How Chinese Investors Inflate Housing Markets in the US, Canada, and Australia, as Governments Try to Stem the Tide

The “waterbed effect” of money flows.

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,” explained RBA’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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  139 comments for “How Chinese Investors Inflate Housing Markets in the US, Canada, and Australia, as Governments Try to Stem the Tide

  1. Rates
    Jun 7, 2018 at 9:44 am

    When you print money and your currency still rises, why not do it all the time?

    • cdr
      Jun 7, 2018 at 3:53 pm

      It’s much less complicated than that.

      What’s going on is a large number of mandarins who gamed the system and made massive amounts of money in China thanks to their position and access. Getting the money out of the country into assets with permanent value is the next step. Permanent value does not mean constant or rising value. It simply means that cash with a cost to them of close to $zero retains useful value for later. Even if 50% is lost in the process, it’s still lots of free money for the mandarin who got it out of the country.

      Our real estate bubble = their money laundering.

      To the big picture, this is simple cash repatriation of dollars from China.

      If we had an excess of Chinese money, we would be inflating their real estate and supporting their empty cities and empty malls with out greed and stupidity. But, they did that to themselves already.

      • Lenz
        Jun 7, 2018 at 4:58 pm

        Just like Japan in the 80s-90s? An economic growth fed by gov subsidies, State Champion companies and corruption.

        So we are witnessing the biggest heist of our lifetime, (east to west) wealth transfer. Was hoping for more defaults this year but looking at the amount of M&A and the size of these deals. I guess not yet.

        • alex in san jose AKA digital Detroit
          Jun 7, 2018 at 8:31 pm

          Simple. Seize foreign-owned houses and put homeless/poor people in them. Seize large amounts of money being brought into the the US by foreigners. This is all Sesame St. simple.

      • Nick
        Jun 10, 2018 at 8:13 am

        +1000

    • Thomas Molitor
      Jun 8, 2018 at 6:05 am

      Skirting Chinese capital controls explains the rise in crypto values. Chinese are using BTC to get their money out of China.

  2. Gershon
    Jun 7, 2018 at 10:10 am

    Asset inflation driven by hot-money flows due to central bank creation of trillions in funny-money “stimulus” funneled directly to the central bankers’ favored oligarchs and financial henchmen. All of this runaway speculation aided and abetted by the same institutions that are supposed to be safeguarding our financial system and looking out for the public interest. Yet still the sheeple graze placidly on the shoots growing from the manure the MSM flings across their pasture.

  3. oah
    Jun 7, 2018 at 10:30 am

    Chinese money mow flooding into the Philippines as well. Some are buying 10 condos.at a pop. Many being used to house online and other gamers

    • d
      Jun 7, 2018 at 2:23 pm

      The Philippines has a control every country should have. Regarding residential or agricultural land.

      As a foreigner, I can buy an apartment there. live in it, rent it out, or leave it vacant.

      I can only buy 40% of any building that has a land title. Or lease land on which to build.

      • Ricardo
        Jun 7, 2018 at 5:55 pm

        I believe the system that is in use in the Philippines should also be introduced into New Zealand. The indigenous peoples (Maori) of New Zealand are always complaining how their land, and NZ in general, is always being sold off to foreign purchase. Once gone it rarely comes back.

        • d
          Jun 7, 2018 at 6:32 pm

          “I believe the system that is in use in the Philippines should also be introduced into New Zealand. ”

          So do I

          And Australia among other places as well.

          If you look at the Philippines, (and Thailand which has similar land laws) and all its Multitude of problems. The 1 thing it does not have, is a residential property bubble. Outside of apartments. It is Blatantly Obvious to any fool with half a brain, why that is.

          I spend roughly 6 months of every year in NZ.

          The only land that is currently sacrosanct, is Maori land.

          We never had this homeless problem, until after the leftist did the trade deal with china.

          We never had this huge Vacant speculation property problem, until after then either, as Mainland chinese like to keep their speculation/trophy properties, vacant.

          We used to restrict Agricultural land purchases and there is still some control over a certain $ figure.

          We were forced by the WTO the US and the IMF in the eighties to completely deregulate and completely open our markets to free trade.

          This has benefited the FEW.

          In a country that almost had 80% home ownership the generation currently leaving school will only ever be able to afford single family homes, if they inherit them. If there are not big changes, many of them will never even be able to afford to rent single family homes. As the rent on such, is currently more than 1 average wage.

          Thank you America. For Turning a necessity into a speculative asst class, then exporting the model of housing, as a national ATM, to the rest of the planet..

  4. JB
    Jun 7, 2018 at 10:56 am

    Although not ideal , these foreign purchases reduce our current account deficit. Placing a large surcharge on these transactions at the national level will help only if the money is diverted into low cost housing.

    • Neal Woods
      Jun 7, 2018 at 12:22 pm

      “Placing a large surcharge on these transactions at the national level will help only if the money is diverted into low cost housing.”

      There’s an effect on bids for house purchases that helps plenty of buyers competing for those houses.

      It’s like you’re saying the only way less demand means lower prices is if supply also rises. No, supply and demand can affect prices quite independently of each other.

      • JB
        Jun 7, 2018 at 3:30 pm

        all i am saying is that if a foreigner wants to buy US real estate he should pay a large premium . That premium should be allocated for replacement housing . A suggested solution to the issue

    • Finster
      Jun 7, 2018 at 1:17 pm

      No matter how you slice it, if you keep importing things you wear out or burn up, and exporting things of enduring value, you’re still running a serious deficit.

  5. Mean Chicken
    Jun 7, 2018 at 10:59 am

    I like it from the perspective this style of free trade might slow the infiltration of rude riff-raff millenials into my neighborhood.

    • Franklin Sanders
      Jun 7, 2018 at 12:35 pm

      You are indeed a Mean Chicken.

  6. Debt Free
    Jun 7, 2018 at 11:02 am

    Why not just ban ownership of U.S. real estate by foreigners and foreign-owned entities? Seems a simpler solution that wouldn’t involve messing with the tax code. Alas, perhaps I am delusional to think our politicians actually work for the people and not the bankers.

    #MAGA

    • d
      Jun 7, 2018 at 2:36 pm

      “Why not just ban ownership of U.S. real estate by foreigners and foreign-owned entities?”

      Because its CORPORATE AMERICA that drove this model on the rst of the world and its CORPORATE AMERICA that is a big speculative buyer all over the world.

      Just not big residential property buyer. The chinese in residential properties is what has really thrown the spanner in the works of this CORPORATE AMERICAN money machine.

      So many chinese are still Borrowing in china frequently with non existen security. Buying outside china then defaulting, or paying 1/2 % interest only in china.

      Just as bulk Metals that were supposed to be in bond stores were found to be missing and were found to have been used as security in Multiple loans, totaling many times their entire value. So other loan securities in china have multiple claimants, for many times the value of the security, when things start going south.

      The chinese dont sign things, they stamp them, and stamps can be copied quiet easily and accurately.

      • kitten lopez
        Jun 7, 2018 at 8:28 pm

        wow. i kept asking THE SAME thing as “debt free” above. thanks for this so that my head doesn’t explode.

        it scares me how much i learn to stomach here, and STILL i am a completely obedient passive viewer and believer of all this propaganda without knowing how many LEVELS there are to its completely assimilating me in on all this.

        i’d forgive myself a little more at least if i wasn’t so obedient to a CORPORATION and at least an idea of a country or belief. but “corporation” makes me think Wolf’s come back to right when referring to us as “consumers.”

        NO WORDS. (just an existential nausea that i’m learning to carry around like a goiter on my neck)

        i mean existentially no words; hence the drama of all caps. but a “thank you” will hopefully suffice as something to say about your answer.

    • james wordsworth
      Jun 7, 2018 at 5:45 pm

      As much as I hate the foreign money wrecking the housing market, I will point out that if the US went back to an isolated mode, with far less immigration the world would be a whole lot better off, and the USA a lot poorer. With its pathetic education system if the USA had to rely on its own native born citizens to create wealth it would be in a lot of trouble. (For fun take a look at the names on most of the research done at US universities … not USA natives on many of them).

      • alex in san jose AKA digital Detroit
        Jun 7, 2018 at 8:41 pm

        All I’m saying is, for every foreign worker, H1B, etc brought in, there must be a Federal law that an American must be hired at 120% the pay the foreigner gets. The American shall not be required to do anything; they can take classes, play Angry Birds, doesn’t matter.

      • Debt Free
        Jun 7, 2018 at 9:08 pm

        The employment picture in STEM is a lot less rosy than what they would like us to believe. There was an article on this exact subject in the IEEE Spectrum magazine several years ago. Like you say, there are many foreign students in U.S. universities in technical fields. There is less incentive for U.S. students to pursue an advanced degree in the STEM fields for exactly the reason of competition with foreign students in the job market after graduation.

        You, humble American, have been sold down the river… In nearly every way possible.

        #MAGA

        • ru82
          Jun 8, 2018 at 4:11 am

          exactly. I was talking to a co-worker from China who was working in the U.S. She said she would not have been able to afford to go to college if she lived in the U.S. I asked her how much she paid in China and she said it was free (scholarship or something).

          This Chinese engineer can ask for less salary as she does not have a $60k student loan hanging over her head.

      • Dahlia
        Jun 7, 2018 at 10:44 pm

        Not quite JW. Those foreign names you speak of are taking spots that should be filled by US students. Thank God the current admin is limiting access to our sensitive intellectual property and stopping the theft of communist countries doing ‘research.’

        • Axel
          Jun 8, 2018 at 3:44 am

          It is more efficient for the US to get 130+IQ foreign students in STEM fields than 110+ US students. I think draining the best students in the world is one of the best move of the US

        • Sub
          Jun 9, 2018 at 10:00 am

          It blows my mind how many people have the short-sighted foolish attitude presented by Axel. The US has a population of 330M, which means that there is a native population of ~7.5M people with 130+ IQs. More than enough to fill our research needs without importing foreign scabs, which is what is going on here.

          It isn’t 1985 anymore when China and India had little to offer foreign students educated in the US, which meant that they typically stayed in the US and the US was the beneficiary of their research. There are quality positions in those countries for researchers now, so they come to the US to take advantage of the high quality of our educational systems and then return home, where the home country benefits from their training, and then makes the US bleed through “free” trade of the products generated by that research.

          It takes over a decade to generate a modern researcher of any quality, simply due the complexity of the modern knowledge base. Most of our top research educators will train only a handful of people to their level of work in a lifetime, so if the ones trained leave the country and go elsewhere, that opportunity for the US to benefit from that knowledge is lost forever. Don’t be surprised if the US is way behind the 8ball in R&D a generation from now, and has no way to replace the trained scientists it could have had, had they not been sold to foreign nations that may not always be open to collaboration, or even to being friendly.

          IME, the only people who think it is a good idea to sell the CCP our R&D expertise for short-term pennies on the dollar are people who personally benefit from the labor arbitrage, and those people should be launched out of the US by catapult.

    • Kraig
      Jun 10, 2018 at 10:11 pm

      Because US states allow foreigners to open us companies without declaring their foreign status. Hell A Wyoming llc can be totally anonymous. This is why Wyoming,Nevada, Delaware etc make great tax havens for non us folk

  7. Ambrose Bierce
    Jun 7, 2018 at 11:17 am

    So much for China’s capital controls

    • Bobber
      Jun 7, 2018 at 11:29 am

      That’s what I was thinking. How do you reconcile the currency controls with the marketing of these foreign properties in China? Obviously, the government is turning a blind eye towards foreign investment. What is the purpose of having rules if they are not enforced. This lets criminals reap rewards, paid for by law-abiding citizens.

      • JZ
        Jun 7, 2018 at 11:36 am

        We have NOT seen anything yet. In the near future, there will be companies chop houses into bits and block chains and raise money from internet and buy up all residential houses in the world. Capital control that.

        • RepubAnon
          Jun 7, 2018 at 2:50 pm

          Or simply create an LLC in the US, hide the shareholders’ identities, and have the LLC be each home’s owner.

          However, if Trump gets us into a shooting war with China over the South China Sea, one would expect lots of real estate to hit the market all at once…

  8. Debt Free
    Jun 7, 2018 at 11:36 am

    Warren Buffett, the kind and warm old grandfatherly figure, has your best interests at heart average American by selling out your birthright to wealthy foreigners.

    Now go back to watching football and updating your Facebooks.

  9. ScottS71
    Jun 7, 2018 at 11:43 am

    it’s interesting living in China. I travel to a lot of 2nd and 3rd tier cities and the prices, the locals quote, are very similar. about 1mil CNY (160k usd) for a 100m2 (about 1,000SQF} appartmemt (you loose 10-15% to common area use).

    Most workers make about 600-1,000usd take home per month, however, many of these complexes are sold out.

    Housing is the only place to invest in China as the stock market is dominated by mom and pop gamblers who get skiddish/spooked easy.

    Short term rates at banks are at 6% for a 3yr deposit, but truns out its an insurace company product, not the banks; buyer beware.

    Shanghai, 1mil usd for a 1,000SQFT appartmemt, in an okay area.

    Money needs a home and buying abroad makes sense as the prices, lifestyle and clean air, is a good investment; even if you dont live there.

    As one local taxi driver told me in a 3rd tier city, “Prices will always go up as the govermemt will makes sure of it so the market doesnt collaps” I would say, it cant go up forever, but have been saying that since 2006 and their have been some setbacks in some cities, briefly, but it keeps going up, although, now at modest 5% yoy In these 3rd tier cities. But still, he makes 600usd a month and he is betting the ranch. This where Rumsfeld quote needs experience to understand “… their are unknow, unknowns” and makes sense. But if you dont know or have ever experienced the unknowns, then they are just, unkown!

  10. Bobber
    Jun 7, 2018 at 11:43 am

    That mansion is ridiculous. You’d have to be one self-centered peacock to live there. I doubt anyone will buy it in this caustic environment. How comfortable would you be as a foreigner in Detroit, living in a mansion in the woods? You’d be an easy target. This is why smart money keeps a low profile.

    • Rates
      Jun 7, 2018 at 12:19 pm

      Obviously you’ve never been to Hollywood nor Greenwich, Conn, or Atherton, CA, etc, etc.

      Isn’t the goal of most Americans to be a self centered peacock? The Chinese are just immitating us.

      • Mean Chicken
        Jun 7, 2018 at 1:44 pm

        Good one, made me take note. Hollywood and peacocks are like two peas in a pod, and even more so if hubris is accounted for.

        • d
          Jun 7, 2018 at 1:56 pm

          The chinese were self centered peacocks, long before white men, first went to America (The Vikings circa 895 AD/CE (App)).

        • d
          Jun 7, 2018 at 1:57 pm

          Typo should read 985 AD/CE.

      • Mike B
        Jun 8, 2018 at 6:16 am

        Or Great Falls Virginia or Potomac Maryland (both suburbs of DC)

  11. no_free_lunch
    Jun 7, 2018 at 11:47 am

    Western governments and most businesses have short-term (tactical) business and economic plans, if they have any plans at all. China thinks and plans long-term (strategy). Using the U.S. as an example, manufacturing was off-shored to China, along with the associated jobs and technology. This has allowed China to leapfrog ahead from third world “Middle Kingdom” status to modern, but merchantilist, economy status. For example, China is now member of WTO.

    Follow the money. China manufactures cheap goods. Sold at Walmart. Dollars flow to China. Chinese investors look to diversify outside of Communist country with many ills and problems. Chinese money flows back U.S. (for example) as real estate “investors” try to extinguish hot money. The whole cycle starts with “money for nothing” from Central Banks (e.g. the Fed) printing endless fiat dollars, which are used by the “magic” of fractional reserve banking to create debt and leverage.

    Summary: The middle class has been impoverished and normal economics has been short-circuited by the “miracle” of financialization; aided and abetted by the nefarious Central Banks.

    John Hussman (Hussman Funds) has an excellent commentary on this “financial wizardry” in his current monthly commentary. Here’s an excerpt:

    “Debt-financed prosperity is typically abetted by central banks that encourage consumers and speculators to borrow (the demand side of Ponzi finance) and also encourage yield-seeking demand among investors for newly-issued debt securities that offer a “pickup” in yield (the supply side of Ponzi finance).”

    As I recall, Ponzi schemes work until they run out of new investors. I think we’re approaching that point (again). There’s also the greater fools factor here. The bottom line is that this won’t (like the last time) end well.

    • Rates
      Jun 7, 2018 at 12:25 pm

      As much as I admire the Chinese, let’s not put them on a pedestal. If the Chinese as a people always practice long term thinking then how did the West leapfrog them in the first place? Remember, this is the nation that invented paper (including paper money), gunpowder, etc.

      The Chinese have a saying: Wealth can not last beyond 3 generations.
      First generation builds it up
      Second generation tries to maintain it, but the decline has already started.
      Third generation, the wealth is lost. I call this the Muppets generation, which is what we are.

      Same saying can be applied to nations as well. So what if the US were to sink this generation. The next will learn some lessons and will probably be the one to make Murica great again. If not, it’s the Hunger Games.

      • Ethan in NoVA
        Jun 7, 2018 at 12:31 pm

        Stole their silkworms, the original IP theft. They had IP controls, but the outsiders still stole it and started to produce silk also.

        (Thanks to my buddy Steve for telling me about this history the other day.)

        • Rates
          Jun 7, 2018 at 1:18 pm

          Not only that. Tea as well. At least you know history as opposed to most muppets here who think that everything’s invented by the West.

          People should really read The Silk Road book. Everyone’s been stealing from one another since the beginning. Christianity is an Asian religion. The best empires sometime would even adopt the culture of the conquered. There’s no shame in adapting a best practice, no matter who comes up with those.

          The US stole plenty of IP from the UK as well no doubt.

          It’s not the strongest who thrive, it’s the most adaptable.

        • Mean Chicken
          Jun 7, 2018 at 1:56 pm

          Were those silk worms genetically modified? I dunno, back in the day there was cotton and a few other fibers could be woven into cloth, so maybe the underlying stolen IP idea was woven Nile cloth itself?

          Not to argue against or belittle China’s return to economic power and ingenuity, but this isn’t complicated. Globalist elites have always levered the FREE (slave labor) trade (aka: labor arbitrage) so it’s in their interest to lobby an elected Congress.

        • alex in san jose AKA digital Detroit
          Jun 7, 2018 at 8:46 pm

          And noodles. I’m pretty sure they invented noodles, and now we have spaghetti etc.

          Am not sure if they invented …. “china” … you know like that bowl I just ate out of. Interestingly, they never really mastered transparent china, AKA glass. Think if they’d done that! They’d have had telescopes 2000 or so years ago and all the constellations would have Chinese names.

      • intosh
        Jun 7, 2018 at 2:58 pm

        “If the Chinese as a people always practice long term thinking then how did the West leapfrog them in the first place?”

        Well, obviously, long-term thinking alone doesn’t mean you will be impervious to any risk or danger, or that you are guaranteed dominance or success.

        • Rates
          Jun 7, 2018 at 3:21 pm

          Exactly. My point was, long term thinking may not be a competitive advantage.

          In the end here’s really the only advantage of Chinese people, which will guarantee that they will be some kind of force forever: they believe in the idea of Chinese people/nation.

          America is a new nation, heck compared to Chinese civilization with 5000 years of history, 400 years of history is nothing. Western societies are more fluid, i.e. many nations in Europe are also pretty recent i.e. some hundred years after BC, and the Western idea of individualism pretty much guarantees that America, England, etc will probably be history maybe a 1000 years from now? But there will ALWAYS be a China (as a country) forever barring a nuclear catastrophe, etc.

        • Nick
          Jun 7, 2018 at 6:44 pm

          The Chinese economic miracle is concentrated in the south east coastal zones. If they don’t extend the growth in western areas, who knows how long China will retain their Western border.

          Lets be honest, In the US, we’re irritated from the foreigners turning our real estate from housing to a speculative global asset class. We’re still not slaving away for $60/month income.

          Imagine how you’d feel when you hear of janitor millionaires in ShenZhen. China has too many internal problems.

      • JZ
        Jun 7, 2018 at 3:32 pm

        Let me give you my understanding of the “how come the west leapfrog the east if the east is LONG term thinking”. The philosophy of the east is to live in harmony with the limitations such as birth, death, day, night, the cycles of sun, moon. The western philosophy is to break the limit. Build the machines and technologies to break the limits. To sail across continents, to mine the earth, go in cars, go the the moon, the mars. Now ask yourself the question, which philosophy is LONG term thinking? The western game theory says the alpha strategy usually leads to bad results, but human nature picks the alpha strategy.

        • Colorado Kid
          Jun 7, 2018 at 5:22 pm

          Polluting your environment like the Chinese have is NOT long term thinking.

        • Rates
          Jun 7, 2018 at 6:10 pm

          Agreed.

        • Lenz
          Jun 7, 2018 at 6:46 pm

          Or implementing a “one child policy” that within on generation removes your “cheap labour” advantage.

        • JZ
          Jun 7, 2018 at 8:39 pm

          That is “AFTER” Chinese was beat and forced to compete the industrialized/weaponized west. They would rather stay rural and exercise TaiQiquan if the west did NOT sail across the map and tried to colonize the land.

    • Drango
      Jun 7, 2018 at 12:51 pm

      You missed the very first step – foreign banks lend “dollars” to each other to finance the off-shoring of American industry. This was done on a huge scale in the early 2000’s. These banks now owe each other billions of “dollars” (and remember, these dollars were created out of thin air by FOREIGN banks). Add in derivatives, and the sum is probably in the trillions. These banks now need a steady flow of dollars to pay their dollar debts, which they obtain from trade surpluses with the U.S. Banks in China and Japan will be in crisis if the flow of dollars stops, that’s why these countries will NEVER agree to lower trade deficits with U.S. Deutsche Bank is a prime example of what comes from this kind of trading. The Fed has been irrelevant to this, thinking all it had to do was raise or lower interest rates. Trump’s trade policies will most definitely lead to a financial crisis, but it’s a crisis that is going to happen anyway. I hope he has people more competent than those at the Fed preparing for it.

    • van_down_by_river
      Jun 7, 2018 at 2:53 pm

      I believe you speak the rare, honest and informed truth. Sad but true.

      The Chinese don’t need to defeat the U.S. in a war, they can buy up the country and then rent it back to the rent slave middle class.

      • alex in san jose AKA digital Detroit
        Jun 7, 2018 at 8:49 pm

        Considering I make what a Chinese worker makes (see above, $1000 “take home” pay) this would not surprise me at all.

      • Drango
        Jun 8, 2018 at 7:13 am

        I don’t think China buying up the U.S. will be a problem. Having to feed dollars into their financial system is a weakness, not a strength. Japan as well. Having a huge trade surplus is also a weakness. The only thing the trade surplus will be useful for is protecting the Yuan if it starts to lose too much value, because there’s no way the U.S. is going to allow China to make any significant purchases with those reserves. Despite misconceptions, a weak Yuan is bad because it means that China has to pay even more for dollars, and nobody knows that better than the Chinese. If China’s reserves disappear, China will be defenseless against all those evil short sellers. Remember, China’s reserves sank by a trillion in a matter of months. If it happens again, China probably won’t recover.

  12. kayjay
    Jun 7, 2018 at 12:19 pm

    Good Read.

  13. d
    Jun 7, 2018 at 1:00 pm

    I was going to send you this 10 + hours before you posted this article but thought not top bother you.

    Check the charts and details for Auckland.

    https://www.bloomberg.com/news/articles/2018-06-07/foreigners-are-snapp

    Like I have said before Auckland family’s are living on the streets in vans (They have to stay in Auckland as that is where the only work is).

    While chinese speculators (many of who are also money launderers) push up prices and hold property’s vacant. Some how this has to be stopped.

    At the moment the new regulations are still to little to late and coming in to slowly.

    Something Radical needs to be done to stop absentee speculators holding residential properties vacant, for long period’s. Not just in Auckland but Globally.

    America has turned a Necessity (Shelter) into a speculative asset class and a National ATM .

    Then EXPORTED that model to the globe, through WTO market access.

    This has to be undone by Governments or Governments will be undone by Homeless people.

    The alarming rise in Violent crime in London (it has not been this bad since Transportation, in the late 18Th and early 19h century’s) is another global indicator that says to governments, fix it, before it, fixes you.

    Then as now Adequate, Housing among the Poor, was a huge issue.

    • Jun 7, 2018 at 2:52 pm
    • MD
      Jun 8, 2018 at 8:31 am

      What you’re talking bout is socialist intervention; you have to bear in mind that whilst such a thing exists, it is now only ever applied when it benefits the wealthy…hence expect no action to be taken to control speculative activity, as usurious lending practices and rampant speculation are key to ‘economic growth’ (ie debt growth) when you no longer make very much within your own borders.

      These are classic speculative bubbles and just like Japan at the end of the 80s they will implode – and Just like Japan the implosion will be severe and the effect on people’s memories will be long-lasting. In many ways, a very good thing.

  14. NY Geezer
    Jun 7, 2018 at 1:30 pm

    Since I can’t read or comprehend Chinese, I checked 8387 Ford Road, Superior Township, Michigan on Zillow which states:
    The house is on 50 acres, was built in 2008, has been on Zillow for 667 days;
    Per Berkshire Hathaway, on 8/8/16 listed for $5.9 million, reduced 11/14/17 to $5.2 million;
    2017 R/E Taxes $82,048.
    Its worth following to see if the price is reduced again (price reduction almost due) or if it is quickly unloaded on a willing Chinese buyer.

    • Mean Chicken
      Jun 7, 2018 at 2:06 pm

      $7,000/mo in property taxes alone. The property tax would be the killer for me, it’s my single largest expense and considerably larger than my energy bill even.

      People who rent don’t seems to acknowledge taxes are paid by someone and that money is gone forever, it’s not coming back.

      • Kent
        Jun 7, 2018 at 2:26 pm

        “People who rent don’t seems to acknowledge taxes are paid by someone and that money is gone forever, it’s not coming back.”

        Meh, it goes to the renter’s local city who uses it to pay employees and contractors who use it to buy stuff from the renter’s employer who pays the renter. An economy is a flow of money, not a stock.

      • Matt P
        Jun 7, 2018 at 3:26 pm

        Yeah, all those roads and sidewalks it’s used to build and maintain are imaginary.

        • Mean Chicken
          Jun 7, 2018 at 10:00 pm

          $7k/mo. is an expensive road, I doubt the owner receives $7k/mo of services. Sidewalks are for pedestrian use mostly in cities.

        • LessonIsNeverTry
          Jun 8, 2018 at 3:11 pm

          7k/month is an expensive road? On what planet? It is multiple millions per mile for a new road.

      • Ethan in NoVA
        Jun 7, 2018 at 3:46 pm

        Renters pay the taxes, unless owner is taking a loss.

    • Drango
      Jun 7, 2018 at 2:20 pm

      This area is close to some Chinese grocery stores and an excellent dim sum restaurant. A perfect spot for a communist party cadre to stash his ill gotten gains. I’ve seen several groups of Chinese “tourists” lately. I wonder if they’re all house shopping?

  15. Maximus Minimus
    Jun 7, 2018 at 1:42 pm

    If I opened my mind on this subject, I would be banned from this site for life. So let just say politely, that if you wash dirty money it does matter how much you loose.
    Knowingly, building the economy in foreign financed housing bubble is the dumbest thing to do. Sadly, I don’t expect anything better from the political class.

    • lenert
      Jun 7, 2018 at 2:34 pm
      • Jun 7, 2018 at 3:00 pm

        The linked site is an investment firm promoting its EB-5 bonds. Are you going to pay me for running their promo on my site?

        • lenert
          Jun 7, 2018 at 6:24 pm

          Sorry, nope – didn’t mean to promote, have no interest in what they buy or sell, and I haven’t crossed that bridge in years, but it’s an angle I hadn’t seen before.

        • lenert
          Jun 7, 2018 at 6:27 pm

          It’s not just housing but infrastructure.

        • Jun 8, 2018 at 12:41 am

          It’s not just freeloading but blogspam.

        • Jun 8, 2018 at 8:26 am

          Yes, that was my way of saying it. I don’t ever sell promo links in the comment section.

          But lenert explained that it wasn’t meant as a promo. And I believe it, based on prior comments of the long-time commenter. I appreciate the explanation and apology.

  16. Guido
    Jun 7, 2018 at 2:20 pm

    Since undoubtedly some of these actions are money laundering, is this now a blessed way to launder money from everywhere? Why couldn’t a drug lord launder his money through a third party that pools money from China into the USA?

    • Mrs. B
      Jun 7, 2018 at 8:39 pm

      That is exactly what is happening here in Vancouver and probably elsewhere. Criminal gangs from around the world funnel their money into China where it makes its way to Vancouver-we have poor enforcement of our rules here and are known for being an easy place to launder money. Not to mention the high level members of the Communist party of China who are parking their money in real estate here plus a myriad of triads and the like. Fentanyl from China is causing hundreds of deaths per year, the money from sales of it is being washed through our casinos and much of it pumped into our real estate market. It’s a gong show.

      • Jun 8, 2018 at 12:43 am

        Fentanyl needs to be declared a chemical weapon.

        If Sarin gas arrived in a package posted from China what do you think we’d send back? Hint: it’s not a customs invoice.

    • Nick
      Jun 10, 2018 at 8:21 am

      In Australia you buy real estate with cash and no questions will be asked.

  17. John
    Jun 7, 2018 at 2:29 pm

    If one is inclined to live in Detroit and vicinity why spend money at all ?

    Just squat there.After 10 years claim the land by adverse possession.If you somehow survive.

    SpotCrime Crime Map-updated in real time:

    spotcrime.com

    Before moving there it pays to specialize & acquire some ASI-advanced skill identifier like Burglary,Robbery,Arson,Theft,Vandalism etc.

    • Drango
      Jun 7, 2018 at 2:55 pm

      Reading this was 10 seconds of wasted time I’ll never get back.

  18. van_down_by_river
    Jun 7, 2018 at 2:47 pm

    Chinese people have produced trillions of dollars worth of plastic junk to sell to eager U.S. consumer and all that was given in return was a bunch of trashy currency. Did you expect the Chinese to hold all of those dollars until the value falls to zero? The dollars don’t buy much, but paying multi millions of dollars for crappy homes is better then getting nothing.

    At least it was a win-win for baby boomers – they got a bunch of junk from China, basically for free, and now the dollars are coming home and inflating the value of their homes. Everything is left to be paid for by younger generations but boomers get uninterrupted prosperity through their golden years without having had to save or work for it – beautiful.

    • colorado kid
      Jun 7, 2018 at 5:27 pm

      Quit overgeneralizing. I know plenty of Boomers who are almost destitute. Your hatred of Boomers is misplacing the blame from the banks, the FED, and all the other real rascals involved in this. A lot of Boomers can’t sell and get that so-called equity because they can’t afford to replace their houses.

      • alex in san jose AKA digital Detroit
        Jun 7, 2018 at 9:06 pm

        This. I, depending on hard numbers, am a Boomer. Depending on life experiences (went from middle class at age 10 to poorest of poor at age 18, had to fish, forage, etc to survive, no help with college, no help with food, no help with anything) am an X’er and I’m starting to hear all about how it’s the X’ers now who are hoarding all the money.

        What money? I make a little over $1000 a month, gross, out of which I have to pay 20% right off the top for taxes, SS, Medicare etc. In accordance with my “halving” theory, where you’ll have half the wealth each decade you did the decade before, a decade ago I had a motorcycle, now I have a bicycle, and in 10 years I may feel very lucky to have a few good pairs of boots/shoes which is why I buy English-made Doc Martens when I can because they last a long time.

        Most of the chronic homeless people around here are older than I am, that makes them Boomers. Are they just playing at being homeless while gloating over their 100 shares of Birkshire Hathaway back at their tents in the evenings? Fat chance.

        This is not about age. This is about class. This is about pitchforks, people.

        • kitten lopez
          Jun 8, 2018 at 8:14 am

          “This is about class. This is about pitchforks, people.”

          EXACTLY

    • Lenz
      Jun 7, 2018 at 5:49 pm

      win-win?? Maybe for baby boomers who were lucky enough to own homes in coastal cities. I doubt all baby boomers fall in this category, since home ownership % is at a 60+ year low.

      If anything, this is creating an even bigger divergence between the successful boomers and the ones who just never achieved greatness.

      Add to this the weaker purchasing power of the dollar, those poor suckers going to see their Social Security buy less and less, without taking into account the rallying cry of retired Alan Greenspan recently calling for a 25% decrease in SS entitlements in a Bloomberg interview.

      Most of the money is being made from the select few firms and banks who have cut into the market and are the reason home ownership is in such low levels. My guess.

  19. M Jones
    Jun 7, 2018 at 3:40 pm

    Exactly what is happening in the Far North Dallas Texas cities now. Just learned from reality sources that many of these same homes are not being lived in but turned into Airbnb’s, which doesn’t help the locals or the neighborhoods. City governments are just now addressing this issue and are determined to stop or greatly limit this building trend.

    • MC01
      Jun 8, 2018 at 6:29 am

      Just a friendly warning based on personal experience.
      Unless there’s an alert, large and dare I say bellicose group of citizens breathing down the city council’s neck at every step, never ever trust city governments to do anything about real estate speculation and never believe their promises until they deliver.

      City councils all over the world are either broke (an issue they invariably blame on anything bar years of waste and overspending) or have irrealistic public work projects in the drawer due to vanity, cronyism or both, so they are always looking for money.
      And real estate is big money for councils: land sales (either direct or through stamp duty), impact fees, property taxes and junk fees. They will not resist the sirens unless citizens make them resist and don’t fall for the usual request for “small sacrifices”. Again, it’s a clip I’ve seen a few times too many.

      I am sorry for the tirade but due to personal experiences real estate speculation is one of the few things that make my blood really boil.

      PS: Wolf, there’s another piece which is pretty much finished, but I need to trim down quite a bit of fat over the weekend so it will be probably delivered early next week.

      • Jun 8, 2018 at 8:42 am

        MC01: Thanks. Looking forward to it.

        • RD Blakeslee
          Jun 8, 2018 at 1:23 pm

          Wolf, can I post my link to what I maintain is my down-to-earth use of real estate in my life, without waiting the prescribed six months? Like many things in my life, it ain’t about money. If it’s spam, it’s priceless …

          +chuckle*

      • d
        Jun 8, 2018 at 11:20 am

        And when the local Muni/Council/Authority can get involved in setting valuations they will collude with “Valuer’s” “Sales Agents” and Banks, Etc to drive prices up as much as possible.

        Every property price increase = a revenue increase for them.

        When prices attempt to start to return to reality, one of the things that instantly starts to hold them up. Is the TAXABLE VALUE. Which sales agents instantly point to to justify the insane asking prices, and of course that “value” NEVER EVER goes down.

        Used to be a time when banks had their own valuers. Now Bank’s, Municipalities Etc, and buyers, all use the same “Independent” valuation Agents.

        Those Agents dont get work if their “Valuation’s ” are to low to.

        I have stood and listen to Sales and Valuation Agents. Discuss asking prices, offers, and “Valuation’s” to satisfy finance agreements.
        For multiple pending sales.

        They always end with a Valuer sucking his teeth saying “Oh Oh have to look into that.” ” Dont know about that that” and those written “valuations” always come back close enough to make the deal work.

        No collusion between Sales, and Valuation, Agents.

        No, of course, not.

      • juanfo
        Jun 8, 2018 at 4:05 pm

        Thanks MC we’ll be here waiting eagerly for the drop.

  20. Shawn
    Jun 7, 2018 at 3:46 pm

    Got to love the kleptocracy that is China today. They print 15 trillion dollars over the the past decade, quantitative easing on steroids I call it. This gets dolled out to a profoundly corrupt banking system and the end recipients of all this free money promptly launder it through gambling rackets, bitcoin and real estate out of the country. Most US cities are far too corrupt to resist this pot of gold flooding into their respective real estate markets.

  21. jim smith
    Jun 7, 2018 at 4:58 pm

    Simple solution. Demand our government to stop allowing China to fix\peg their currency to the USD, otherwise they continue printing CNY (usd) and buying up the world

  22. jest
    Jun 7, 2018 at 5:16 pm

    good information! thanks. It seems hard to connect things in markets ..it’s not like a mathematical equation giving an exact
    answer. Funny, i seldom hear someone smart enough to know what’s going to happen in the markets. Like if this is happening then this will result! but no! i don’t see that. Where is oil going , where is the stock market going , where is the economy going? all these factors available should give enough data to give an answer! Things should be obvious, but there not! no one knows much it seems when it comes to predicting the future .
    Like a master equation that can link it all like Einsteins Grand Unified Theory.
    I mean look mexico’s market is falling bad, Brazils too! yet usa is at record highs..or is it soon to follow Mexico and Brazil? see, the factors all should tell whats going to happen! but no one i read knows it!
    It can’t be that difficult!

    • JZ
      Jun 7, 2018 at 5:32 pm

      There is NO “truth” or “facts” in anything social science/phenomenon. It is a consequence of you against other competitors. The moment the “truth” is out/known, it would be changed into the opposite by the people/entity you are competing with. I have given it up a long time ago. But I still need to make real life decisions without any sustainable “TRUTH”. So this will be life long observation, thinking and competing.

  23. lenz
    Jun 7, 2018 at 5:19 pm

    Wolf,

    Do you see similarities worth exploring of the Japanese ’90s crash and the effects on US real estate and whats happening now with Chinese inflows?
    Or is the difference in the scale of their economy nullify any affinity.

    Would love to see an article on WS of the aftermath of that unwinding in the early ’90s, how the loans and foreclosures were treated. Or if you could recommend any reading on the topic. The iconic real estate sales of Rockefeller centre and golf courses were easy to find but on a local level, were regular Japanese buyers forced to sell their investments by the banks? Japanese gov? How/if they were forced to sell?

    From my research and experience, most Chinese are buying homes with cash offers. Does that make them immune to a real estate downturn? If they are borrowing heavily from Chinese banks or western friendlier banks like HSBC, how vulnerable would they be?

    Great article as always

    • MCH
      Jun 7, 2018 at 9:19 pm

      That’s a very interesting comment. What if a “chinese buyer” borrowed from a Chinese bank, and then used the cash and bought a house in the US, and defaulted on his loan in China.

      What would the recourse be if this guy moved out?

      I know the premise is a bit silly. But it’s nothing more than the take the money and run routine.

      • d
        Jun 8, 2018 at 12:23 am

        “I know the premise is a bit silly. But it’s nothing more than the take the money and run routine.”

        The premise is NOT silly, this is what is happening, except they are not buying 1 house in the forigen market they are buying 3 or 10 with interest only loans in china at 1 or 2 % secured against fresh air in many cases.

        Many of them are waiting for enough defaults to occur in china so that tehy can default as well and it will just ge t lost in the whirl pool of defaults.

        Or they just retire overseas when ready as so many do. and nobody knows where to find them.

  24. raxadian
    Jun 7, 2018 at 7:00 pm

    Australia is so deadly it makes the Amazon Forest and Africa look safer. And is rampaging with ninja Emus, why do the Chinese want to live there anyway?

    And China itseft is going hard after Chinese investments overseas.

    • d
      Jun 7, 2018 at 7:41 pm

      “ninja Emus”

      Nearly PMSLOL on that one blue.

      Although in a mob they can be dangerous, to small things, they dont like loud bangs, like most birds.

      Shotgun discharged at the sky generally sees them off in a hurry.

      • raxadian
        Jun 7, 2018 at 11:02 pm

        Now that no one under thirty has any clue about Crocodile Dundee, the Emu Wars and everything there wants to kill you is the two “facts” everyone who knows how to use Google knows about Australia.

        Oh and the whole “is a Continent or not?”

        My geography teacher at high school said it wasn’t one because Oceania is the continent and includes more than Australia alone.

        That said, the main reason Chinese money is drying up is the Chinese Government going on the next step in their “Big Brother” program and getting more and more control with the excuse of avoiding an economic crisis and to fight out “terrorists” aka anyone who disagrees with the Government.

        Honesty at this rate they might as well put an Emperor again.

  25. MCH
    Jun 7, 2018 at 7:07 pm

    If this was the late 80s, we could substitute in Japanese for Chinese. The only difference now is that it’s much easier thanks to the internet. So the Japanese didn’t inflate as much of a bubble then. Isn’t technology great?

    • Jun 7, 2018 at 8:00 pm

      One of the many differences between Japan then and China now is that the Japanese never felt they had to create an escape route for themselves or their money. They invested overseas in commercial real estate and by buying companies, but there was no wave of Japanese investors buying homes in the US, Canada, and Australia, and applying for visas. Most Japanese were all too happy to stay in Japan except for short vacations.

      • d
        Jun 7, 2018 at 8:11 pm

        You left out much better manner’s, and the fact that the Japanese used to lease, or rent out their “Investments”. So actually contributed to building stocks.

      • MCH
        Jun 7, 2018 at 9:15 pm

        That is absolutely true, because the Japanese government couldn’t just decide one day to take away the money of their citizens. That said, I have to wonder about the missed opportunities here.

        Functionally, real estate is an asset class. One that should be generating returns. I would be curious to know how many of these “Chinese” owned properties there are, and how many of these are actually sitting empty.

        If they are sitting empty, I would bet that one of the potential issues here is lack of familiarity with the local markets. Let’s say I decide to buy a property in another country, but I would still want to generate a return on that asset, and the only way to do that would be to rent it out. In that respect, our Chinese buyers are no different from anyone else.

        But not knowing the particular market or anyone in it, perhaps it becomes difficult for someone who just owns a couple of property to try to rent it out and generate returns. Imagine the headaches that would involve in learning the local rules and such, and not knowing people. That could be potentially one reason why there are so many empty homes in places like Vancouver. Because let’s face it, if the buyers actually live there, then no one should have any real cause to complain.

        It would be as troublesome as me going to China and finding out that unless I had money in a bank in China, that I can’t use Didichuxing because they only accept payment through Wechat which require a Chinese bank account attached to it. It’s an oblique example, but you get the idea.

        • Lenz
          Jun 7, 2018 at 9:38 pm

          You can always use a management company and pay a % fee.

          The reason why they are not renting the places is a combination of the exuberant amount they paid for the place, vs the comparably low rent which would still keep them at a loss.
          The downside of renting is property wear n’ tear.
          Tenants tend to damage the property during their use, and management companies also tend to add expenses sometimes above and beyond reason.

          The reality is simpler, its money being converted into RE for safety. And in countries such as Canada, a big enough investment gets their kids free schooling and eventually free health-care. The real benefits of foreign ownership. Losing out on a 3-6% yearly return is an afterthought in comparison.

      • Lenz
        Jun 7, 2018 at 9:43 pm

        Thanks Wolf,

        So the economic downturn in Japan in early ’90s and their selling of commercial real estate in California & NY (as an example) had no direct effect in those residential RE markets?
        Must have been coincidental.

        an old article from Los Angeles Times in the middle of it 1990-07-26

        http://articles.latimes.com/1990-07-26/news/mn-943_1_california-real-estate

  26. kitten lopez
    Jun 7, 2018 at 8:34 pm

    Wolf… that was just fxcking excellent, that article and how you tackled it. It’s interesting how none of us wants to TALK… and that scares me and is brilliant at making us uncomfortable.

    More and more i understand where “trump people” are coming from i have got to say. i GET it. i get it. and i blurt out things no one would ever dare say or think without going to a shrink or finding jesus, but even i am shocked at how …CONVENIENT our discomforts are. on all sides.

    nothing is black or white. the infinite shades of GREY blind me more than any rainbow ever could’ve.

    Petunia, where are you?

    and Wolf… on this article… WOW.

    let’s the rest of us count down til the ny times or the wsj takes this on now that there’s an …”acceptable” angle.

    wow. i’m ALMOST starting to believe in the power and magic of writing again. almost. we’ll see how this is run with and how it’ll be sacked into a whimpering mass of simplistic binary hate.

    WELL DONE, Hombre. seeeeerious up-nod on this one, My Brother. Well done.

    (huuuge smile of all teeth)

    • RD Blakeslee
      Jun 8, 2018 at 1:30 pm

      “wow. i’m ALMOST starting to believe in the power and magic of writing again.” – Kitten

      Kitten, I’ve never lost that belief, in you or me (or Wolf, to a lesser extent).

      *chuckle*

  27. R Davis
    Jun 7, 2018 at 8:51 pm

    How Chinese Investors Inflated Housing Markets:

    Is that completely correct -?

    maybe it should be …

    How Global Property Investors Inflated Housing Markets From China (pretending to be Chinese)
    – to take advantage of lurks & perks ???
    who knows.

    • R Davis
      Jun 7, 2018 at 8:54 pm

      In my wildest dreams;
      I cannot believe that Australian greed would allow Chinese Investors to take all the cake.
      That cunning Australian Investors let the Chinese share in some cake – yes.

      • R Davis
        Jun 7, 2018 at 8:59 pm

        It allows the Australian government to cry at us ..

        “Look what the Chinese Investors are doing to us.”
        “It’s not us.”
        “We are not doing this.”
        “We are powerless to stop them.”
        ” We are victims here.’

        And they believe that we believe them.
        Amen.

  28. Anon1970
    Jun 7, 2018 at 9:02 pm

    “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.” I hope the BC government takes this new tax program seriously and does not staff it with incompetent political hacks. I recommended something similar in several of my posts on the subject in the Toronto Globe and Mail in recent years.

    Governments do a great job going after worker bees who fail to file income tax returns or “forget” to include interest or dividend income from their 1099’s (or the equivalent in Canada). But it is a lot harder to get Chinese residents living in the US or Canada to declare their world wide income. My guess is that governments have the ability to impute income based on lifestyle and to assess income taxes accordingly but I suspect it is a labor intensive chore requiring highly paid accountants.

    Ontario, with all of its financial problems ought to follow BC’s lead in creating a split property tax roll.

  29. kitten lopez
    Jun 7, 2018 at 9:03 pm

    I have to add something while i just got the extra time because i think this is an extraordinary conversation and i want to “bring anyone with me” if i wasn’t or am not clear:

    this conversation has been hijacked by a rightful fear of xenophobia and as a colored girl who’s catching a lot of hell out here right now, i am also aware of how i also can feel and see the discomfort around talking about actual foreigners buying up land and renting it back to us AT THEIR PLEASURE.

    all this is interesting because i actually think this is where we do overlap and need to talk and COME TOGETHER and not be at each others’ throats. us here on the bottom and the edges of this flushing toilet have so much more in common and i fear that revolution will be bloody, pointless and not very “revolutionary” as long as we are comfortable pitting each other against each other.

    maybe you think i see too much, but nah. i LIVE for catching moments of life and …FRESH LOGICAL IDEAS that don’t mean someone’s gotta DIE or bleed to make someone happy.

    Wolf’s graphs and charts… i used to roll my eyes at the logic of it all, but it’s the only thing that keeps all of us coming back here with our different and odd backgrounds.

    i mean we have so many different types getting along and civil here and i mean… do we have to WASTE this and figure it’s accidental incidental and not THE FXCKING WAY THINGS SHOULD BE IN A MICRO AND MACRO WAY???

    so keep going into the ugliness but find ways of turning your fears into fear and thoughtful compassionate action and not into HATE, right? i don’t know. i’m wingin’ it here.

    i’ll probably be back and overstay my welcome with the percentage thing about posting, but maybe i can help spark open the conversation about H1B visas and cheap labor upon which this country was FOUNDED upon. it’s in the very DNA and what we see going forward now that everything is commodified.

    i may seem to be overstating it but i’m NOT.

    wow… i’m inspired and i’ve gotta go. James made dinner. i LOOOVE him. he’s a saint. i’m evil and horrible next to him. you should see this place…

    anyhow when you see how this country works and how we’re all consumers in a CORPORATE state and we see how we think and how it’s now dehumanized us and each other…we’ve no choice but to blow up or fxcking hope that Alex in Detroit and OTHERS and ALL have amazing health care and not fear getting culled from the herd so casually.

    gotta go. he’s yelling at me. i’m being rude. see the evil! own your own too! it doesn’t have to be eternal. the evil or good thing.

    • d
      Jun 8, 2018 at 12:45 am

      Ther is soem Xenophobia from some.

      this does not Negate the basic fact that in Canada Australia and New Zealnd in particular CCP chinese residential property speculators have grossly distorted the markets and made local people, homeless and in many cases unable to ever afford a home. New Zealand hand one of teh highest home ownership rates in the OECDS before the CCP chinese speculators came post 2000. Now its nearly the lowest.
      We habve had Taiwanese immigrants since the 70’s no problem.

      We have and are still getting Hiong Kongers no problem, we have a mixed blood almost native chinese community that goes back over 150 Years no problem, We took a lot of Vietnamese and Cambodians post Vietnam and the Cambodian civil war. No problem.

      All of those groups are now taking a huge amount of flack a due to the issues caused by the CCP MAINLAND residential property speculators, and they hate those speculators, even more than we do. For that reason.

      Hong Kongers named the CCP Mainland People “Locust”, for a reason.

    • Bobber
      Jun 8, 2018 at 9:53 am

      It’s not fear of any particular nationality. It’s a fear that the 1% is taking all gains from hard work and leaving everybody else poor, and the central banks are condoning it. Lately, the shifts are not so gradual. When you are a millennial and you see housing go up 10% per year, you quickly realize you may never be able to buy a house because of central bank policies. Yet, you are working harder at the same time.

      Anybody who is buying up all the real estate at today’s prices is likely in the top 1% and part of this problem, whether they come from China, UK, U.S., or anywhere else.

  30. Lenz
    Jun 7, 2018 at 11:24 pm

    “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.”

    The foreign buyers tax is just to benefit gov revenue, basically stripping that profit from the seller as for the 2% levy, if they transfer the property ownership to their kids as they go to school and work part-time, or they gain an entry level job post graduation, would that skirt that rule?

    I guess the loonies don’t really want to discourage foreign money.

    • d
      Jun 8, 2018 at 1:02 am

      “I guess the loonies don’t really want to discourage foreign money.”

      You got it.

      If they really want to discourage forigen money they should put ownership/purchase type restrictions, by doing as they have, they show that dont give a Continental about the Canadian peopel. All they want to do is continue milking the housing bubble, whilst claiming to have done something about the problem.

      Canada has Americas problem it has turned its populations housing, into a national economic ATM.

      Just like America. Canada dosent know where the money to fuel its economy is going to come from, if the housing ATM. Runs out of credit produced cash.

    • Nicko2
      Jun 8, 2018 at 5:03 am

      Of course not, Canada needs over 300k new immigrants (preferably wealthy ones) to maintain a balanced and growing economy. ——. And 300k is probably not enough, given aging demographic trends.

      • d
        Jun 8, 2018 at 10:57 am

        You miss the point the tax should be aimed at offshore absentee speculators not new IMMIGRANT RESIDENTS.

        You can not attract the new permanent resident, good quality immigrants you want if you excessively tax them.

    • Anon1970
      Jun 8, 2018 at 9:24 am

      Is the special 0.5% levy (increasing to 2% in 2019) a one time fee or an annual tax (which I assumed it was)? In Vancouver, the residential property tax rate is only about 1/4% of taxable value, the lowest in Canada for a major city. So the cost of carrying an expensive home is much lower than elsewhere.

      • Jun 11, 2018 at 9:34 am

        An annual fee levied on everyone who owns property. They should have just targeted the Chinese. Now everyone has to pay for what the Chinese did to Vancouver and the greater Vancouver area.

  31. Felix_47
    Jun 8, 2018 at 12:33 am

    Chinese have bought a lot of real estate in my area. The rent it out quite reasonably since they are not interested in profit as much as preservation of capital. Our schools have quite a few Chinese kids who live in these houses with nannies from China. They are mastering English. They are outstanding students by and large. I think they add a lot more to our society than the bulk of our immigrants from the third world to include the mid east and central America. They pay their own way. We should welcome them.

    • Jun 8, 2018 at 8:16 am

      Yes, but the article wasn’t about Chinese people in America, it was about inflated housing markets and what causes that home-prince inflation and what governments are trying do about it.

    • d
      Jun 8, 2018 at 11:22 am

      Resident chinese that rent their “Investment” properties are not the Issue.

    • Jun 11, 2018 at 9:31 am

      Since I live in an 87 percent Chinese city so I can also tell you virtually none of the Chinese put money into the stock market outside of China. All of their money goes into real estate.

  32. Bernadette
    Jun 8, 2018 at 12:58 am

    As San Francisco Bay Area resident (over 40 years) appreciating the sacrificed contributions of the early ‘imported’ Chinese ‘slaves’ to the US — witnessing this wave of EB-5 of is bittersweet.
    https://en.wikipedia.org/wiki/History_of_Chinese_Americans

  33. MD
    Jun 8, 2018 at 8:20 am

    Investors? No.

    Speculators? Yes.

    I suppose the latter is a subset of the former but the distinction is an important one as ‘investment’ implies some measure of view for the longer term, whereas speculation is merely the search for the bigger fool to flip to for instant profit. Also for the purposes of money laundering and tax evasion, natch.

    Interesting times ahead because the problem with speculative bubbles is that you need to panic first; those left trying to sell into a deflating market will find there’s absolutely no-one buying. As it always has been, and always will be, with all speculative bubbles.

  34. Lemming
    Jun 8, 2018 at 10:25 am

    >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.”<

    Like a smoker who tries hard not to get lung cancer by cutting back to 29 sticks a day instead of 30.
    These governments are addicted to the moolah – most politicians have personal skin in the game too.
    This monster will be ridden hard over the cliff.

  35. Gershon
    Jun 9, 2018 at 10:25 am

    When the crony capitalists running China preside over the next collapse caused by rampant corruption and insane debt and credit creation levels, I suspect the long-dormant Maoists are going to come roaring back with a vengeance to settle accounts with these “capitalist roaders” and “Red princelings” who led the country to disaster.

    https://www.bloomberg.com/view/articles/2018-06-06/fear-the-china-debt-mountain-nobody-s-talking-about

  36. Jun 9, 2018 at 4:40 pm

    Newly elected fatso Ford states he will eliminate the foreign Chinese buyers’ tax in the golden horseshoe area of Ontario Canada. This will effectively double the price of a house in Toronto over the next 3 to 5 years. It will drive the cost of living sky high and millions will leave Ontario for other provinces.

    • d
      Jun 9, 2018 at 10:25 pm

      One thing I have been predicting for some time is that some cities will become ghost towns, or at least go into massive downward cycles as they will simply become to expensive for any but the financial top tier to afford to live in.

      That Financial tier will not be interested in paying the levels of tax required to keep the city alive.

  37. Lenz
    Jun 10, 2018 at 4:57 pm

    But can anyone REALLY stem this inflows?

    When you got instruments like: “Indexed Fractional Ownership”

    “We are preparing to launch an innovative technology enabled platform that will connect owners of single family residences to investors to unlock equity in homes through a transaction called an IFO (Indexed Fractional Ownership™). This arrangement will allow property owners to receive cash with no monthly payments for the untapped equity in single family residences (up to 30%). In return, the investor would share the appreciation or depreciation of the home when the property is sold. ”
    – weissanalytics

    https://www.marketwatch.com/story/america-is-house-rich-but-cash-poor-these-businesses-see-opportunity-2018-06-08

  38. Andrew
    Jun 10, 2018 at 9:49 pm

    I’ve read this site for awhile, but never commented. Here is an abstract paper from the US Army’s Foreign Military Studies Office on Chinese money laundering. It covers more than real estate, but is an interesting read. Only 13 pages which is a novel for most people these days.

    https://community.apan.org/wg/tradoc-g2/fmso/m/fmso-monographs/197164

  39. Jun 12, 2018 at 8:00 am

    I’ve just arrived back home in Australia after a 6 week motoring holiday in North America. Despite having held a drivers license for 50 years I had a driving lesson upon arrival in Vancouver with an Asian instructor…and he told me to my face that the Chinese view a move to a western country as a sound strategic decision and it’s usually done to get ” hot ” money out of China. The way he told the story was like it’s all a big joke.

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