
Chinese Investors Fuel California Housing Bubble - donsupreme
http://thediplomat.com/2014/08/chinese-investors-fuel-california-housing-bubble/
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nyc640
When you talk about Chinese "investors", I think of high-wealth individuals
who see real estate as a long term investment and/or occasional vacation home
(e.g. Manhattan or London). Then the article goes on to present the strong
Chinese cultural presence and good local schools as reasons why these
individuals are buying real estate in the area. Those are things that
immigrants care about, not investors. And if these are law-abiding Chinese
immigrants buying homes in the Bay Area, so what? They have every right to it.
Why are we promoting some new wave of fear about mega-rich Chinese people
buying up all our houses when there's no evidence it's happening. Stop
deflecting blame from the groups and organizations that could actually fix the
housing situation.

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steven2012
What about all the hedge funds that have bought 10's of thousands of houses? I
heard not only are they raising the prices on the way up, but they aren't
maintaining the houses and screwing up the rental markets.

~~~
michaelochurch
There are a lot of speculators (domestic and foreign) buying US houses because
of their appeal to corrupt foreign officials who need to reinvent themselves
as legit corporate execs under new identities (and it takes 2-3 years to get
the fake jobs and references in place; during that time, a person is living
out of his house, which is what makes the Valley so appealing).

I'm completely OK with the US as a place where people from all over the world
can reinvent themselves and tell a second chapter of their stories. That's
what it's been for hundreds of years, and what made it great. Almost every one
of us has at least once ancestor who came here to escape trouble in the old
country. I'm _not_ OK with it when it means that Americans are priced out of
their own housing, especially now because these corrupt foreign officials
aren't even coming here, but just buying real estate _just in case_ things go
bad in their home countries. Not only does it make housing unaffordable for
us, but there's the moral hazard angle as well: by allowing nonresident
foreigners to buy so much of our best real estate, with a great proportion of
those being corrupt officials or people seeking resale to them, we're
effectively subsidizing corruption in the rest of the world.

(Is it correct that every foreign investor buying real estate is a corrupt
third-world ultra-HNWI? No, that's only about 1 in 4. The other 3 are
speculators banking on the resale value to corrupt officials abroad.)

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jacques_chester
I've seen you say this a few times now. Do you have a source?

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michaelochurch
There are millions of sources on the use of high-end real estate for foreign
money-laundering operations. Like this one:
[http://nymag.com/news/features/foreigners-hiding-money-
new-y...](http://nymag.com/news/features/foreigners-hiding-money-new-york-
real-estate-2014-6/)

The question is: why are we allowing foreign speculators in our real estate
market, prices where they are, in the first place? Once an average house costs
more than 8 times the average income, you _have to_ protect the homeland.
Unless you've stopped caring about your own people.

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onethree
8 times? the median house price in Sydney just hit 800k. The median wage is
57k. I wish house prices were only 8 times the median wage...

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enraged_camel
He said _average_ income, not median income. There's a huge difference between
the two when you talk about the Bay Area, since the income gap is so huge
there.

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theworst
There appears to be only slight anecdotal evidence that "the Chinese" are a
significant, over-represented, or manipulative force in Bay Area real estate.
Or did I miss it?

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michaelochurch
I really dislike the attribution of this stench to one nationality. It's a mix
of dirtbags, foreign and domestic, from all over the world. The only thing the
pattern has in common is that dirty money is flowing into real estate in the
world's top cities: London, New York, San Francisco, Paris, Singapore, Hong
Kong, and many more.

In New York and London, it's "the Russians" who are blamed, as if they were
the only one; in San Francisco, it's "the Chinese"; in parts of Southern
Europe, it's "the Arabs". In reality, it's nonresident dirtbags from all over
the world, including the U.S. Attributing it to one nationality is racist,
unfair, and misleading. Really, the problem is dirtbag _global elite_
speculators (and, likewise, the average Russian or Chinese isn't a dirtbag,
and the average American ultra-HNWI is one) but that's too many words so
people just shorten it to "foreign speculators". (By the way, speaking as an
American, I am totally fine with Londoners and Parisians calling American
nonresidents "dirtbag foreign speculators". It's not racist to hate the global
elite of all stripes; it's patriotic no matter where you are.)

Is it "the Chinese"? No. It's corrupt ultra-HNWIs from all over the world.
People just blame "the Chinese" because a fifth of the world's population is
Chinese, but it's really unfair because _most_ Chinese people (like 99.9
percent) aren't the dirtbags buying up Palo Alto, and many are the victims of
the dirtbags buying up Palo Alto.

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seanmcdirmid
The problem is where the money comes from: in Russia and china, alot of it is
corruption based and buying property abroad is a great way to launder it as
well as prepare an exit strategy. This isn't all of it: we just lack decent
domestic investment options in china and have no choice but to look abroad.
But the sort of balance that will lead to is bound to be bad for the global
economy.

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univalent
I don't think its just Chinese investors. Its all investors since there are
fewer better investments for them now. Prices on my street are up 250k in 18
months. And this is in San Jose. I'm not really celebrating. They could just
as easily come crashing back down.

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syllogism
People worry about this in Australia too, which always strikes me as damn
strange. If you think you're in a bubble, then the more stock you can sell at
the high price, the better!

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zizee
It is a problem if it drives the prices out of reach for the local people.

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syllogism
If the prices reflect stable fundamentals (i.e. it's not a bubble), then yeah,
that'll be a problem. But if you're in a bubble, then it won't.

So, the articles should be saying something like, "there's fears of a property
bubble, but fortunately, we're selling a lot to foreign investors, so we're
off-loading our risk". Instead they're saying, "we're in a bubble, and now
it's being fuelled by foreign investment!!".

Really, foreign property ownership is pretty sweet. You take their money, but
are under no obligation to protect the price of their assets in your future
policy. So, if prices stay strong, you can redevelop.

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gengstrand
Last year, I purchased a house in the Bay Area which has a very competitive
real estate market that favours the seller. The mortgage broker, whom I worked
with, claimed that of the thirty clients that he represented, 2 were able to
win a bid and usually had to bid on many houses before winning. They weren't
losing to higher bids, he said. They were losing to all cash offers from
Chinese investors.

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panabee
how many over-bidders does it take to start distorting home prices? obviously
this varies by region, but curious if there are any general ratios, i.e., 1
over-bidder per 20 home listings, that help gauge the effect on home prices
when new money floods in from, say, a company going public (e.g., facebook,
google) or from foreign speculators.

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gamblor956
Those Chinese investors will be in for a nasty surprise when they try to
sell...the FIRPTA laws require buyers to withhold 30% of the purchase price of
U.S. real property sold by foreigners that are not U.S. taxpayers. (Yes,
that's 30% of the gross, not net!)

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jlmorton
I don't think that's accurate.

FIRPTA requires a buyer to withhold 10% of the purchase price, not 30%. But
that's just to ensure the tax is paid. The tax is only on the gain in the
property, not the gross sale price. Sales registered with the IRS ahead of
time (so that actual tax amounts can be estimated) do not require withholding.

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autism_hurts
I read that -- and I may be incorrect -- that real estate investment is a
fast-track to permanent residence. A chinese (or really, anyone) "business
owner" can buy up multi-tenant property and get citizenship or permanent
residence here in the US.

California is just particularly attractive to wealthy chinese.

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mikeyouse
The EB-5 visa is quickly becoming a popular route for wealthy Chinese citizens
to get permanent residence status in the US:

[http://money.cnn.com/2014/03/25/news/economy/china-us-
immigr...](http://money.cnn.com/2014/03/25/news/economy/china-us-immigrant-
visa/)

