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.
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.
We're seeing similar activity in an area that we're still stuck with a house and renting out (don't buy houses in mid-07 kids, that market hadn't crashed yet).
We've been approached by a few with very low offers (via an agent). I've been tracking sales in the neighborhood and every month or so another 4-5 houses that were never on the market are sold. They are then rentals shortly thereafter. I've been pretty surprised at what things are still renting at, I thought it would plummet prices (and it still may) but they seem stable at about .6-.70 cents/sqft. It's not the Bay Area or even the nicest place in town but I find it peculiar that large investors would be interested enough to buy up 1% of the houses in an area every month or so, though the prices seem pretty good and that'd be a great rate of return.
Reminds me of this [1]. Unsettling, to be honest. Finance helped to bring about the housing bubble and the 2008 crisis, and now it's purchasing depressed housing stock.
Yep and it seems to make sense for them at the prices I'm seeing but I can't help but feel there's something else there. Also, the word "Blackstone" is an immediate red flag to me after going through a corporate merger with them.
That's so strange, because to hear free-marketers and political armchair warriors speak of it, they placed the blame squarely on dumb homebuyers who couldn't afford their house, President Clinton, Barney Frank, and Fannie&Freddie.
All the talk of the Financial Sector, Credit Default Swaps insured by AIG London advised by Blackstone, and 30:1 leveraging of Mortgage Backed Securities deepening the crisis is met with yawns and allegations of being a socialist hippie who hates business.
Nope, it was the poor people who were too stupid and lazy to afford mortgages who were at fault. They were blamed for the 2008 crisis, and they'll be blamed for this bubble too. Oh, and the Communist Chinese too for good, Xenophobic measure.
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.)
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.
I'm not referring to buying real estate. I'm referring to your specific accusations that Chinese (edit: foreign) nationals are launching fake identities in Bay Area companies.
I'm a foreign national, incidentally. I contribute to the high rent in NYC. I'd say tech money is ruining the city but the fellas down in FiDi got in ahead of us 30, 15 and 5 years ago.
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.
That's a very long article. Does it make the claim that the fradulent fraction of the foreign investor (which I predict is small) is large enough to have a significant impact on the housing price?
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?
The article gives a number, stating that Chinese nationals account for about 11% of home buyers in the US. That's a nationwide figure, and I'd guess the proportion is higher in the Bay Area than it is in the national aggregate. Up to the reader to determine whether 11% constitutes a significant or manipulative force in the market.
Followup questions I'd have: 1) Historically, what proportion of SF or nationwide housing is sold to foreign buyers? 2) Historically, what proportion of that figure is sold to Chinese buyers? Especially curious about #1. If the Chinese are just taking the place of yesterday's big foreign buyers (Russian, Japanese, or whoever), then we can put this into a typical perspective. If indeed they're raising the overall percentage, and not just their own representation within it, that's a more compelling statistic in favor of the author's thesis. Either way, I would have liked a bit more analysis in the piece.
I think s/he means that there's no evidence that there are more Chinese investors than one would expect.
Let's say there are only 3 kinds of investors: Chinese, Chilean and Czech. In a ideal world where those countries have the same population and the same wealth distribution, you'd expect each country to be represented equally, so you'd expect 33% of investors to be Chinese, 33%$ to be Chilean and 33% to be Czech. Now, if you see that 40% of investors are Chinese, then they are clearly over-represented.
It's kind of difficult to define 'over-representation' in this case, because the normal parameter (population of country of origin) doesn't really apply. Now, if you define it as 'number of people with the money to invest in housing in California', maybe you have a way to measure it...
Don't underestimate the effect of information sharing in inter-personal social networks. (Of the people variety, probably facilitated by online social networks.) The Chinese ethnic communities in the Bay Area have well established networks of people with a culture of facilitating opportunities for each other.
People form networks with their friends to help each other. This is not a remarkable thing, and it doesn't benefit all Chinese.
I have a couple friends, immigrants from China, who wanted to retire and move to a part of San Francisco with less steep hills. They complained that every time they found a place, it would be snatched away by somebody with a whole lot of cash. Mainly, somebody from China.
Eventually, they did find a nice little house in the desired neighborhood, much smaller, only a few yards away from a bunch of grocery stores and the church that they attend. So, that worked out for them.
Some of the Asian communities do a better job of it than other ethnic communities. That isn't racist. Facts aren't racist. Only people's interpretation of facts can be racist. It only says something about you if your only interpretation is that the condition is directly tied to race.
If the condition isn't tied to race, then noting this might cause other people to benefit themselves economically through cooperation.
Surprised I was down-voted for pointing out something that's mildly racist. Do we ignore all the back-scratching that's been happening in the California high-tech sector (and one that's lacking in diversity too)?
Surprised I was down-voted for pointing out something that's mildly racist.
I am Asian myself, though not Chinese. There are such groups associated with my ethnicity which engage in such mutual support. I, personally, am not laboring under the impression that this is any kind of proof of one group's superiority over another. Please produce your evidence to the contrary.
So, is any mention of ethnicity an automatic indicator of mild racism? How is this at all logical? It's not, so I'm pleasantly surprised that you were downvoted.
Do we ignore all the back-scratching that's been happening in the California high-tech sector (and one that's lacking in diversity too)?
No. If you look back on my posts, you'll find frequent comparisons of mine of the Bay Area tech sector to the old boy network in Mad Men.
Eh, what? Chile has 18 million people, The Czech Republic has 11 million. China has 1,356 million. I would expect the Chinese investors to comprise 98% of the three nationalities.
> In a ideal world where those countries have the same population and the same wealth distribution, you'd expect each country to be represented equally...
That part was kinda important to understand the example :)
Obviously I missed the "same population" part. I still don't get the point, though. You can still say a certain ethnic group or nationality is over-represented by adjusting for wealth and population.
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.
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.
> dirty money is flowing into real estate in the world's top cities: London, New York, San Francisco, Paris, Singapore, Hong Kong
That's one of two trends here. There other is specifically Chinese, like Hong Kongers, Taiwanese, and Koreans before them, emigrating to various English-speaking cities around the Pacific Rim, such as Sydney, Melbourne, Auckland, Vancouver, Toronto, Seattle, and San Francisco/San Jose. The (Northern) "California Housing Bubble" is a conflux of these two trends.
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.
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!
This has also been going on in New Zealand (Auckland), heating up considerably over the last 2+ years, with all of the same concerns. California is just one more place that newly-wealthy young Chinese find as an attractive immigration destination and they are moving and buying accordingly.
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.
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.
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.
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!)
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.
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.
You are likely misinformed. The purpose and one of the requirements of EB5 visa is to create job opportunities for Americans [1]. Simply buying real estate with investment potential is not going to satisfy that.
