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Thread: Foreign purchases of American homes plunge 36% as Chinese buyers flee the market

  1. #1

    Foreign purchases of American homes plunge 36% as Chinese buyers flee the market

    https://www.cnbc.com/2019/07/17/fore...yers-flee.html

    JUL 17 2019

    Challenging conditions in the U.S. housing market, along with tighter currency controls by the Chinese government, caused a stunning drop in foreign demand for American homes.

    The dollar volume of homes purchased by foreign buyers from April 2018 through March 2019 dropped 36% from the previous year, according to the National Association of Realtors. The decline was due to a drop in the number and average price of purchases. Foreigners bought 183,100 properties with a total value of about $77.9 billion, down from 266,800 valued at $121 billion in the previous period.

    They paid a median price of $280,600, which is higher than the median for all existing homebuyers ($259,600), but it was down from $290,400 the previous year.

    “A confluence of many factors — slower economic growth abroad, tighter capital controls in China, a stronger U.S. dollar and a low inventory of homes for sale — contributed to the pullback of foreign buyers,” said Lawrence Yun, NAR’s chief economist. “However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.”

    The Chinese were the leading buyers for the seventh consecutive year, purchasing an estimated $13.4 billion worth of residential property. Yet that was a 56% decline from the previous 12 months and comparatively the biggest percentage drop of all foreign buyers. Chinese economic growth slowed to 6.3% in 2019 compared with 6.9% in 2017, when the previous buyer survey began. The Chinese government also tightened its grip on the outflow of cash to purchase foreign property.

    The Chinese may also be souring on U.S. real estate due to the current political climate. Anecdotally, real estate agents in California have seen a pullback in Chinese buyer demand. Southern California had been particularly popular with Chinese parents hoping to send their children to American colleges.

    In the first quarter of this year, Chinese buyer inquiries for U.S. properties on Juwai.com, a Chinese real estate site, were down 27.5% from a year ago. Inquiries have been down in four of the last five quarters.

    “We call it the Trump effect. It’s a combination of anti-Chinese political rhetoric, a clampdown on visa processing, and of course tariffs,” Carrie Law, CEO and director of Juwai.com, said in a recent interview. “The Trump effect is undercutting some of the primary drivers of Chinese demand for U.S. property, including buying homes for students who are studying in the U.S. and the country’s reputation as a safe investment.”

    Chinese buyers were followed by Canadians ($8 billion), Asian Indians ($6.9 billion), U.K. buyers ($3.8 billion) and Mexican buyers ($2.3 billion). The Chinese purchased approximately the same number of homes as Canadians, but the Chinese bought pricier homes and therefore beat the Canadians in dollar volume. The Chinese first pulled past the Canadians in volume in 2015, surged strongly in 2018, but then fell back dramatically in the past year.

    Foreign buyers include those living in the U.S. and overseas, but the majority (60%) were recent immigrants and foreigners who live in the U.S. for work, school or other reasons.

    While the Realtors point to the steep runup in home prices over the past several years, as well as the shortage of existing homes for sale, foreign buyers have long been big players in the newly built housing market, where homes come at a price premium.

    There is a large supply of move-up range new homes for sale, especially in areas where foreign buyers have shown the most interest, such as the Inland Empire of Southern California as well as Texas and Florida. It may just be that foreigners don’t see the U.S. housing market as the most lucrative investment anymore. Home values are already gaining less than they were a year ago, and in some major markets values are falling.

    Foreign investors continued to flock to Florida, according to the NAR report. One in 5 foreign buyers purchased their properties in the state. About 42% of Canadian buyers, often referred to as snow birds, purchased in Florida.

    “Many Canadians and other foreigners found Florida so enticing because of its lenient tax laws,” said Yun. “Additionally, many Florida metro areas have an inventory of cheaper properties, relatively speaking — a combination which makes the state a very popular destination.”

    Behind Florida was California, which garnered 12% of international purchases. About a third of Chinese buyers purchased property in California, although that figure was down from the previous year. The next most popular destination for international buyers was Texas, especially for Indian and Mexican buyers. Arizona and New Jersey rounded out the top five, with North Carolina, Illinois, New York and Georgia not far behind.



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  3. #2
    China is having money problems.
    Never attempt to teach a pig to sing; it wastes your time and annoys the pig.

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    A Zero Hedge comment

  4. #3
    Quote Originally Posted by Swordsmyth View Post
    China is having money problems.
    They cracked down on the amount of money people can take out of the country a while ago. That is slowing foreign purchases by individuals- as the OP article notes.

    The Chinese government also tightened its grip on the outflow of cash to purchase foreign property.

    https://www.cnbc.com/2019/02/27/capi...rs-survey.html

    Beijing’s capital controls are weighing on Chinese investors looking to buy property abroad

    Chinese investors are keeping unchanged or even reducing the amount of money they allocate for overseas property purchases as they continue to struggle to get money out of the country, according to a survey conducted by a global real estate services company.

    That comes amid China’s continued campaign to clamp down on funds leaving the country. Beijing ramped up capital controls several years ago to fight a volatile currency, but the last few months of slowing economic growth, a declining current account surplus and uncertainty due to the trade war with the United States have led many to believe those measures will persist.

    On top of that, it became increasingly difficult for investors to obtain loans last year as Beijing sought to control the high levels of debt in the real estate sector.

    In its 2019 China Outbound Real Estate Investor Intention Survey conducted during the final three months of last year, Cushman & Wakefield found that a combined 84 percent of respondents had either kept their funds for foreign real estate acquisitions at about the same level or reduced them compared with 2017.

    The firm said the results, released Friday, were based on responses from 51 mainland Chinese who invest in overseas real estate and who represent combined offshore capital of 280 billion yuan ($41.81 billion).

    The survey also found that 65 percent of respondents were “significantly or severely impacted” by Beijing’s measures to crack down on money leaving the country, an increase from 50 percent who expressed such a view in 2017.

    Also, 60 percent of respondents said they didn’t think policy restrictions would ease this year while 59 percent expressed the view that domestic lending conditions for real estate won’t improve.

    Chinese investors acquired a total of $15.7 billion worth of overseas real estate in 2018, down 63 percent from 2017 and the lowest figure since 2014, according to data from Real Capital Analytics cited in the Cushman & Wakefield report.
    Last edited by Zippyjuan; 07-18-2019 at 11:47 AM.
    Quote Originally Posted by Swordsmyth View Post
    The quality seems to have dropped significantly since I came here, I guess you get what you pay for.
    "There is always a tweet. That has become accepted fact in the Trump presidency: For every pronouncement the President makes, there is at least one tweet from his past that directly contradicts his current view." -CNN

    I am Zippy and I approve of this post. But you don't have to.

  5. #4
    I am currently accepting chinese gold for safekeeping at a very low rate .
    Do something Danke

  6. #5

    Chinese Money in the U.S. Dries Up as Trade War Drags On

    https://www.nytimes.com/2019/07/21/u...trade-war.html

    July 21, 2019


    WASHINGTON — Growing distrust between the United States and China has slowed the once steady flow of Chinese cash into America, with Chinese investment plummeting by nearly 90 percent since President Trump took office.

    The falloff, which is being felt broadly across the economy, stems from tougher regulatory scrutiny in the United States and a less hospitable climate toward Chinese investment, as well Beijing’s tightened limits on foreign spending. It is affecting a range of industries including Silicon Valley start-ups, the Manhattan real estate market and state governments that spent years wooing Chinese investment, underscoring how the world’s two largest economies are beginning to decouple after years of increasing integration.

    “The fact that the foreign direct investment has fallen so sharply is symbolic of how badly the economic relationship between the United States and China has deteriorated,” said Eswar Prasad, former head of the International Monetary Fund’s China division. “The U.S. doesn’t trust the Chinese, and China doesn’t trust the U.S.”

    For years, Chinese investment into the United States had been accelerating, with money pouring into autos, tech, energy and agriculture and fueling new jobs in Michigan, South Carolina, Missouri, Texas and other states. As China’s economy boomed, state and local governments along with American companies looked to snap up some of those Chinese funds.

    But Mr. Trump’s economic Cold War has helped reverse that trend.

    Chinese foreign direct investment in the United States fell to $5.4 billion in 2018 from a peak of $46.5 billion in 2016, a drop of 88 percent, according to data from Rhodium Group, an economic research firm. Preliminary figures through April of this year, which account for investments by mainland Chinese companies, suggested only a modest uptick from last year, with transactions valued at $2.8 billion.

    “I certainly hear in conversations with investors a lot of concern about whether the U.S. market is still open,” said Rod Hunter, a lawyer at Baker McKenzie who specializes in foreign investment reviews. “You have a potentially chilling effect for Chinese investors.”

    A confluence of forces appear to be at play. A slowing economy and stricter capital controls in China have made it more difficult for Chinese investors to buy American, according to trade and mergers and acquisitions advisers. Mr. Trump’s penchant for imposing punishing tariffs on Chinese goods and an increasingly powerful regulatory group that is heavily scrutinizing foreign investment, particularly involving Chinese investors, have also spooked businesses in both countries.

    China, which has retaliated against American goods with its own tariffs, may also be turning off the investment spigot as punishment for Mr. Trump’s economic crackdown.

    Concerns about America’s receptiveness to Chinese investment have been aggravated by a flurry of transactions that collapsed under heavy scrutiny from the Committee on Foreign Investment in the United States. The group, which is headed by the Treasury Department, gained expanded powers in 2018 that allow it to block a broader array of transactions, including minority stakes and investments in sensitive technologies like telecommunications and computing.

    Shortly after the New Year, China’s HNA Group took a $41 million loss on a glass and aluminum Manhattan high-rise after American regulators forced it to sell the property because of security concerns about its proximity to Trump Tower, only a few blocks away.

    The investment chill could hurt the American real estate market particularly hard. A May report noted a “frenzy of disposal activity” among Chinese commercial real estate investors in the United States.


    In March, the Chinese owners of a gay dating app known as Grindr were told by regulators to find a buyer for the company. The Trump administration feared Beijing could use personal information as leverage over American officials.

    Those interventions followed prominent cases earlier in Mr. Trump’s term, such as Broadcom’s quashed bid for Qualcomm and the sale of MoneyGram to a unit of the Chinese e-commerce giant Alibaba last year. An agreement involving Lattice Semiconductor and an investment firm with reported ties to the Chinese government was also rejected.

    In some cases, the chill has benefited American companies. In June, UnitedHealth swooped in to buy PatientsLikeMe, a health care technology start-up, after the committee said it was a security risk to allow the company’s Chinese owner to have access to health data. The purchase amount was not disclosed.

    But the increased scrutiny is also complicating efforts by American industries to team up with Chinese investors and leading to a retrenchment in certain sectors. The real estate sector, which has been buttressed by investors from China in the last decade, has had a steep falloff as relations sour and as Chinese officials clamp down on foreign real estate investment.

    A May report from Cushman & Wakefield noted a “frenzy of disposal activity” among Chinese commercial real estate investors in the United States. In 2018, there were 37 property acquisitions by Chinese buyers worth $2.3 billion, but $3.1 billion of commercial real estate was sold off. The report said that the treatment of HNA and tough trade talk made Chinese investors feel unwelcome.

    Chinese investors are also showing less appetite for residential real estate in the United States. Research released recently by the National Association of Realtors found that purchases of homes in America by Chinese buyers declined by 56 percent to $13.4 billion in the year to March.

    “The magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.,” said Lawrence Yun, chief economist at the realtor’s group.

    Despite the decline, China was still the top foreign buyer of American properties from April 2018 to March 2019.

    The financial sector, including banks and private equity, is also feeling the effects. A fund that Goldman Sachs started with the China Investment Corporation in 2017 is being looked at closely by the Treasury Department, according to two Treasury officials. The fund, the China-US Industrial Cooperation Partnership, was set up to invest in American manufacturing and health care companies and then forge business ties in China.

    A Goldman Sachs spokeswoman said that the bank was in compliance with all government regulations.

    John Kabealo, a Washington-based lawyer who specializes in cross-border transactions, said that American private equity funds are now less likely to team up with foreign funds when making acquisitions because doing so could raise red flags.

    “I think there’s a whole lot of concern in the fund world right now,” Mr. Kabealo said. “Funds still want to take Chinese money, but they’re being much more cautious in the way that they do it.”

    Tougher regulatory scrutiny in the United States and a less hospitable climate toward Chinese investment have fueled the slowdown.

    ...

  7. #6
    They must be finished liquidating their dollar denominated holdings into hard assets and income producing assets like real estate.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    Visiting the Outer Banks of NC?
    Outer Banks NC Fishing Boat Rentals

  8. #7
    Quote Originally Posted by devil21 View Post
    They must be finished liquidating their dollar denominated holdings into hard assets and income producing assets like real estate.
    Sure.

  9. #8
    Quote Originally Posted by timosman View Post
    Sure.
    Weak sauce Osama. Your posts are wastes of forum space lately.

    It's a very reasonable explanation for why Chinese buyers are stopping. Or do you believe the crap cover stories that CNBC pumps out?
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    Visiting the Outer Banks of NC?
    Outer Banks NC Fishing Boat Rentals



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  11. #9
    Quote Originally Posted by devil21 View Post
    Weak sauce Osama. Your posts are wastes of forum space lately.

    It's a very reasonable explanation for why Chinese buyers are stopping. Or do you believe the crap cover stories that CNBC pumps out?
    There is the CNBC crap level and there is you.

  12. #10
    Quote Originally Posted by devil21 View Post
    They must be finished liquidating their dollar denominated holdings into hard assets and income producing assets like real estate.
    Like selling off all those US Treasuries they hold? Wait- they haven't dumped those.
    Quote Originally Posted by Swordsmyth View Post
    The quality seems to have dropped significantly since I came here, I guess you get what you pay for.
    "There is always a tweet. That has become accepted fact in the Trump presidency: For every pronouncement the President makes, there is at least one tweet from his past that directly contradicts his current view." -CNN

    I am Zippy and I approve of this post. But you don't have to.

  13. #11
    Quote Originally Posted by Zippyjuan View Post
    Like selling off all those US Treasuries they hold? Wait- they haven't dumped those.
    Nope, they put them up as collateral for cash loans from US banks and have used the cash to buy the assets. The holdings still sit there on the books until they're taken as collateral and reported as being divested. Whether they're ever reported as being divested is anyone's guess.

    Or perhaps you and @timosman have a better explanation? Must be capital controls in China, yeah that's the ticket. Capital controls that prevent a foreign country from divesting of dollar assets that are clearly on the way out. Sounds legit. You must also believe that it takes 2.5 years to work out a "trade deal" that never happens, too.
    Last edited by devil21; 07-22-2019 at 11:30 AM.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    Visiting the Outer Banks of NC?
    Outer Banks NC Fishing Boat Rentals

  14. #12
    Quote Originally Posted by devil21 View Post
    Nope, they put them up as collateral for cash loans from US banks and have used the cash to buy the assets. The holdings still sit there on the books until they're taken as collateral and reported as being divested. Whether they're ever reported as being divested is anyone's guess.

    Or perhaps you and @timosman have a better explanation? Must be capital controls in China, yeah that's the ticket. Capital controls that prevent a foreign country from divesting of dollar assets that are clearly on the way out. Sounds legit. You must also believe that it takes 2.5 years to work out a "trade deal" that never happens, too.
    Link?
    Quote Originally Posted by Swordsmyth View Post
    The quality seems to have dropped significantly since I came here, I guess you get what you pay for.
    "There is always a tweet. That has become accepted fact in the Trump presidency: For every pronouncement the President makes, there is at least one tweet from his past that directly contradicts his current view." -CNN

    I am Zippy and I approve of this post. But you don't have to.

  15. #13
    Quote Originally Posted by Zippyjuan View Post
    Link?
    No link sorry. Not everything is provided on the internet. Believe what you wish.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    Visiting the Outer Banks of NC?
    Outer Banks NC Fishing Boat Rentals

  16. #14
    Quote Originally Posted by devil21 View Post
    No link sorry. Not everything is provided on the internet. Believe what you wish.
    So you know it is true but have no evidence of it even occurring. I see.
    Quote Originally Posted by Swordsmyth View Post
    The quality seems to have dropped significantly since I came here, I guess you get what you pay for.
    "There is always a tweet. That has become accepted fact in the Trump presidency: For every pronouncement the President makes, there is at least one tweet from his past that directly contradicts his current view." -CNN

    I am Zippy and I approve of this post. But you don't have to.

  17. #15
    Quote Originally Posted by Zippyjuan View Post
    So you know it is true but have no evidence of it even occurring. I see.
    Theoretically, even if I didn't "know", it would be what I would do if I were holding dying assets denominated in a dying foreign currency without spooking the markets. If I were Chinese leadership I certainly wouldn't place capital controls that force my citizens to hold assets that are quickly heading toward worthlessness. Would you?
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    Visiting the Outer Banks of NC?
    Outer Banks NC Fishing Boat Rentals

  18. #16
    The major reason they don't want to get rid of dollar denominated assets is how that would effect the dollar/ yuan exchange rate. It would drive up the value of the yuan making their exports more expensive- on top of Trump's tariffs. That would not be good for their economy.

    They put capital controls in place to prevent money from leaving the country (along with their wealthy people who can afford to buy property abroad).
    Last edited by Zippyjuan; 07-22-2019 at 12:27 PM.
    Quote Originally Posted by Swordsmyth View Post
    The quality seems to have dropped significantly since I came here, I guess you get what you pay for.
    "There is always a tweet. That has become accepted fact in the Trump presidency: For every pronouncement the President makes, there is at least one tweet from his past that directly contradicts his current view." -CNN

    I am Zippy and I approve of this post. But you don't have to.



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