China's Colonization Of America's Luxury Real Estate Market In One Chart
As we first reported two years ago, one of the primary reasons, if not the main one (there is also the Fed to thank) why the US housing market, and specifically its ultra-luxury segment, has experienced a recovery in the past two years even as the other segments of US housing have languished, was due to foreign investors laundering offshore funds in the US real estate market facilitated by the NAR's exemption from anti-money laundering regulations. This topic finally made the mainstream media recently with the NY Mag's article on just this topic titled "Stash Pad", which we also covered extensively. Today, for the first time, we have definitive evidence of not only all of the above, but granular detail of just how "easy" Chinese money has been when it comes to bidding US real estate.
As the WSJ reports, "foreign purchases of U.S. real estate jumped by 35% last year, and the Chinese led the way, according to a survey released Tuesday.
Chinese buyers have become the largest source of foreign cash in the U.S. residential real estate market, accounting for nearly one in four dollars spent by foreigners on American housing last year, the National Association of Realtors said in its annual survey of international property sales.
China accounted for $22 billion in international sales for the 12 month period ending March 2014, or 24% of all foreign sales, up from $12.8 billion, or 19%, during the year-earlier period.
Total international property sales rebounded last year to $92.2 billion, according to the NAR’s estimates, up from $68.2 billion in 2013 and $82.5 billion in 2012. The total represented around 7% of the market for all U.S. sales of previously owned homes during the same period.
This is shown in the chart below:
All of the above is well-known.
But the smoking gun is the following data point which confirms what was long suspected, namely that overseas buyers tend to hunt for trophy properties, and China wants the trophiest of all: "the median purchase price to international clients ($268,284 last year) is significantly higher than for all sales ($199,575). That’s particularly true of Chinese buyers, where the average purchase price topped $590,000 and the median exceeded $523,000. Canadian and Mexican buyers, by contrast, appear to buy much more modest homes."
So for all those upwardly mobile middle class Americans (amazing they still exist under the current central planning regime which takes from the middle class and gives to the ultra rich and uber poor) who are eager to buy a better house, and suddenly find themselves priced out due to an ongoing surge in the prices of ultra-luxury segment, here is what you need to know:
In short: confused who to "thank" for being priced out of the luxury housing market? Start with the PBOC and the $26 trillion or so in bank "assets" sloshing in China's corrupt and rickety financial system, which desperately are trying to get out, and when they do, end up being parked in the most expensive segment of the US housing market.
Was the money laundered and obtained otherwise illegally? It doesn't matter - recall that the NAR has an exemption from money-laundering rules, as the only thing it cares about is boosting the equilibrium price and pretending that the US housing market is "recovering" when in reality all that is happening is trophy properties serving as the New Normal Swiss bank account.
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