
Chinese Buyers Replace Canadians as Top Foreign Buyers of U.S. Homes - prostoalex
http://www.wsj.com/articles/chinese-buyers-replace-canadians-as-top-foreign-buyers-of-u-s-homes-1434580337?mod=e2fb
======
ddeck
It's interesting to note that China's capital controls make it illegal for any
Chinese national to purchase greater than $50,000 in foreign currency per year
without explicit government approval, and thus many of these purchases require
illegal asset transfers and money laundering (although some domestic banks
offer legally murky services [1])

Popular methods methods include Macau casinos and high-end art.[2][3]

By some estimates, between $1 trillion and $4 trillion in untraced assets have
left China since 2000.[4]

Chinese buyers are also the largest group of foreign investors in residential
property in the UK and Australia.[5]

[1] [http://www.scmp.com/business/banking-
finance/article/1550351...](http://www.scmp.com/business/banking-
finance/article/1550351/bank-china-laundering-money-would-be-emigrants-cctv-
reports)

[2] [http://money.cnn.com/2014/02/20/news/economy/china-art-
laund...](http://money.cnn.com/2014/02/20/news/economy/china-art-
laundering/index.html)

[3] [http://qz.com/19712/how-chinas-elite-illicitly-move-their-
mo...](http://qz.com/19712/how-chinas-elite-illicitly-move-their-money-
offshore/)

[4] [http://www.icij.org/offshore/leaked-records-reveal-
offshore-...](http://www.icij.org/offshore/leaked-records-reveal-offshore-
holdings-chinas-elite)

[5]
[http://www.ft.com/cms/s/0/fcc2d346-bcd3-11e4-9902-00144feab7...](http://www.ft.com/cms/s/0/fcc2d346-bcd3-11e4-9902-00144feab7de.html)

------
nugget
I work in real estate and am privy to the behind-the-scenes details of some of
these all cash, foreign buyer deals, in markets like SF, NYC and Miami.
There's nothing new about it: money laundering has been around for a long
time. And that's all it is, money laundering. Chinese families are moving
assets out of China and into real estate in Western countries in order to
evade taxes, evade lawsuits (often for obvious theft) and/or protect
themselves from political crackdowns. In Miami, it's South American families
doing the same thing to flee unstable or unfavorable regimes in that part of
the world.

If I were a law-abiding millennial trying to buy a house in one of these
markets I would be extremely frustrated. The playing field was a little uneven
before (young versus old) but the influx of foreign money has taken it to the
next level. The domestic political challenge is that current homeowners have
no incentive to stop it because they receive a net benefit from rising home
prices. And of course the real estate machine (agents, appraisers,
contractors, etc) are all incentivized to ensure it continues.

Most economists seem to agree that the best long-term solution is a high land
value tax (replacing various other taxes). Let the foreign owners pay 3% of
home value each year to local governments - it will encourage them to invest
elsewhere, or at least discourage letting properties sit idle. But in the
short term house prices in areas like California would fall.

~~~
mlrtime
Why not just add a tax for homes that aren't your primary residence?
Foreigners will not do this since they would need to pay income tax as well?

~~~
prostoalex
1) Easy to game the system.

2) Why? Somebody is already paying 100% of the property tax without putting
stress on the roads, the schools, police and fire services, local parks,
libraries, and other services that local governments are hired to provide. The
neighbors get more bang for their buck, leave alone financial stability that
property appreciation brings.

~~~
mahyarm
Those people also put nothing into local economy through their spending. You
get the vancouver effect. No incomes or jobs, but high housing prices.

A high tax for unoccupied residences would be a better one. It would increase
housing supply so the double whammie of buying a house and leaving it
unoccupied wouldn't effect the housing supply nearly as much.

------
tfigueroa
I've seen this, anecdotally, in trying to buy a house in the bay area. I've
lost two serious bids to "foreign investors" who pay 10% above asking price,
100% cash, with no contingencies. I've heard stories of these properties going
vacant, as well. It's frustrating.

An acquaintance who works as a wealth management consultant made an
interesting point: there are hot markets in other areas of the country, but
SFO is right here. The bay's accessibility could be exacerbating our problems,
ironically.

He is advising his clients to pull out of real estate in California right now
- not so much because of a potential bubble, but because the market is so
bizarre.

~~~
karmazeroed
This is commonplace in London too. Streets of empty properties. London already
has a housing crisis which can't be fixed by ordinary means because the
population growth far exceeds the property construction, despite it having
been ramped up. What would help of course is Land Value Tax, but that is less
desirable the higher up the social pyramid you are.

~~~
dharma1
Another way would be forcing empty properties to be let, and fine owners who
don't

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mcCuppaT
Can someone post a link thats not behind a paywall please

~~~
equil
sure thing. [https://archive.is/g4PKD](https://archive.is/g4PKD)

~~~
dipendrapkrl
Thanks.

------
hiou
I didn't see a link to the actual report which I believe is this[0]

[0] [http://www.realtor.org/reports/profile-of-international-
home...](http://www.realtor.org/reports/profile-of-international-home-buying-
activity)

------
kelukelugames
It took me three tries to buy a house this summer. I lost the first two to
overseas buyers with all cash.

One of the properties was vacant and owned by a Taiwanese citizen. I guess
they really don't care about ROI.

------
fown9
China has an authoritarian government that produces pollution that threatens
the entire world, uses the great firewall to attack tech companies in other
countries, prints up to 282% of GDP [1] in order to buy their way into other
countries real estate and companies, ignores human rights and free speech,
creates artificial military island near neighboring countries, and supports
dictators in Russia and Africa. If China gets anymore powerful, the world is
doomed. We need to curb commerce with China.

[http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/11/c...](http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/11/chinas-
increase-in-debt-is-massive-and-unsustainable/)

~~~
hawkice
This comment seemed familiar, so I looked at your comment history. You've left
this comment over and over on different stories. In general, it is preferred
you leave comments specific to the stories your are commenting on.

------
o0-0o
This story is playing out all over the world. A while ago, the Chinese figured
out that by pegging their money to the USD they could simply print more money,
pay people more, and their citizens would flourish. It's a great strategy if
you're an up and coming solution. Unfortunately, the ending has played out
before. Crash and burn. With the burn part being a bloody conflict or war.

~~~
zhte415
> the Chinese figured out that by pegging their money to the USD they could
> simply print more money, pay people more, and their citizens would flourish

This isn't correct. By maintaining a low exchange rate, people were paid less
(the government acquired debt in lieu of a higher exchange rate) resulting in
China (the people in China) having a lower international purchasing power.

Wealth would have no doubt similarly been accumulated by those that owned the
factors of production, but a lower exchange rate deflated China's, and it's
citizens', purchasing power, from foreign holidays to domestic essentials,
such as oil, and even the price of corn, beans and rice (produced
domestically, but prices set largely by international demand).

Why? The government was petrified by unemployment. Closing down government
enterprises meant people had to be employed somewhere. Better to have someone
working hard all day providing for their family and seeing economic progress
(obstensively the East of the country) than back on the farm with too much
spare time.

Something different is happening now - from my perspective the East is
'developed enough' and bitterly complaining about pollution. The inner
regions, comparatively much poorer, complain about lack of wealth more than
pollution - so move some production there (despite significantly increased
logistics costs), mainly for the now much larger domestic market, and let
development in the East slow (or, slightly, contract - cool the bubble that
does exist).

For housing costs - surely things like the EB-5, which for a modest investment
can grant a green card for you and your family are a major driving factor.

~~~
seanmcdirmid
Better to see someone working hard to provide for their family than with
enough time to protest inequality or otherwise take interest in their
political fate.

The main issue is that wealth is very unequal in China. That low level
official making 5k rmb/month is pulling in 20, 30, 40k rmb in grey money. They
have to stash it somewhere, and overseas is safer when the government can make
you an example at any moment.

Also, there are so few investment option in the mainland that if you do have
money even from purely legit sources, buying a house overseas is probably much
more sane than investing in extremely bubbly local real estate or stocks.

~~~
olalonde
Plus, many Chinese cities have caps on the number of apartments one family can
buy.

~~~
seanmcdirmid
Those caps went away quickly as soon as the market showed a little bit of
weakness. I think they only remain in Shanghai and Beijing, and even then....

A lot of apartments are owned and vacant even in first tier cities; rents are
incredibly weak compared to sale prices. I pay 7500 rmb/month ($1100?) for
something that would go on the market for $700k! Top that off, volume in 2nd
hand real estate is pretty low even here in Beijing (you hear "I would sell
one of my apartments, but no one would buy it for the price I want" \- doh!).

