
Chinese Cash Floods U.S. Real Estate Market - walterbell
http://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estate-market.html
======
hoodoof
There's potential to destroy the fabric of a society when the residential real
estate is sold off to foreign buyers.

The dream of most ordinary people is to own their own home. When prices are
pushed out of the range of ordinary people then the citizens have just sold
their home overseas and can only rent it back. That can't lead anywhere good.

It's the end game of greed in which we have sold everything including our
homes.

Countries no longer need to invade other countries - they just buy everything.
It's a strange thing that there is an obsession with the risk of terrorism but
selling real estate to other countries is not seen as a threat to national
security.

If the government cared about its citizens then selling residential real
estate to non-citizens/permanent residents would be outlawed. But instead what
we get is a clear illustration that in our society the only thing that matters
is money - our country is no governed for the people, its governed for the
dollar.

The disaster can't be undone because governments will see the flood of cash
and tax it, becoming addicted to the revenue and if anything, try to make more
of it happen.

This will end badly one day, when ordinary people realise that the rich sold
their dreams and ambitions to other countries.

~~~
nostrademons
The same fears were expressed when the Japaneses were buying up prime real
estate in U.S. cities (Rockefeller Center, etc.) in the late 80s.

The result of that was that the Japanese asset bubble collapsed, all the
(generally heavily-leveraged) foreign buyers found they were broke, and
Americans bought back the properties at fire-sale prices.

I wouldn't be surprised if the same thing happens again when the Chinese asset
bubbles crash. Locals have a huge information advantage over absentee
landlords; this is far more likely to end poorly for Chinese buyers than for
American residents.

~~~
e15ctr0n
It can't happen again because the Chinese have paid the full price up front in
cash. Also, many of them want to become American residents.

~~~
meric
They borrow cash from China using assets there for collateral to pay for US
housing with cash. If they need the cash back for margin calls they will still
need to sell houses.

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micky_25
As someone living in a city where property prices and rent are sky high partly
due to Chinese buyers, partly due to government incentives, lack of planning
and a bunch of other reasons, I’ve given up on ever owning my own home in the
city I grew up in. Economically it’s all great, at least in the short term and
for those who already own property, but for someone like me staying here is
becoming less and less appealing, and this is the majority consensus of my
social circle which consists mostly of young, educated professionals. We are
all keeping our eyes open for greener pastures.

------
w1ntermute
Chinese Pull Back From U.S. Property Investments:
[http://www.wsj.com/articles/chinese-pull-back-from-u-s-
prope...](http://www.wsj.com/articles/chinese-pull-back-from-u-s-property-
investments-1448649226)

~~~
gleenn
One of the quoted Chinese said he was dissatisfied with Chinese air quality as
a reason to buy in CA, wouldn't it be great if they fixed that themselves over
there instead of just leaving...

~~~
evanpw
Who actually lives up to this standard? If you lived in an area with bad
schools, would you send your kids there instead of moving? If you were born in
a third-world country, would you stay there instead of emigrating to make a
living? Are all of the people who move to Silicon Valley from other parts of
the US for the job opportunities wrong?

------
jonkho
Two decades of exporting the US dollar for low-cost Chinese goods. Now the
Chinese has fistfuls of US 'paper coupons' and have to redeem them somewhere
(US real estate). US home prices go up for everyone. It's tit for tat. No free
lunch.

~~~
bitdiddle
Agreed, this is much like the situation in the 80s, and generally a good
thing.

The only question I would have is what happened to export controls of capital?
Is all this money legit? Cash is king I guess.

------
rdl
If Chinese people just want to invest in the US real estate market, the
win/win would be some kind of REIT which did rentals. SF tenant laws suck for
landlords, but if you're in modern construction, rent control at least goes
away, and if it's a REIT/pooled asset, you care less about individual ones.

What hurts SF from a jobs perspective is the lack of 1-2BR at the
$1500-3000/mo price point, not the affordability of housing. If the "SF deal"
were that you could rent for 5-10y at $1500-2000/mo and have a reasonable
place, make 2-3x the prevailing wage in other markets, and then buy a house in
SFBA (if your equity hits) or elsewhere (if it doesn't), then that's a pretty
reasonable deal.

What I hate is the cost for a new person to move to SF and find reasonable
housing, either solo or with a family, with time pressure, and without local
connections for roommates, sublet of a rent controlled place (which
happens...), etc.

If I'm paying fair rent, I don't care if the check goes to a management
company who pays a Chinese investor, a REIT, an earlier tech person, or
someone who has owned property in SFBA since 1980s.

Encouraging sale of property at market price from people who bought it in pre-
boom period, to a REIT or Chinese investor directly, is also a huge win for CA
on taxes (and thus for residents), due to prop 13. It also converts the asset
of a nearing-retirement-age person into cash, which might be more productively
deployed elsewhere (or, a late-90s buyer, who might instead choose to invest
in startups).

The problem is owned property being left vacant.

------
patio11
This article was written about Japanese buyers, verbatim, hundreds of times in
the 1980s.

~~~
e15ctr0n
For the sake of a fair comparison, here is a New York Times article from June
1993: [http://www.nytimes.com/1993/06/02/business/headache-for-
japa...](http://www.nytimes.com/1993/06/02/business/headache-for-japanese-
investors.html?pagewanted=all)

> During the real estate boom of the 1980's, Japanese investors purchased or
> financed tens of billions of dollars of American property

> the Japanese are now forced to consider the same unpleasant choices that
> their American counterparts have already been confronting: foreclosing on
> mortgages, writing down loans and thus acknowledging grave losses, or
> selling the whole mess to someone else, almost certainly at a loss.

> The Mitsubishi Estate Company ... Rockefeller Center ... mortgage for $1.3
> billion

> The Shuwa Corporation of Tokyo ... ARCO Plaza complex in Los Angeles, the
> U.S. News & World Report Building in Washington ... 18-story office building
> at 551 Madison Avenue ... $10 billion in debt

> Mitsubishi Trading Company ... 1,400-room Westin Bonaventure hotel ... $75
> million mortgage.

In summary, Japanese companies bought commercial property via loans.

Today, Chinese individuals are buying residential property, paying full price
in cash up front with the aim of settling down in America and sending their
children to the local schools.

Doesn't appear to be the same situation at all.

------
ausjke
Is this the recurrence of what happened when Japanese was buying USA? only
this time it's at a much larger scale.

I saw rich people overseas buying real estates with cash, giving birth to kids
for citizenship with tourism visa, sending their older kids to private schools
here over the last few years, it's a trend getting stronger. While USA got
some property tax in the pockets, the damage this does is more than any gains.

They come here simply because they have cash. The business of America is
business, I guess that's the only thing matters.

------
jMyles
I don't personally own any "real" estate, but this is scary to me.

~~~
peteretep
If you did own some, this would make you happy, as your investment would go up
in value

~~~
hoodoof
Yep, it's easy to work out who is "for" selling real estate overseas and who
is "against".

If you own, you make big cash - you're for it - sell it all!

If you don't own - you're against it - you'll never own a house.

Great way to fuck the basic happiness of a society. And for what? Money.

~~~
buzzdenver
Not necessarily. Remember how cheap renting was right after the housing bubble
burst ? All those speculative home/condo buyers wanted to rent their places
out to avoid having to declare bankruptcy.

------
Sarkie
Welcome to London.

------
thrwy_01
Another reason why Chinese love coming here is to take advantage of government
benefits, particularly with regard to medical care. There is effectively no
social safety net over there, and Chinese who are well off enough to set
themselves up over here find America to be an easy mark. I personally know of
many recent immigrants talking about loopholes to hide their overseas assets
to qualify for Medicare and section 8 vouchers, and how to avoid detection of
their ties to the communist party.

A big difference between these immigrants and earlier waves is the ones coming
now have already made it, often by being shrewd about playing the system. This
also means they have no compulsion or desire to assimilate, unlike past
immigrants who had to work within the system here to ultimately find success.
I have been personally shocked by the level of contempt shown of American
values - although this is something you will only see expressed to members of
the same circle (I look like them and can talk like them, which gains me
admittance).

All of my own grandparents and some of my own parents immigrated from china,
and I have many other friends, acquaintances and family members who I would
qualify as recent arrivals (my more negative statements apply to some of them)
so I am not inherently anti Chinese immigrant. But I am not optimistic about
the new arrivals being a positive thing in the long term.

~~~
jzwinck
> Another reason why Chinese love coming here is to take advantage of
> government benefits, particularly with regard to medical care.

As an American living in Asia this is horrifying. How did you discover this
group of Chinese people who were so successful that they have to hide their
assets, yet so stupid that they seek public health care in one of the only
first world countries which does not adequately provide it.

~~~
thrwy_01
I have some family members who are going through the immigration process, and
they and I have talked to many others who have gone through the same;
acquaintances, coworkers, friends. I was saddened the first time I heard these
stories. After hearing them a dozen times I was horrified. It really shattered
my illusions that people who should ostensibly have a similar perspective to
me could be so radically different. One part of me hates to share these
stories as there are many people in this country who would look at me and
associate me with them by dint of the obvious ethnic similarity. But I think
it does my fellow citizens a great disservice not to be informed.

