did a Zillow search recently just to see about this low inventory meme and in the 4 county area, LA, OC, RC, SBC, there are approx. 40,000 homes for sale not counting foreclosures.

      I realize that Zillow isn’t the authority on the topic but it does give a snap shot to inventory, but maybe 40,000 properties for sale isn’t that many for the population density.

      • alex in san jose AKA digital Detroit
        Jan 17, 2018 at 12:06 am

        Remember it’s a strong meme to leave California when you retire. Everyone dreams of moving to someplace cheap in flyover country after selling their Cali house and buying a cheap flyover house and still having a half mil or more to live it up on. It’s a once-in-a-lifetime cash out, and I wish I were old enough to be in on it.

  16. Jon
    Jan 16, 2018 at 2:02 pm

    One of my friend lives in one of the expensive neighborhood in San Diego. The smallest single family house costs atleast a million dollar there.

    He observed that his chinese neighbor has converted his garage to a bunk bed style bedroom and he is bringing pregnant chinese ladies from China so that these chinese ladies can deliver babies here in usa and get us citizenship. ofcourse the chinese ladies keep changing and the house owner is getting money from these ladies to provide facilities.

    my friend complained this to relevant govt authority but to no avail

    • Jan 16, 2018 at 2:38 pm

      thats amazing i hope you pass that on to the local news

    • Michael Fiorillo
      Jan 16, 2018 at 2:51 pm

      I can see local authorities being indifferent, but I’d be very surprised if ICE wouldn’t be interested in a tidbit like that.

    • Rates
      Jan 16, 2018 at 2:57 pm

      LOL. Local authorities? The Chinese even made a movie about this phenomenon: https://en.wikipedia.org/wiki/Finding_Mr._Right

      Location: Seattle.

      Suggestion: start learning Chinese or start visiting the local church to pray for a Chinese collapse.

      Best way forward: do both to hedge your bets.

    • Maximus Minimus
      Jan 16, 2018 at 3:12 pm

      It’s not illegal to put up pregnant ladies, and to get citizenship, you have to deliver in a hospital. So that’s where the act happens. That said, with regard to this, or money laundering, the authorities are more than indifferent; I would call them complicit.

      • fozzy
        Jan 17, 2018 at 11:50 pm

        “It’s not illegal to put up pregnant ladies”

        No, but visa fraud, which is often required to get these women into the country, is.

        • Tina
          Jan 19, 2018 at 3:35 pm

          They usually come in tourist visa, which is not a visa fraud. This is happening in lot of places in the US.

    • Ehawk
      Jan 16, 2018 at 7:06 pm

      ICE ICE ICE Baby.

      take video and upload it explaining the situation, share it on Facebook and other social media…

      unfortunately, it takes to go viral for anything to happen.

    • d
      Jan 16, 2018 at 11:33 pm

      “He observed that his chinese neighbor has converted his garage to a bunk bed style bedroom and he is bringing pregnant chinese ladies from China so that these chinese ladies can deliver babies here in usa and get us citizenship. ofcourse the chinese ladies keep changing and the house owner is getting money from these ladies to provide facilities.”

      If everything in china is so good and the US is so bad, why do millions of chinese women seek to do this if they can afford it. ????????

      • alex in san jose AKA digital Detroit
        Jan 17, 2018 at 12:08 am

        Because tons of people still think it’s 1969 in the USA.

        Good jobs, strong Unions, cheap education, this thing we used to have called “social mobility”.

      • Jon
        Jan 17, 2018 at 11:22 am

        Us citizenship is still most coveted by almost all over other world

        Either driven by hype or not.. but coveted it is

        • R2D2
          Jan 17, 2018 at 11:40 am

          Driven by Hollywood movies; look at the Hollywood movies; all of us in US, regardless of having a job or not, live in luxury and party every night with 20 gorgeous babes; and yet get to be billionaires within days. That’s the life style we live according to Hollywood movies, and everyone around the world wants a piece of that action.

        • jon
          Jan 17, 2018 at 1:21 pm

          Actually, in general living conditions in USA are the best comparatively.
          Millionaires in big cities in India and China have to breathe in polluted air and deal with dilapidated infra…

      • JZ
        Jan 17, 2018 at 1:39 pm

        Same as the inequality issue here, there is two China. The rich that cash buy houses and the poor/middle trying to get away from the control of the rich and powerful.
        Even the rich need to get US citizenship to hedge the inevitable killing among the rich as it always happened in Chinese culture.

        • d
          Jan 17, 2018 at 5:07 pm

          “Even the rich need to get US citizenship to hedge the inevitable killing among the rich as it always happened in Chinese culture.”

          Exactly US citizenship is the easiest to get by delivering a child in that country. Many countries are or like ours have stopped that practice.

    • SnotFroth
      Jan 17, 2018 at 4:14 am

      I’m aware of a house in San Jose running a similar business. It was purchased by a wealthy Vietnamese family and the garage is now such a dorm.

    • Tina
      Jan 19, 2018 at 3:34 pm

      Same thing is happening in Bellevue, WA

  17. Michael Fiorillo
    Jan 16, 2018 at 2:48 pm

    Is the De Blasio administration not enforcing the law because it’s trying to “inject” undocumented /”illegal” people into the city, or, like every other municipal government in the country, because it’s captive to landlord and real estate interests?

    If you claim it’s the former, please provide evidence, otherwise we can assume it’s the latter.

  18. Mike R
    Jan 16, 2018 at 3:26 pm

    If Chinese investors are buying RE with cash and doing so to diversify assets out of China, why would the absence of such buying create a crash?

    This is a different situation/time that 2007/8/9 at least in that respect. Sure, the bubble will deflate down a bit, but unless people HAVE to sell, a crash seems unlikely.

    • Rates
      Jan 16, 2018 at 3:52 pm

      And if the Chinese government tells the investors to sell at all cost, then what? You do know that the government there holds all the power no?

      Also where’s the data that shows that all of these were paid with cash?
      http://fortune.com/2017/12/19/chinas-hna-overseas-property

      At current low rates, it’s not the Chinese who’s been buying trophies with debt, that’s for sure.

    • interesting
      Jan 16, 2018 at 5:49 pm

      “but unless people HAVE to sell”

      I’ve asked this question elsewhere but i’m wondering how much of this “demand” is 2nd or 3rd homes being used as retirement savings. I ask because my X sold a house in 2016 (for $30K less than purchase in 2005) to an “investor” who bought it to rent it out. ~30% of her old hood is now rentals.

      How many of these “investors” pulled money out of 401k’s or took out 2nd’s on the primary to become landlords? how far do prices drop before said “investor” thinks, WTF I better get my money back.

      07/8/9 had it’s version of why, this time around may not be the same but may rhyme…… Mark Hanson makes that very case that many people in the last bubble from 2003 -2006 were buying 2nd and 3rd homes and not buying homes as primary shelter and it’s the same now. Anecdotally, I was at a party in 2006 talking with this guy that had 3 houses and used a 2nd on one of the properties to buy a condo in Vegas……he was a bit worried but was really already bankrupt.

      • Maximus Minimus
        Jan 16, 2018 at 7:36 pm

        Speculators need not worry, forever. Remember Greenspan/Bernacke put which some in their confusion call Keynesian.

  19. Gandalf
    Jan 16, 2018 at 6:18 pm

    The relevant terms are “birth tourism” and “anchor babies”. Lots of other nationalities do it too, Mexicans, Russians, etc. It is big business on the island of Saipan, because its people are US citizens, and it requires no visa for Chinese to travel there. Some 70% of births on the island of Saipan are anchor babies from China.

    https://en.wikipedia.org/wiki/Birth_tourism

    The Feds have raided some of these maternity houses in Southern California. It is not illegal to come to the US and deliver a baby, however, the immigration visa forms contain some sticky questions that require some lying to get past the U.S. consular officials so that they will not suspect that this is a birth tourism trip. And the maternity houses themselves often violate city zoning regulations.

    http://www.latimes.com/local/lanow/la-me-ln-birth-tourism-schemes-raids-20150303-story.html

  20. R2D2
    Jan 17, 2018 at 12:02 am

    If you send real estate agents and associations to one of China’s ghost cities where only 1% of apartments are occupied, they will still give you the “dwindling supply”, and “tight supply” story; what a bunch of scumbags.

  21. Jon
    Jan 17, 2018 at 2:37 pm
    • fozzy
      Jan 17, 2018 at 11:55 pm

      “High cost of living give you this”

      I seem to recall reading that Bernanke’s PhD dissertation was what the Fed’s policy should be in a protracted depression(i.e. The Great Depression). When I see pictures of tent cities it makes me think of those old black-and-white pictures of Hoooverville’s and it makes me wonder what’s the difference for a certain segment of the population.

    • Tom
      Jan 18, 2018 at 4:52 pm

      I watched the video and read the OC register article, then proceeded to google earth to see what the satellites picked up. Interestingly, I counted less than 10 tents and the image is dated 2018. Clearly, google is using very old satelite images and faking the date to scrub this problem away. I wish it were that easy.
      @ 1min in the FB video, they pass the Renaissance apartments (essexapartmenthomes.com), interestingly, its one of the few places where you can not do street view in all of Santa Ana. Yup, intentionally scrubbed from google earth, problem solved I guess.

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