Chinese Politicians Are Buying Billions In U.S. Real Estate

Tyler Durden's picture

Back in September, we explained that when it comes to "boom" in US real estate, there are three key driving forces: i) the Fed's monetization of mortgage backed securities whose impact however is at best to stabilize the demand floor (and judging by the recent collapse in refi activity even that is questionable), ii) an implicit subsidy as banks keep millions of units on their books (to get a sense of how much check out at the chart in "Six Month + Delinquent Mortgages Amount To More Than Half Of Bank of America's Market Cap") in some phase of the foreclosure process, and away from clearing in the market, and perhaps most importantly, iii) the fact that the NAR can legally launder offshore money courtesy of being exempt from anti-money laundering provisions. This allows billions in ill-gotten offshore cash, sourced primarily from Russia and China, to be "invested" in US real-estate, with no cost or pricing discrimation and without any questions asked from any authorities. Because, sure enough, the final result can be spun as a "boom" in real estate by the administration and the banks so very invested in reflating the housing bubble.

This was explained as follows:

the NAR, best known for misrepresenting the real state of the existing US housing market for years, has an open waiver for anti-money laundering regulation from none other than Uncle Sam. Because while it is one thing to blow up the biggest breadwinning industry in Switzerland to pad the tax bill and to spread class warfare, it is something totally different to represent to the world that ultra-luxury segment aside, which is merely an artifact of global money laundering, the US real estate housing emperor is as naked as he was 4 years ago.

As a reminder, here is where the NAR stands on the issue of its most generous clients possibly being some of the worst criminals known to man, courtesy of Elanus Capital:

Many of you reading this will undoubtedly have spent time in an international bank and been forced to sit through countless hours of “know your client” and AML training. Fascinating to note that the National Association of Realtors lobbied for and received a waiver from such regulation. That’s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States – and prevailed.

 

Here's their official position:

 

"NAR supports continued efforts to combat money laundering and the financing of terrorism through the regulation of entities using a risk-based analysis. Any risk-based assessment would likely find very little risk of money laundering involving real estate agents or brokers. Regulations that would require real estate agents and brokers to adopt anti-money laundering programs may prove to be burdensome and unnecessary given the existing ML/TF regulations that already apply to United States financial institutions."

 

Hat’s off to the NAR – that is some serious doublespeak. My translation: We’ll support you as long as we don’t have to support you.

Indeed it is. What the NAR is saying is that for now go ahead and lift every offer on every duplex and triplex off Central Park. Your money is absolutely safe with us... this instant. 

* * *

While the above explained what is going on in theory, today courtesy of Mike Krieger we now have formal glimpse into just what is really supporting US housing in practice.

From Corrupt Chinese Politicians are Buying Billions in U.S. Real Estate,  from Liberty Blitzkrieg

Many of us spent much of 2012 confused about how the U.S. real estate market was improving within the context of a broke and unemployed citizenry.  Well as time has passed the answers to our questions have been revealed.  The criminals are piling in.  I first explained a couple of weeks ago how the financial oligarchs in the United States are currently in a bidding war to become America’s slumlords in my post:  America Meet Your New Slumlord: Wall Street.

Now we also discover that part of the bid to U.S. real estate has come from another criminal class. In this case, we are talking about corrupt Chinese officials who are pulling their ill gotten gains from their homeland and desperately placing it in real estate all over the globe.  From The Telegraph:

As China’s new leaders intensify a campaign to root out corruption, thousands of Communist party officials have been panicked into a fire sale of their illicit properties while billions of pounds have been smuggled overseas.

 

It said the volume of deals had intensified by “a hundred times” after Xi Jinping, the incoming Chinese president, warned that corruption could kill the Party and put one of the country’s most vigorous and resolute politicians, Wang Qishan, in charge of stamping out graft.

 

It also claimed that an astonishing $1 trillion (£630 billion), equivalent to 40 per cent of Britain’s annual GDP, had been smuggled out of China illegally in 2012.

 

Marco Pearman-Parish at Corporation China, a company in Beijing that helps clients find properties abroad, said there had been a strong rise in clients looking for homes in the Cayman Islands.

 

In the United States, the National Association of Realtors said that more than $7 billion of properties had been bought by Chinese in the US last year. Some high-end homes are now specifically built for rich Chinese with ponds for koi carp and a second kitchen for pungent cooking.

I guess word has gone out globally that the U.S. is open for business as far as the global criminal class is concerned.  They can rest assured knowing they will never face repercussions in this lawless land.  At least that is what they think.  What we must do is never forget who is buying all of these properties and when the time comes they should all be seized and these crooks sent back to the place they came from.

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razorthin's picture

And the penniless Americans get to pay even more inflated prices if they could buy.  Bravo, a$$holes.

redpill's picture

It's not just the Chinese. Brazilians are buying property in south Florida like crazy. Once they realized we were broke and the stuff that isn't nailed down is largely worthless, they started buying the things that are.

Spitzer's picture

US real estate has a ways to fall if you compare it to Japan's bubble in the late 80's. Plus, RE will flat line at best.

Lots of bubble hawks out there that think gold is a bubble. These same hawks think RE is cheap. Dumb fucks

economics9698's picture

Shit must be getting hot over in China.  

Harlequin001's picture

The Chinese just like others simply print money and use it to buy real estate. There is no way you can compete with that.

There is no way they can lose money printed from nothing. It is an excellent deal for everyone except Americans.

Only a gold standard can protect you from this. Until you get one you are fucked. Period.

economics9698's picture

Preaching to the preachers there H. 

 

Pure Evil's picture

The Chinese are used to building ghost cities, so why not sell them thousands of empty houses with no hope of ever unloading them or renting them out.

YuShun's picture

Anti-corruption drives are often mostly talk with little action.
It's refreshing to hear that China's is serious,
and is driving out lots of crooks.  

lunar's picture

"....Only a gold standard can protect you from this"

They keep buying gold - how much is really in Fort Knox?

Harlequin001's picture

It needs to be in money, not in Fort Knox.

This can only end up one way, everything in America (and elsewhere as well) will be owned by those that simply created money from nothing and bought assets with it.

It matters not whether it is Chinese criminals syphoning funds from government projects in China or sovereign wealth funds investing their government funded 'capital' into Western assets or domestic banks stuffed full of 'taxpayer created magic money' the result is still the same. There is no way you can compete and you end up poor.

Only a gold standard can protect you from that.

NidStyles's picture

They measure in GDP as well, and they were printing at 10% up until what 1.5-2 years ago? You know as well as I do what that means.

onthesquare's picture

China has lots of useless US$.  Warehouses full of it.  Gotten by making trinkets and selling them to the west.  Most of them are broken or useless or toxic.  Anyway what better way to get rid of that cash than by turning it into a real property in the country from wence it came.

Throw another chicken head on the barby and invite the neighbours over.

chump666's picture

China is a corrupt sh*thole, there has been a huge liquidity squeeze over there for months as money is leaving China on mass, converting to USDs and buying assets, property

sgorem's picture

and I wonder who is laundering all this money for the crooks? well hell, other crooks like JPM and BoFA, et al..................Mozzilla on the West coast, and 'Cortizone on the East. experienced.

post turtle saver's picture

I'm trying to pick which phrase to describe this activity... I have it down to a tie between "flight to safety" and "repatriated dollars". Hmm, decisions...

ozman's picture

A lot of people are ignorant to the where these money come from.  If you read Confessions of an Economic Hitman then you get the picture.  Around the world, politicians from other nations are buying real estate in US and Europe because their money bribed to them by EHMs are in dollars.  They use to park these investments in bonds and other paper assets which blew up in 2008, now these laudered money have gone to buying tangible assets. 

These are not money converted to USDs if that is the case the nations would suffer currency devaluation already, in China's case, the stolen domestic money goes to prop up the domestic real estate bubble hence the ghost cities as all these politicians which all have ties to the triads are involved in real estate development.  The domestic corruption is the real cause to skyrocketing real estate prices pricing out the people.  However with more EHM laundering money from corrupt politicians in Europe and US (together with money made from bonuses and corporate welfare) looking for higher yields and open new operations in China or Brazil, these US dollar denominated bribes goes to the pocket of these politicians who now have to park these US dollars as they are not accepted domestically. So the end result has always been buying assets with the paper assets collapsing, real estate is the only final bastion.

With the in fighting among the big family triads over (shrinking the control from 9 to 7 families), the crackdown is on against these politicians who these big nationalist oligarchs think are selling out the country.  With the on going central bank reform, up coming gold standard currency, these politiicians guilty of selling out to EHM and foreign interests are now packing up especially under the light of the Bo Xilai scandal. 

 

Please read the John Perkins book and you get the full picture before speaking.

 

Harbanger's picture

It's all relative Spitz (I hate relativism), I come from very meager means.  I've raised myself above my lot thru faith, hard work, and learning from old men with wisdom.  I own property in the US that chinese nationals are lining up to buy.  Tons of cash that I'm afraid to even accept.  When all of the worlds currencies are in question, physical assets of all types, especially in a perceived stable environment, is the only thing left with any real value.

sgorem's picture

sell it to 'em, keep the mineral rights and if they build something on it, drive an oil well in their front yard. take the money and buy gold/silver, and a few guns.

Spitzer's picture

Thats is the same reasoning people had during the housing bubble.

These prices are being supported by credit. Not cash.

What is your opposition to buying gold rather then houses ?>

Harbanger's picture

Who said I was opposed to gold?  The bubble now is in currency.  This is causing the stock market to be over priced right now. I'm long gold, silver, oil, and other commodities including well placed RE. 

yogibear's picture

"US real estate has a ways to fall if you compare it to Japan's bubble in the late 80's. Plus, RE will flat line at best."

Bravo! Few people realize this. 

Japan soaked up all that real estate in Hawaii and then the bottom dropped out. SUckers.

Local governments are starting to license rental property so they can make money off of the corporations and investors that rent.  


Lord Koos's picture

Chinese are generally very pragmatic and think long-term.  In the long run, real estate is usually a pretty good investment if you buy right.  Some people buy dips in gold, what's different about buying dips in real estate?  It's not just about investing for the Chinese, it's an escape hatch both for their wealth and their families.  As bad as the US has become, the corruption here pales next to China, so it is still viewed as a safe haven by many people.

Spitzer's picture

20 year bear market in RE in Japan. Thats not a dip

Why not buy gold ?

ACP's picture

Don't forget the RUSSKIES.

And maybe a Bulgarian or two in the Upper East Side (chuckle).

 

DoChenRollingBearing's picture

@ redpill  + 1  

True dat re Brazilians buying big in S Fla.  Venezuelans & Colombians too.

The Bearing cordially invites any Chinese prospective buyer to buy our condo.  Starting price: $5 million.  $4.5 million if you pay in gold.  Hurry!

CheapBastard's picture

more Golden Showers for the American Middle Class.

 

Thank you Barry.

Never One Roach's picture

The BBC reported that over 50% of the people in China live on $1 a day. I bet they feel warm and fuzzy seeing their local officals embezzling millions of dollars and sending it overseas.

clara-to-market's picture

I'm broke.

I'm ugly.

I'm not very bright.

And now Mr. Chin is my earthly master.

But, other than that, I'm doing pretty well.

http://www.angrysinner.blogspot.kr/2013/01/yesterday-dragon-lady-drove-to-hi-mart.html

zorba THE GREEK's picture

The Japanese bought billions in West Coast real estate years ago and lost their

shirts when the bubble popped. I wish the same on the Chinese, especially since

they are buying with money stolen from the ignorant masses. 

CPL's picture

Shit, that old trick wouldn't work again...and again....and again....

economics9698's picture

Well they burned through Nasdaq, housing, T-bills, what else is there to dumb trillions on?

whoopsing's picture

And east coast property also with the same result

ricky2's picture

Yeah, but those RE investors found that their assets didn't react to well to water and 60+mph winds......too soon? Sorry :/

Left Coast Dan's picture

Just what I was thinking. Although Japanese 2 decades ago were making poor investment decisions based upon the obscene overpricing of Japanese real estate. In this case, Chinese may be paying top dollar, which isn't bad for US interests, but as individuals they are expatriating the money to where they can keep it.

percolator's picture

And hopefully the US extradites those corrupt fucking thieves and the Chinese put a bullet in all their heads!

ozman's picture

The US wont extradite them as most of these corrupt politicians are in the pocket of the US and European EHMs from Hackulyt and InQtel.  If you know where the money come from, these money are printed by the fed out of thin air and taxed to the American people.  Yes the bailouts to the banks becomes bonuses and bribes to superpac ends up in accounts in George Soros' funds which ends up hiring EHM to assist Western Corporate interest to get contracts and seek higher yields for politicians investments. 

The great Canadian PM Harper's money together with the Power Corporation of Canada invested funds in George Soros' funds led to monies ending up in the pockets of Bo Xilai. The conduit is an account manager under George Soros and an agent for Hackulyt (founded by MI6) Neil Heywood.  When the nationalist triads (represented the by 7 members of the head committee) found this, Bo and his wife tried to cover it up by offing the MI6 agent while moving as much of the laundered US dollar denominated money taken from EHMs to foreign lands. 

China right now is undergoing a banking system reform and a monetary system reform that is getting all these anomalies into the limelight.  If you think that all these news spreading via Weibo is not endorse by the shadow government of China think again, they after all funded Weibo and traffic of all internet goes to back to the a government department similar to the US and Europe.  If you think your post are not viewed by the government, you must be drinking the kool-aid.

 

fonzannoon's picture

What would you rather own, a shitload of devalued currency, or prime U.S real estate?

We have the infrastructure, educational facilities and medical institutions. Plus food and water. While dumbasses like Newt keep looking to colonize the moon the chinese are just gonna root themselves in here while we go broke.

nmewn's picture

If you don't hold it, you can't own it.

Are we really saying we will respect the law and contracts now after all this?

Not me.

Muppet Pimp's picture

Legacy properties have no mers problems to deal with, particularly in all cash sales (no MERS title before or after).

Shell Game's picture

+1  Eminent domain of the Renewed Republic, I say.  

 

nmewn's picture

Same here, I don't give a flying fuck about meaningless contract law anymore.

Come get it and bring enough shit to hold it Wang.

nmewn's picture

+1

They've corrupted the entire process with the EXPECTATION it will be honored by the honorable?

Nope, it doesn't work that way. They better bring enough bodyguards and ill-gotten cash to buy more domestic guards.

And somewhere, Krugman smiles.

laomei's picture

Don't worry, they can afford all the body guards and protection they need.

The majority of these buyers are sucking up large estates that are somewhat remote and odds are you'll never find them or know where they are.

 

This actually ain't too bad of a move economically.  Taking all those dollars which had ben converted to RMB and boosting Chinese inflation... then converting them back, removing the RMB from circulation and dumping the cash right into the US at a time when it's printing like mad.  Seriously, this class of people has so much damned money it's not even funny.  A few million here and there is pocket change.

nmewn's picture

"Don't worry, they can afford all the body guards and protection they need."

I'm not worried at all, when I really put my mind to it, I'm a somewhat decent cook, chemist, outdoorsman, pyrotechnician, strategist, engineer, craftsman, marksman and propagandist.

I'm sure they would find me a useful employee in some fashion. They're only real concern is my intent & loyalty.

New World Chaos's picture

 

“Rememeber this. The people you're trying to step on, we're everyone you depend on. We're the people who do your laundry and cook your food and serve your dinner. We make your bed. We guard you while you're asleep. We drive the ambulances. We direct your call. We are cooks and taxi drivers and we know everything about you. We process your insurance claims and credit card charges. We control every part of your life... So don't fuck with us.”

Teamtc321's picture

"The majority of these buyers are sucking up large estates that are somewhat remote and odds are you'll never find them or know where they are."

 

If SHTF finally, do you really feel being tucked away in a nice, clean remote location is going to keep the un-savory mountain boys from slipping up at night? Keep those light's dim at night and the smoke down during the day is all I can say city boys.

 

 

bunnyswanson's picture

More extensive research with google searches including CMB (closed military bases) is needed.  They are buying everything including closed factories and abandoned warehouses.  There is a deal in place and great effort is being made to make investing in America easy.