While the government meddlers aim at the impossible (“stimulating the economy”) with the aid of the unethical (appropriating tax payer funds for their interventions), the much-maligned market is doing its best to sweeten the pain the only way it knows – providing new buyers at prices that turn the old buyers into sellers. Joel Bowman at The Daily Reckoning reports (June 12, 2010):
“For a growing number of well-to-do, geographically mobile Chinese citizens, property investments abroad are becoming a popular store of wealth, and a hedge against an increasingly precarious market back home. The Middle Kingdom’s emerging middle class has relatively few options when it comes to protecting their savings. (The National Bureau of Statistics announced yesterday the annual rate of inflation rose to 3.1% in May – up from April’s figure of 2.8%.) Many are wary about investing in stocks after recent, violent selloffs in the markets (the Shanghai Composite Index “officially” entered a bear market last month after declining more than 20% from its 2009 high). And again, fears over government efforts to cool the housing markets in major cities are further encouraging them to look farther afield.
Seen by some as “the new Russians,” wealthy Chinese businessmen and women are snapping up top-end properties from London to Sydney, Vancouver to New York. According to a world wealth report published last year by Merrill Lynch and Capgemini, the number of dollar millionaires in China outstripped the number in the UK for the first time in 2008. Only the US, Germany and Japan now have more millionaires…although the rate at which China is promoting new super rich is by far outstripping the west (the US, for example, is actually demoting millionaires at the fastest pace globally.)
It’s hardly surprising then that these hard-working, well-educated individuals are pouncing on depressed real estate markets abroad. Last year, Soufun Holdings, one of China’s largest real estate companies, arranged a series of “property investment tours” around the US. For $3,600, Chinese buyers were given a whirlwind tour beginning in Boston and continuing on to San Francisco, Los Angeles and finally on to New York. Typically, buyers were looking for homes in the $500,000-$1 million range. The tours were so popular, the company had to put 400 people on the initial waiting list.
“We never thought these tours would garner such interest, but we’ve had an overwhelming response,” SouFun CEO Richard Dai, told newswire AP at the time. “Before, we heard of Chinese or Hong Kong movie stars buying homes in the US, and now more and more Chinese can afford to have the same.”
It’s not only distressed sales in the US that have piqued the interest of cashed up Chinese buyers. A notable portion of that mobile cash is flowing into Vancouver, Canada.
“Out of the nearly $200-million [worth of real estate] we’ve sold so far this year, I’d say 50 per cent was sold to Mainland Chinese,” George Wong of Magnum Projects recently told Vancouver’s The Globe and Mail. “There’s a growing middle class and a growing wealthy class. And they have become the fuel to our real estate.”
According to Mr. Wong, who travels to Beijing and Shanghai to showcase Vancouver properties, Chinese investors accounted for around half of the units purchased at the spiffy, downtown condo development, Harbor Green. The average unit cost there is a cool $5.5 million.
Earlier this year, Hong Kong-based billionaire, Joseph Lau, treated himself to a £33 million six-floor mansion in London’s exclusive Eaton Square, in Belgravia. [As an important aside, Lau also has one of the world’s finest private wine collections, with over 10,000 bottles.] Super rich Chinese buyers are also loading up on high-end luxury apartments in Australia. Ewan Morton, managing director of Sydney-based Morton and Morton, said Chinese investments in the capital’s real estate market more than tripled during the past year, accounting for 16% of the agency’s $21 million turnover.”
Read the whole article at The Daily Reckoning:
We are old enough to remember the 1980s when Japan Inc. was going to take over America via property purchases. Now it is the Chinese.
We also remember what happened to the Japanese economy …
True. But this piece isn’t critical of the Chinese.
Also, the Japanese government has been under the thumb of the US..and it is a much much smaller country, so China may be different.
That said, there is a lot of hype about China, both in terms of its commercial strength and its military.
The Anglo-Am establishment would like to hype these threats to justify its own aggressive posture I imagine
There are far too many countries that don’t allow foreigners to own property.
I think foreign investment/ownership is not only just and moral but essential for a strong economy. Just think of what it would do for a country like Mexico.
Plus countries that trade and prosper together will typically be peaceful. While protectionism usually leads to conflict.
Many people in India actually prefer foreign renters/buyers because they look after the property better. I think “sensitive” assets can be reserved for citizens, when needed. But you know, citizens can be more treacherous than “foreign devils” sometimes…
True. But this piece isn’t critical of the Chinese.
??
Lila … Think it IS implicitly critical of China’s economy, which shows so many signs of a classic bubble …
“The Middle Kingdom’s emerging middle class has relatively few options when it comes to protecting their savings. (The National Bureau of Statistics announced yesterday the annual rate of inflation rose to 3.1% in May – up from April’s figure of 2.8%.) Many are wary about investing in stocks after recent, violent selloffs in the markets (the Shanghai Composite Index “officially” entered a bear market last month after declining more than 20% from its 2009 high). And again, fears over government efforts to cool the housing markets in major cities are further encouraging them to look farther afield.”
No. I mean it’s not critical of the Chinese for buying up real estate…it wasn’t xenophobic or protectionist…or anti-Chinese.
It was critical of the bubble in China. That’s not being anti-Chinese. That’s simply analysis of the probable result of cheap money and intervention
We have to differentiate between critical reporting of facts and animus against cultures or people.
I don’t believe I’m anti American..I certainly slam the US economy and government a lot because I’m a libertarian and I can foresee the counterproductive results of intervention
I know what you mean though…
In some of the DR columns they take the same tack as Chanos and the speculators who see a bubble in China as a whole.
Bowman notes that the Chinese put down upto 80% so even housing is likely to hold up better there than than in other places. I tend to think housing in the coastal cities is probably in a bubble and will fall (although housing in Asia generally is ultimately well supported because of the high density of population)
Is this anti-Chinese?
Or is there a difference between describing a situation…which is what I see in this piece..and hyping an angle in order to provoke or create an eventuality that you have a financial interest in?
Jim Chanos for eg. is accused (credibly) of manipulating events through corrupt dealings with financial journalists and journalist-allied hedge funds that promote his short positions. That’s different from an analyst or writer publishing an opinion in which he doesn’t have a direct financial interest, except maybe in the most general sense.
Not sure we understand ALL your points, though they are as always lucid and well written. Agree with you that there is no point in being anti-Chinese in terms of the PEOPLE (1.3 billion). As fine a culture as any the human race has produced ….
So … how about this: Let us be proudly ANTI-Chinese – as in “anti” the Chinese government which is a collection of malevolent old men and their technocratic proteges that have clearly illustrated they will publicly murder anyone who attempts to remove them from power.
They are, in fact, horrid people who exercise merciless power over the poor Chinese people who have suffered so much.
The system of dysfunctional Western capitalism that has been inflicted on the Chinese (to the point where desperate functionaries build whole empty cities to fulfill growth quotas) will eventually result in ruin, bankruptcy, a reversion to past chaos and more poverty. The Chinese may believe that the current system is a golden ticket out of poverty, but when the inevitable bust comes, they will see it has been no such thing. Would not like to be caught in China when that happens …
The only bright spot is that it will also momentarily remove the ticks and leeches on the body-politic – the government bureaucracy itself. This weird technocratic – stay-in-power-at-all-costs communism will give way to something else. Hopefully better.
OK. Yes, we’re on the same page on that.
I’m anti-Chinese in that sense too.
But the anti-Chinese meme I bring up is something other than that.
It’s the tendency of liberal Democrat (pro regulation, big government left-liberals)to become anti-Chinese to distract from Greenspan’s culpability. That is, they blame the Chinese government when the Chinese government (corrupt as it is) is reacting to the Anglo-Am establishment’s provocations.
Some of the speculators fit into that group (Chanos I believe).
You are correct about this. But the Chinese government, in the sense that you present it, uses the West for the same purposes, as a distraction, an “other” … to retain what popularity it still has …
True. Limiting ourselves to English language media we often forget that…
On the other hand, English is a universal language so the propaganda in it has much wider and more consequential effects.
The US also dwarfs China in military terms.