China's Colonization Of America's Luxury Real Estate Market In One Chart

Tyler Durden's picture

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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buzzsaw99's picture

this is exactly what the maggots want

NOTaREALmerican's picture

The home-debtors in Cali aren't complaining either.    In Merica, we've got the system the property owners want.

AlaricBalth's picture

In the 1980's I recall reading a headline that said "The Japanese Are Buying Our Country With Our Money". Japanese investing in US properties topped out in 1988, when they spent $16.54 billion. Loose credit in Japan at that time was nothing compared to the lax standards currently in China. As it turned out, the Japanese top ticked the market as real estate, especially high end, rolled over and the S&L crisis reached its climax. 

In the 1980's, "The combination of excess liquidity in the banking system, financial deregulation and the country’s export “miracle” eventually led to overconfidence and overexuberance in Japan’s economy, which became the second largest economy in the world after the USA in just a few decades."

Just take out "Japan" and replace it with "China" and you get the picture.

Hongcha's picture

What with China having rolled over to the US on the FATCA issue, a top may be in.

SOMA San Francisco is rife with cranes (the metal kind) and city hall is awash in work permits.

The scene at say 1st and Folsom reminds me of Bangkok late 1990's.  There, the cranes stood idle for a long time after the 1997 Asian Tiger crash.

In SF, landlords have been selling out long, long-term renters left and right.  The renters have gone to Oakland which is the new 'Old San Francisco'.  They point accusing fingers at the mayor.

I am hearing insane prices for rentals in Oakland - $2500/mo. for little cubbyholes in Katy-bar-the-door neighborhoods.

Be that as it may ... a wave is not a stream.  The iKidz are not paid all that well and their stocks & options may have topped.  There are just not many citizens who can pay >500k for a small 1BR condo in SF, still less >1MM.

I am calling a major TOP here and now.

Prepare accordingly.

All jmvho.

chumbawamba's picture

What's funny is this: most of the houses being snatched up are foreclosures.  Every foreclosure in this nation presently and since the early 2000s is more or less fraudulent, and the "lender" (more like the servicer, i.e. just a lowly debt collector) doesn't have proper title to do so.  These foreigners are buying up properties with problematic chains of title.

In future years, when someone renting one of these foreign owned houses gets a 3-day notice, one might be able to do a proper Chain of Title Analysis, find out the foreigner took ownership based on a fraudulent Trustee's Deed Upon Sale, and challenge the foreigner's status as "owner" by filing a counter-claim in court with an action for quiet title.

These foreign purchasers are fucked.  The American mortgage/foreclosure industry (one in the same now) sold them a bill of goods.

I am Chumbawamba.

macholatte's picture


China is not Japan, not Korea, not the Arabs, not the Brits, the Irish, the Italians, the Mexicans or anyone else.

China = Predator

falak pema's picture

NOPE, The US oligarcgy cannot impose a Plaza Agreement on China to implode their money line like they did with Japan in 1987. Japan was a conquered nation after Hiroshima.

Not China; its ally WON in Nam; whence the ping pong game and then "OUTSOURCE" Chindia!

The game that destroyed middle class USA !

Thank you very much Bush/Clinton/GWB.

The US OLigarchs have made China king-pin since 2000.

trader1's picture

don't you want to extend your thanks all the way back to mr. henry and mr. richard?

                                         [  b i g   p i c t u r e ]

youngman's picture

a commission is a commission in any language

jcaz's picture

"Commrission" never translate well to them-  watch their faces as you tell them it's six points.......

bpj's picture

Now my car insurance is going to go up.

Buckaroo Banzai's picture

Q: How do you cut off an asian's peripheral vision?

A: Put 'em behind a windshield!

NOTaREALmerican's picture

The 500k Chinese buyer is mostly purchasing in LA and SF-Bay area, so it's not really luxury (exactly).   But, yeah, there sure are allot of Chinese people buying Real-Estate in Cali. 

lotsoffun's picture

The UK number is large also.  don't be fooled.  that's arabs via UK.

NOTaREALmerican's picture

Yeah,   I suspect the Asians are mostly west-coast and non-asians east coast, but regardless, Cali attracts people from all over.    Hard to beat the climate and diversity (assuming you can pay the price). 

Government needs you to pay taxes's picture

You talking about Long Beach Compton diversity?

NOTaREALmerican's picture

More like Orange County, Walnut Creek diversity.

angel_of_joy's picture

I say let them buy it all !

The joke is on them, once they realize the implications of buying property in a foreign country (taxes & fees, 3rd party administrators, tenancy laws, etc.)

An owner is nothing more than a cash cow, nowadays...

DoChenRollingBearing's picture

No problem.  Maybe we should find out what our condo is worth, and then add $1.5 million more to the price.  Or even more than that.  

The higher the price, the more money laundered successfully.  Easy-peasy!

Dr. Engali's picture

We get cheap Chinese trinkets that need replaced every year purchased with loads of debt, and they get hard assets..... sounds like a bargain and completely sustainable to me.

LawsofPhysics's picture

The Chinese are among the most racist people on earth. Once they own the luxury market, you can bet all the gardeners, pool-boys, etc. will be chinese as well.  I wonder how the hispanics in California are going to like that?

NOTaREALmerican's picture

They are also cheap.   The Mexicans will do fine.    Besides,  TRUE racists wouldn't hire a superior race to do inferior tasks. 

LawsofPhysics's picture

The mexicans are cheap you say?  Please, how many of them at Foxconn.  The Chinese hire Chinese, period.

NOTaREALmerican's picture

I meant the Chinese were cheap.   There's lots of Chinese in the Cali now.     The Mexicans cut their grass.     Beside, how many Chinese are even available to cut grass?    Cutting grass is for Mexican and Vietnamese immigrants, not Chinese (or Indians).    There are specific rules on what immigrants can do:  Indians do IT,  Mexicans do grass,   Vietnamese do grass and restaurants,   Chinese do universities.    

LawsofPhysics's picture

"Chinese destroy universities reputations."- fixed.  So much bogus "scientific" work in the public now, thank the Chinese for that.  many of the Chinese I have known admit that China is about one thing and one thing only.  Complete and total control of all humanity.  The word "China" itself means "center of the universe".  They only hire their own, period.

TradingTroll's picture

Yes they are racist, but the outcome is different.


At Vancouver Canada's UBC (University of Billions of Ch*nks), you can see the rarest cars in the world driven by Chinese students (they tell dad how much cheaper they are in Canada), all with 'N' sticker for new driver on the back.


In April-August, when UBC ends, Craigslist Vancouver has a selection of lightly used Bugatis and Lambo's with the outline of the removed N sticker still showing.


You dont see many non-Asians at UBC anymore. There are a few professiors and administrators, the staff in the Starbucks and cafeteria, the bus drivers.


Oh yeah, and for the rich Chinese who live on campus, in the trendy housing for high end foreign students (who pay 3x Canadians) all the gardeners and people mowing lawns, and window washers, dog walkers, are white.

angel_of_joy's picture

That's great for "the economy" though...

RaceToTheBottom's picture

The FED prints huge amounts of money making it fictional at best.

They use that printed money to buy real assets.  Who is nuts?

We still have the debt, they have the assets.

Government needs you to pay taxes's picture

And they will have to pay taxes on those assets.  This is where Uncle Sam bends 'em down!  No likey?  We'll just dispatch an MRAP and go a-SWATTING!

Hindenburg...Oh Man's picture

This is why Manhattan (and soon Brooklyn) is quickly becoming an island of offices, high end condos, Starbucks, and chain luxury stores...and nothing else. 

NOTaREALmerican's picture

The DNA bling of the Elysium class will do very well there.

Survival of the fittest, bitchezzzzz!!!

Dubaibanker's picture

One mind blowing statistic: China has used more cement in the last 3 years than USA has used in the last 100 years! 

 Please watch the video in this link: It is barely 2 minutes long. Vaclav Smil is a Canadian University professor whom Bill Gates follows religiously:

Interesting part in the video is that Dubai shows up in the end of the video in terms of quality and longevity of the things the modern world builds currently with a focus on Burj Khalifa.

 Some data on the Chinese economy straight from the UK Govt through their embassy in Beijing:

One more mind blowing statistic: Chinese economy has grown by just under 10% pa for 32 years now.

In terms of trade currency, the yuan is now the 2nd most used currency in the world after USD. This is creating very rapid demand for the yuan and provides a lot of support.

Even as of today, several US Govt officials are travelling to China today and claim that China's currency is undervalued:

 This suggests that in the years ahead, Chinese yuan will continue to appreciate against the USD and preserve the value of money.

 Form what I am hearing, there has to be a major reset of monetary system around the world and bring values of all currencies to reality in relationship to each other. If any such thing happens, then the Chinese yuan value will rise and USD will decline and all others will decline and get adjusted in relation to the Chinese yuan because China is the biggest spender, producer, consumer of almost every major item in the world. USD will not collapse but things will keep getting expensive in USD terms or in terms of other currencies hence their value will be lower in comparison.

 For example, China buys more Gucci, Louis Vuitton and Bvlgari items than the rest of the world combined.

It will be similar to what happened in Egypt over this weekend when the price of petrol was increased by 78% in 1 day!

Already in countries like Venezuela inflation is running above 60%. Internet and telephone prices are being jacked up.

 Even in a large country like India where inflation has been above 6% and sometimes close to 10% pa, railway fares, petrol prices have been raised just last week and more is expected in the months ahead. Mobile phone rates and 3G rates are being doubled in India since least year by various telecom companies. The ones who cannot make money keep leaving India, for example, Carrefour announced last night that they will shut down their Indian operations this month.

All the above increases are related in one way or another to the rise in the price of oil globally and consequently inflation and therefore lack of sales and profits. The interesting part is that we do not hear such inflationary stories from China where due to the rise in the value of their currency, inflation is around 2%-3% pa since 2010 and has been trending DOWN since 2008 and their growth continues undisturbed.

Meanwhile, in terms of total global usage of a currency worldwide, yuan has jumped from No 13 in 2013 to No 7 in 2014. From 0.63% worldwide in 2013, yuan is used in 1.47% of all payments worldwide.

The latest research from DBS bank issued a few days ago sums it very well. dbs game changers rise of the renminbi

The report is aptly titled 'Asian Game changers: Rise of the Renminbi".

Just a few of the global central banks who have started keeping Chinese yuan since 2010-2011 as a reserve currency just like I recommend to have some in portfolios are:

1. Malaysia

2. S. Korea

3. Indonesia

4. Thailand

5. Cambodia

6. Nepal

7. Nigeria

8. Australia

9. Abu Dhabi Investment Authority - ADIA

10. Sovereign Wealth Fund of Norway Govt

11. Qatar Investment Authority

12. Kuwait Investment Authority

13. Sovereign Wealth Fund of Singapore - Temasek.

Also, China, exports over USD 2 trillion in goods and services per annum which are stable for the last decade. This allows US and European consumers to send their money to China and continue the global trade. Just like we had the 'petro dollar' for decades now it is the turn of the 'trade yuan'!

That is why one can also hold yuan which should appreciate in value should any global monetary change happen. They have some issues down in China but they are not nearly as bad as in US or Europe hence aside from gold, yuan should also hold steady if any major monetary change occurs, IMHO.

Chinese are buying real estate around the world in most metro cities. The latest countries to be added to their long list is NZ and Dubai. London, NY, CA, Toronto, Vancouver, Singapore, HK, Australia etc are already tired of the Chinese but everyone needs what they have, and no else does!

jcaz's picture

Wow, I think you're really onto something here, Fuad-  who knew China was growing?   Show of hands, please....

combatsnoopy's picture

so when is China going to remove it's barrier to the US financial sector?  Clinton's Mulitlateral Investment Agreement circa 1995 between the US and China was a disaster.  
We need to stick 99 Wall Street in the middle of Macau and stick ticker tapes on teh slot machines.

Thanks to STUPID baby boomer  trash voting majority, I was the meal ticket to Asia Visa sponsors- one who was sponsored was an arrogant pos asshat like the rest of her family who like the US government- gamble away other people's shit.

Narcissistic control freaks and narcissistic ideologues are very dangerous people.  


Somebody is out there telling these foreigners that we have unlimited money to give away to them, yet these "somebody's" cant explain where the public funds come from WITHOUT A PRIVATE SECTOR.  


The Asians are going to lose their money on slot manchines and real estate anyways, we need to put them to good use. 

And I'm related to the ching chong baby beating self loathing backs tabbing trash.  

The fucking boomer and AMerican delegate/lobby sector impositioned me at their mercy and it si NOT working out .  

Excuse my "racism"- I am part Asian.  This is NOT good.  

angel_of_joy's picture

I beg to differ !

It is VERY good.

For them...

SethDealer's picture

Chinese fire drill

Government needs you to pay taxes's picture

I'm more than happy to welcome the Chi-coms to US property taxes.  May every municipality find a new way to soak the Communists!

str8face's picture

"Other" is Russia, right?

deepsouthdoug's picture

And when the Chinese Commies complete their Minsky Moment, they'll dump it all for whatever price they can get - spoiler alert - not much more than what a pinch of dog shit is worth. 

Salsipuedes's picture

I'm lovin' it! I just know I'm gonna get that penthouse in Vegas for 500 bucks and my Beatles LPs.!

PGR88's picture

If that's the case, the Chinese are going to get screwed.

Laddie's picture

They’re Coming to America (Chinese Plutocrats, That Is)

Don’t forget money laundering.

For rich Chinese, it’s easy to exploit naive American loopholes in the green card and citizenship system, They can score EB-5 permanent residence visas for merely $500,000 that they get back! And birth tourism is highly economically rational as Chinese language ads itemize.

On Independence Day, why don’t we show some independence, self-respect, and backbone and resolve not to let our fellow Americans be so crassly exploited by fast operating foreigners?

Salsipuedes's picture

Of course this has nothing to do with our crass, fast operating Countrymen.

p00k1e's picture

Detroiters welcome the new Chinese landlords.

But Detroiters still complain if you buy a Toyota. 

falak pema's picture

So China buys up the Augusta golf course? 

abatis's picture

Japan was buying Amerika at the top decades ago and look at them now. Everyone said the same thing about Japan as they are now saying about China. China also has a demographic problem with the two only children. Rinse repeat redistrubution of global wealth. Our insurance companies/hedge funds will buy all this crap back after the Chinese go bust and sell it to the next upstarts.

laomei's picture

China is buying under market conditions that are most definitely not "top", China's also got a shitload more wealth.

Uninvested funds sitting in personal accounts in China as of 2013: 100 trillion RMB ($16.2t).  Not even taking into consideration the semi-invested funds.  That's money looking for an outlet.  Property in China is HIGHLY RESTRICTED.  To buy in any hot and desirable market is a pain in the ass, and even then, it's still hot.  There are limits on LTV based on various factors, after you own 2 properties it's all gotta be in cash up front, and that's even if you're allowed to do it.  Non-resident? Wait 5 years with stable employment (no interruptions).  Chinese are buying in the US because it's cheap and the government doesn't really mind much as it's a great way to ditch some USD reserves and pull back in RMB to help with inflation.

laomei's picture

$500k is only 300w.  For a major city in China, that's NOTHING.  Hell, if we were to sell our villa (300sqm) and 2 apartments (130 and 50sqm) in Beijing we'd be sitting on 1800w or about $2.9m in cash to do whatever with.

But we like our villa, and we like our apartment, and our small apartment secures access to a top school as well as bringing in ~$1100 a month in rent income.  If we bailed, we could rent it all out and pull around $6k a month in stable, tax-free rent income paid 12 months in advance.


Now why are people buying the 500k+ places in the US? 2 reasons.

1) Money laundering

2) Chinese who are sent overseas for job postings tend to be rather foolish and want to do a full buy-in.  A lot of it is tech sector, and housing in tech sector cities is crazy expensive.  I know far too many people who did this and are now rather screwed.