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]
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.
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.
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.
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.
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.
Another option / the "traditional WSJ paywall sidestep" is to google the headline (copy and paste it from the paywalled article, e.g.) and then visit it from the google results.
I agree with you. Unfortunately dang disagrees and has explicitly threatened removing the ability to flag from those who choose to flag stories for this reason: https://news.ycombinator.com/item?id=9717601
If you really hate paywalls, the only real solution is to find a different online community.
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.
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.
Not trying to derail from your point, which is valid and a good observation, but I wanted to let you know that "Japs" is considered a derogatory term these days. It's simply fixed by saying "the Japanese" or "Japanese citizens"
It's no more derogatory than Yanks. If people are losing sleep over that term they probably need to find a new cause to be offended over for all the people who don't care.
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.
> 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.
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.
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!).
> yep a lot of the property is brought as a safe guard against the the day when the mob starts hanging people from lampposts.
Do you have any evidence to back that up or are you just making it up? I'd personally be surprised if it has even crossed the mind of some of them. More likely, the Chinese are buying US properties because they are cheap and can be rented for profit.
Not saying there will be a mob but the Chinese stock market is heating up to the point where companies are stopping manufacturing and using their assets to buy stocks instead.
And the level of unserviced debt is getting high, but the central bank prefers to have the lenders rolling it over rather than letting defaults be triggered.
So buying property abroad would make sense for those Chinese who can afford it in terms of diversifying their investments as well as having a back door out of the country if it things go sour.
Agreed. I guess I might have taken parent's comment too literally. I'm just tired to see the inevitable and often gratuitous China-bashing in those types of submissions.
You don't think some of the Cadres saw what happened to Nicolai Chauchesku and think that if it went really bad that that could be them. Remember that within living memory China has had extended periods of almost anarchy.
Time for China's own class of corporate criminals to get outta Dodge before the 粪 hits the 风扇. It's so much easier to cook the books when the economy is hot, but when money gets tight, there's no hiding place. I predict addresses of new US homes will contain at least one number 8.
Also, it helps America. The middle class can't buy homes any more, so it's nice we can import a new group of rich people. That way we can keep playing games in the real estate and mortgage markets.
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...
[2] http://money.cnn.com/2014/02/20/news/economy/china-art-laund...
[3] http://qz.com/19712/how-chinas-elite-illicitly-move-their-mo...
[4] http://www.icij.org/offshore/leaked-records-reveal-offshore-...
[5] http://www.ft.com/cms/s/0/fcc2d346-bcd3-11e4-9902-00144feab7...