Chinese Developers Rethink U.S. Real Estate Projects: "I See Danger...U.S. Real Estate Is Peaking"

Tyler Durden's picture

For months we've been warning that real estate markets in NYC and San Francisco, among others, are getting ready to rollover as the market is about to be flooded with new supply of luxury apartments (see here and here).  Real estate in both markets are just starting to show signs of cracking as the apartments sales cycle is getting stretched out and pricing growth has stalled. 

Now, per an article from the Wall Street Journal, wealthy Chinese real estate investors are admitting that the jig is up in large cities like New York and are running for the hills.  With a substantial amount of capacity expected to come online over the next several quarters and a growth cycle that is entering its 8th year, one Chinese real estate investor admits "you get a sense now that it’s peaking."

Swelling supply of high-end New York condominiums could result in losses for some Chinese developers, analysts said. A push to partner with U.S. developers on other projects, meanwhile, has brought unexpected legal spats and other delays.

 

“I see a danger in the real-estate market in the U.S.,” said John Liang, Xinyuan Real Estate’s managing director of U.S. operations. “With its seven- to eight-year cycle, you get a sense now that it’s peaking.” He added that he sees value in middle-tier residential properties in Manhattan and Queens.

 

“Right now the prices are really high,” said Zhang Xin, chief executive of Soho China, whose family invested in a stake in Manhattan’s General Motors Building in 2013. “I would be very cautious if I were to make a large investment in New York’s real estate today.”

NYC

 

Of course, Manhattan isn't the only Burrough experiencing a supply glut.  Forest City Realty was just forced to take a $300mm impairment charge on a joint venture with a Shanghai-based development company after "unprecedented rental supply in downtown Brooklyn" forced the copanies to delay development.

CL Investment, which has three other high-end residential projects in Manhattan, plans to keep the office space as part of efforts to diversify, according to a person with knowledge of the matter.

 

In Brooklyn, N.Y., a deal between Shanghai-based, state-owned conglomerate Greenland Holding Group and Forest City Realty Trust on a 22-acre, 15-building mixed-use project in various stages of construction is facing stiff headwinds.

 

Forest City earlier this month said it took a $307.6 million impairment charge for the project, called Pacific Park Brooklyn, and said it plans “to delay future vertical development.”

 

“We revised the schedule due to a number of factors, including almost unprecedented concentrations of new rental supply in downtown Brooklyn, which will take time for the market to absorb,” said Forest City CEO David LaRue.

Just to add insult to injury, the softening real estate market is coming just as China is once again looking to tighten rules on capital investments outside of China. 

The headwinds come at a time when Beijing once again is planning to tighten its rules on Chinese investment capital leaving the country.

 

The Chinese State Council is expected to soon announce new reviews of foreign acquisitions of $10 billion or more and property investments by state-owned firms of more than $1 billion, according to people with direct knowledge of the matter and documents reviewed by The Wall Street Journal.

 

Total Chinese direct investment in U.S. real-estate and hospitality assets is nearly $12.6 billion, accounting for nearly a fifth of total Chinese investment in the U.S. since 1990, according to a recent report from the Rhodium Group and the National Committee on U.S.-China Relations. Most of the activity has taken place since 2010 and is concentrated in areas such as New York, Los Angeles and San Francisco.

Of course, no matter what kind of capital controls are put in place, just like the Vancouver and Sydney real estate markets, we suspect that when Chinese money needs to be laundered, people will find a way.  The only question is now that yet another bubble has run its course, where subsequent bubbles will emerge.

* * *

For those who missed it, below is what we recently wrote after 3Q16 apartment closings plunged 18.6% in NYC.

New York City apartment owners should take note of the latest 3Q16 "Elliman Report" on Manhattan real estate sales because the market looks to be in free fall.  In fact, the number of apartment closings plunged 18.6% YoY while apartments sat on the market an average of 8.2% longer.  Inventory also spiked with re-sale inventory up 8.2% YoY and new development inventory up a massive 27.2%.   

"The number of re-sales has fallen year over year in each of the last four quarters at an increasing rate.  Listing inventory reflected significant differences in the rate of growth between re-sale and new development.  Re-sale inventory expanded 8.2% to 5,290 while new development inventory surged 27.2% to 973 respectively from the same period a year ago."

Median sales prices did increase YoY by 7.6% but collapsed QoQ despite a massive surge in pricing on the luxury end of the market.

NYC Real Estate

 

The re-sale market looks even more bleak, on a standalone basis, as the overall numbers above are skewed by sales of super-luxury new development units.  The number of re-sale closings collapsed over 20% YoY while days on the market increased 7.5%

NYC Real Estate

 

All segments of the market exhibited volume weakness with co-op sales down 17.1% YoY on a 14.1% increase in listing days and a modest 1.4% increase in median sales price.

NYC Real Estate

 

Condo sales declined 20.1% YoY on a 2.4% increase in listing days and a 6.7% increase in median sales price.  Meanwhile, condo inventory rose over 15%.

NYC Real Estate

 

And, of course, the luxury market seemed to hold up the best in 3Q with volumes still weak at -18.6% but median pricing up 23.9% and listing inventory down YoY.

NYC Real Estate

 

In conclusion, the lesson seems to be that the marginal New York City buyer has been priced out of the market (volume down 20%) while sellers have not yet accepted that the bubble has burst deciding instead to maintain listing prices while letting their apartments sit on the market longer amid growing inventory levels.  Meanwhile, the luxury market is the only segment that seems to be holding up which only serves to prove that Chinese billionaires still have cash they would like to hide in the U.S.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
buzzsaw99's picture

usa real estate is where hot money goes to die. history may not repeat but it does rhyme.

ITIME's picture

Money never dies, wtf. Didn't you watch Gordon Gekko in "Wall St": it never begins or ends, just transfers. Wtf kinda comment did you make, on this site. Are you General Petraus in disguise?

 

Another tip, "sell high, buy low". Got it yet?

 

And oh yes, if you want to debate that mooney is created by the Fed out of thin air, well, where I used to be and you are at, you'd realize that you are right, however, you could be more right:

that mooney out of thin air routine, was the logical conclusion to 'the problem' (kinda like 'the architect' in the matrix ii and matrix iii).

 

After you see that problem, you know that is not the extent of the problem. That problem leads to the 'take workers sweat and wealth off of them as we disguise it for less than that'; called 'extracting the slave labor without the slaves knowing it; best kind of slaves there are, right Aztec, Mayan, Egyptian and Roman and English!)

I am jack's self-eating conscious.

Save_America1st's picture

Tell the NYT to fuck off, Tyler...gee, how'd they come up with this stunning theory????  Lemme guess...they read ZeroHedge all day and then steal all your hard work and analysis with they're own retarded "spin" on it.

Meanwhile, the "MSM" is going to continue to go "full retard" calling you "fake news" when it has been them and the government and the entertainment industry, etc. who are the complete, treasonous, fraudulent, fakes.

Nemontel's picture

There cannot be any objectivity in the leftoid media. They follow a different evolutionary strategy from conservatives. They will never report objectively. http://www.truthjustice.net/politics/rk-selection-theory-ends-all-politi...

 

Stuck on Zero's picture

A seven or right year cycle in real estate means that now is the best time to invest in a new project. It takes seven or eight years to get all the permits and perform the construction. You then have units coming online just as the market peaks.

JRobby's picture

2 Weeks, 5 days.

"well, where I used to be" very recently it seems.

3 injections of Haldol a day and the white room for bad behavior days.

4 wheel drift's picture

"I see danger in US Real Estate"

 

-lol

"i see dead people"

[in china]

Stan Smith's picture

They see the danger in Real Estate here, but somehow, someway have managed to completely ignore whole cities and towns go up in China that are 90% empty.   

I think its safe to say, at least as private capital goes, China is reactive and proactive.

cowdiddly's picture

I was in the mountains the other day. 40 miles from nowhereville.

came across this spot that had Irises sprouting up out ot the ground in the middle of an old growth forest. Real strange place for bulb flowers to grow. You know ole lady flowers. Not a soul around for miles. I looked around some more and seen a small pile of rocks sticking out of the leaves in what used to be a chimney,

I learned more about real estate that day than 1000 days on zero hedge.

ITIME's picture

Every time you comment, I thank God for the girl on the left in your avatar.....

Then I curse the devil for that girl on the right.

Life in summation.....

cowdiddly's picture

Yea that Devil Woman on the right is a Red Head. Wild one she is. Will hurt yer feelins sometimes.

...................but they are both just gold diggin sluts :7)

opport.knocks's picture

So you are saying you didn't already know:
1. location, location, location
and
2. everything that is built must be maintained

runswithscissors's picture

US Real Estate is Peking? WTF??

napper's picture

LOL. Good humor with the word.

 

The choice of the word "Peking" in the West (or Britain, originally) has an interesting but somewhat hidden (or unannounced) history. It was a play based on Cantonese pronounciation (used mostly in Hong Kong) of the name, meaning Northern Capital, but sounds more like "Bud King". Of course, given China's (or Ching Dynasty's) utter defeat at the hands of the Brits,  someone (I don't know who), applying typical English humor and sarcasm, substituted "Pee King" (which in English means the defeated king) for "Bud King". The name would later morph, for obvious reasons, into the more diplomatic "Peking" and would be used for decades before "Beijing" replaced it after the British handover of Hong Kong to China.

 

So, are you saying US Real Estate is now a "Pee King" (the defeated king), or "Peking" (under Peking / Beijing's influence), or "Peaking"?

Arnold's picture

Nicely informative.

Chip off the old rock, you are.

MadRunner's picture

The Chinese drove the price up to begin with.

Oops

idontcare's picture

So if the Chinese take their money and run,  all the  "high end" 1000 sq ft Miami Beach and Downtown Miami condos go back down to the $250K from $10M+?   Who would have "thunk" it?!

indygo55's picture

Great plan. Let the Chinese buy them and then crash the economy and let the Chinese take the deflationary hit. Just like the Japenese in the 80s.

 

Clock Crasher's picture

Bubble Flakes now with extra housing bubble marsh mellows

Dr. Bonzo's picture

How generous of Americans. You allow a gang of foreign fuckheads to waltz into your lands, buy what they please, then install their offspring in your finest schools, all for a fee, which they handover without a thought, because it cost them not one iota to print it, and then burrow into the highest echelons of your society within one generation. And you are owned. And here come the Chinese hordes......

Try that shit in China. Pffffffff.......

No more free trade. Reciprocal trade or none at all. Either we have all the rights and privileges we throw at fucking commies in CHINA which they enjoy in the US, or they can take their monopoly cash and shove it up their ass.

Wake the FUCK up America. Good grief.............

Lost in translation's picture

US is becoming a Chinese colony.

California has been for some time, now.

ITIME's picture

We need to fuck their women and create more us. Chinese men just gave up on our land trying to fuck our sons via teir daughters and education, we should go buy up theirs having our sons fuck their daughters, thus, carry-on with propogation of our way. And very tight btw....

Dr. Bonzo's picture

US is becoming a Chinese colony. California has been for some time, now.

 

I sometimes imagine what China would have looked like if Chiang Kai Shek had won the Chinese Civil War. So forgive me when I don't particularly hold the CIA in any high regard. They overthrow the government of Greece... but allow Mao to grab all of China and Chiang is lucky to escape with his life. It's not that Chiang was any particular humanitarian, not by a stretch, but he was more in the Park Chung Hee mold and had great aspirations for China, very early. The Taiwanese computer industry was up and running before the US's computer industry was and forging Taiwan into an industrial powerhouse beat the commie fucktards by 60 years, while the only practical use the commies could find for the peasant class was digging their own graves and blowing their brains out. Now we allow the offspring of these genocidal maniacs to carry the fortunes they built ripping off their own country to turn around and burrow into our society without any sanction whatsoever. We're getting the sons and grandsons of Joseph Mengele next door and we're fucking smiling about it. And tomorrow they own the town. SMFH.....

Imagine a China that looked like Taiwan. What a party that would have been.

And now we have the People's Republic of Sheeeeeena and 1 billion Chinese who don't even know their own history, who have lost all touch with their own culture, their own heritage and who have become corrupted by pure raw unadulterated greed and materialism underwritten by genocide, theft, graft, torture and fraud.

Thanks Allen Dullus. You gigantic fucking turd.

indygo55's picture

It kept them down for a couple of generations didn't it? Mission accomplished. (sarc)

indygo55's picture

Go to the Back Bay in Boston the week after Labor Day when all the schools are just in session. You'd think you were in Beijing. 

ITIME's picture

Yes, I will try that in China, and take over the commies. 

 

I heard some dude in India married a couole thousand women at once. My brown hair, blue eye, stud bull can rob their asses for  thousands per fuck, and I bet I can go 100k plus. So get on my team, ensure those 100k are to the richest commies (yes, even if they look like chelsea klingon), and Ill redice tue natiobal debt by iwning each parents labd, then starting a civil war with north commie russia, then owning their parents.

 

If I could charge entrance to Heaven, I would have owned it all, btw, no better business model....

Arnold's picture

I've read two of your posts now.

You seem to have some sort of mental impairment

Sorry_about_Dresden's picture

We might easily sorve thi problem w/ a constitutional amendment banning dual citizenship. The Khazras would go apeshit, but it seems the only solution to me. If one wnats the befnefit of citizenship they must give up all others. That will fix them.

Cheka_Mate's picture

Brooklyn is swarming with Chinese capital following into overpriced neighborhoods.  Even shitty parts like Sunset Park are being propped up by foreign buyers.  They send in a team of workers that just arrived by boat a few weeks earlier to do renovations, then put it back on the rental market.

Eventually, there won't be enough suckers in Brooklyn to live in slum areas hence the market collapse..

yogibear's picture

Where else would the Chinese use all those US dollars?

Bad Whitey's picture

Oh, for goodness sake.  Manhattan and San Francisco apartments are not representative of "U.S. Real Estate."  

ITIME's picture

No,  not at all.

 

It's because they can't reproduce without paying tons of dough for it. Thereforex they are a losong bet in the long run.

 

I am not against homosexuals, but betting on them in the long run is like betting on a snake that eats its tail....not good business sense over time....

Justin Case's picture

Not to worry, capitalism always triumphs over communism and socialism. When they collapse we'll get a loan and go buy up their stuff or Switzerland or Norway or Sweden. The world will be our play ground. Palaces for all.

TradingTroll's picture

Capitalism? Whats that??

I don't see it in any Western country

I do see crony capitalism wrapped inside the flag of democracy, while being sucked dry by socialist parasites, though

roddy6667's picture

What's the matter with you? Don't you read the propaganda manuals and talking points your handlers distribute in your sector? How can you be a good citizen if you don't believe what your government and its captive media tell you to believe?

/sarc alert

chosen's picture

We need to get the chinks out of our real estate markets.

yogibear's picture

We need them in. Somebody has to be the bag holder.

Scrubbing Bubblez's picture
Scrubbing Bubblez (not verified) chosen Dec 3, 2016 3:56 AM

No, we need kikes out of NYC real estate!

GRDguy's picture

From the movie "Enemy of the State": (when Edward's hideaway had to be blown up.)

Robert (Will Smith) "Why is this happening?

Edward (Gene Hackman) "You made a phone call."

(Trump called Taiwan)

ITIME's picture

So why don't our wealthy buy up their earthdirt cheap land, as they did ours, since they just admitted our land is too rich for their taste.

Oh yeah, cause their sick asses are fucked, and no one but their poor wants to live there.

I wonder if we could threaten with earthquakes with 100 percent accuracy, if we could rule all?

your Mother Earth is my mistress and I just grabbed her by the pussy. I'll send her a brother.

Your are all 'normies', ahahaha at you.

yogibear's picture

Come on Chinese developers,

Are you afraid of the same thing that happened to the Japanese with Hawaiian real estate?

any_mouse's picture

No one under 55 will understand the reference.

Exactly. Peak Nihon.

TeraByte's picture

I See Dangel....US Leal Estate Market Is Peaking....
= outflow of illegal capital flom the Main Land became culbed

ITIME's picture

If we commie the commie, then we become the commie.

 

F that, read "Revelation", let the angels do it, and get to f Klingon and Podesta for trur justice.

An angel per corner of the world, and they can teleport, so beat that, "normies", ahahaha

Scrubbing Bubblez's picture
Scrubbing Bubblez (not verified) aliens is here Dec 3, 2016 3:55 AM

If they outlaw commies, then only outlaws will be commies!

Bunga Bunga's picture

"U.S. Real Estate Is Beijing"

ITIME's picture

Only because they want our sons to impregnate their daughters.

We are holding out cheap, period. Brown-haired, blue-eyed men are in demand, let's stop the unfactorial bs and  charge the fockers, then get to till their cheap-ass land with their children, like English taking Native Americans. 

They want our cock, for their survival, duh.....suck it for your survival, cock-smokers.

Their dads' lands are peasant-cheap. Bring our brown-haired, blue-eyed sons to China's tight-twat daughters, and mill their ground, we will take them over like Aztec times.

Suck it world, our genes rule, and will rule, so get used to it since you can't think 2 steps ahead.

I am jack's proto-generion....

WorldvsAmericaWW3's picture

United States real estate market, Art market, classic car market, antiques market all topped in September 2015. The decline is now escalating to a point where they cannot hide it anymore, so they are dropping a bit of truth here and there. 

Equities are a bit of a joke, despite the recent run up, there was no money made. The only buyers of Stock are central banks, domestic and foreign and the Exchange Stability Fund. 

Get ready interest rates going up in December as a big fuck you to Trump and the average guy, the wealth transfer picks up where it left off in 2009..

Because Bush and Obama "fixed" so many laws, the coming wealth transfer will strip the assets from the workers, but the debt will remain to be paid by the assetless individual. They will be no revolt, no riots no problem as most have no idea what is coming