Look Out Manhattan - Chinese Foreign Real-Estate Spending Plunges 82%

Tyler Durden's picture

Earlier this month, Morgan Stanley warned that commercial real estate prices in New York City, Sydney and London would likely take a hit over the next two years as Chinese investors pull out of foreign property markets.

The pullback, they said, would be driven by China’s latest crackdown on capital outflows and corporate leverage, which they argued would lead to an 84% drop in overseas property investment by Chinese corporations during 2017, and another 18% in 2018.

Sure enough, official data released by China’s Ministry of Commerce have proven the first part of Morgan Stanley’s thesis correct. Data showed that outbound investment in real estate was particularly hard hit during the first half of the year, plunging 82%.

“According to official data, outbound investment by China’s real estate sector fell 82% year-on-year in the first half, to comprise just 2% of all outbound investment for the period.”

Overall, outbound direct investment to 145 countries declined to $48.19 billion, an annualized drop of 45.8%, according to China Banking News.

The decline is a result of a crackdown by Chinese authorities after corporations went on a foreign-acquisition spree that saw them spend nearly $300 billion buying foreign companies and assets, with China’s four most acquisitive firms accounting for $55 billion, or 18%, of the country’s total. The acquisitions aggravated capital outflows, creating a mountain of debt and making regulators uneasy. Late last month, Chinese authorities ordered Anbang Insurance Group to liquidate its overseas holdings. In June, authorities asked local banks to evaluate whether Anbang and three of its peers posed a “systemic risk” to the country’s financial system. As Morgan Stanley noted, these firms were responsible for billions of dollars of commercial real-estate investments in the US, UK, Australia and Hong Kong.

The pullback will likely be equally as devastating for residential home prices. Average sales prices for Manhattan residential real estate has continued to climb, but cracks are starting to appear. As we pointed out two days ago, 25% of homes sold in 2Q still experienced a price cut, with that number rising to 40-60% in trendy neighborhoods like the Upper East Side.

While falling real-estate prices would be an inconvenience for corrupt Chinese officials and other shady investors trying to stash their money as far away as possible from their homeland, they’d be a welcome relief for renters and young couples or individuals looking to buy their first home.

Across the US, asking rents hit all-time highs earlier this year.

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the artist's picture

Whats your point? 

We can all cherry pick some stupid stats. In any group or field your going to find hard workers. 

Are you saying that the Chinese are intellectually superior because they share the top ten in some obscure competition with Ural Federal University? I noticed University of Central Florida is listed as #15. I know that school well and its a 3rd tier school for Florida which is saying something. All leads me to believe you are being sarcastic and forgot the sarc tag. Where is MIT on this list?

And this is somehow proof that the Chinese that grift $ from their insanely corrupt system (where local officials literally steamroll over the locals and throw babies under truck tires to make way for their local $ making development project) are not morally bankrupt...and their children are not worse? 

You will need to do better. 

Blue Steel 309's picture

Allowing them to buy real assets is the condition by which the chicoms don't crash the USD and by extension the western civilization.

Anarchyteez's picture

Our exported dollars always come home.

Navymugsy's picture

You still can't afford anything in NYC so who cares if the Chinese aren't buying?

Yen Cross's picture

  I was just looking at the earnings calendar for next week.

 It's ALL RETAIL!!! 

  Grab your britchez bitchez...

Xena fobe's picture

Their 30 year long siege of RE investing and invasion has created a large diaspora of displaced Americans. The bastards destroy everything they touch when they arrive here.  Much if the west coast prime locations are turned into Chinatowns. 

But a reduction in buying is not enough.  These enemies on our land need to GTFO and any citizen who sold or facilitated a sale of RE to them tried for treason. 

 

Sweet Cheeks's picture

Xena fobe,
Live in a rural state so I have never seen a Chinatown. Would you explain how these new rich "bastards" destroy everything they touch.
Is it like a black ghetto? Crime and deteriorating housing and landscaping that is not maintained?

ProsperD9's picture

How else is the US going to pay their debts to China? It's like if you have debt and the lenders come and take your assets. That's what China has done with the US. Can't pay your bills, so we get your stuff. 

Anarchyteez's picture

Now this?! Coupled with NK prepper panic!

What shall we do???

Oh my scary scary. Fucking bring it on.

kiwigal's picture

The real estate market in New Zealand has ground to a halt too. They are spinning the lie in the main stream media that the banks tightening measures are to blame. The current government  has emphatically denied that Chinese money has been fueling the out of control house prices. Amazing that people can swallow a lie so easily. 

Davidduke2000's picture

Banks respond to orders from investors, they are the last to react. I expect very high interest rates and for this reason central banks are forced to raise rates until the market take over the interest rate market as real cash is becoming scarce 

wisehiney's picture

Yeah.

Get so high that no earthly creature can imagine you.

And then get in the elevator.

the artist's picture

Palo Alto is showing cracks. The realtors there are eating each other alive. 

Sellers want last years prices. 

Buyers want next years prices. 

Brokers are promising last years prices to get the listing

Buyers agents are advising their clients to wait and see. 

A classic mismatch!

Davidduke2000's picture

the realtors there are fags and have been eating each others for years. 

silverer's picture

So the horns are falling off the unicorns? About time.

Let it Go's picture

The financial missteps in China have continued. China is no small underdeveloped backwater with an insignificant economy and it is important to remember that "what happens in China does not stay in China." Growth in China has been fueled by its government expanding the money supply and debt, that is distorting markets across the world.

This extends to things like causing housing prices to soar in many parts of Canada. This is why it is so baffling that many economists have chosen to ignore or given a pass to the ramifications of China's policies as they affect the big picture. More on China's economy below;

 http://brucewilds.blogspot.com/2017/07/chinas-financial-missteps-continue.html

the artist's picture

We need to understand that the growth model that China has been on is totally unsustainable. They poured more concrete from 2011-2016, 5 years, than the US did in our entire history. 

Ponder that for a moment. 

A 7% growth rate means a doubling every 10 years, that means twice the energy, twice the steel, twice the concrete, twice the asphalt, twice the water, etc etc etc

Does anyone believe that they can build and sustain twice as many ghost cites this decade as they did last? and double that again the next? 

I dont remember who said it but it "Aint gonna happen".

The central bank credit systems of the world are dependent on this kind of positive growth. To even tread water is death to that model and means pain and suffering on an unprescedented scale. 

Hedge accordingly.

 

 

raybies's picture

They used invented money... so their belief is, be quick before the stupid white wide eyed people realize they've been had.

Davidduke2000's picture

it was about time to start executing some crooked Chinese who steal the country's money and buy american real estate at inflated prices. now the only real estate they will enjoy is 6 feet under very cheep.

silverer's picture

This means the Chinese are pretty sure N Korean missiles can reach NY?

45North1's picture

Marked to Market, you know how you get hungry soon after you've had Chinese Food?

agentsmith308's picture

Say Good bye! go back to that shit hole you call China.

idontcare's picture

Just saying, but have you been to the mainland in the last 20 years?  Better infrastructure, more modern cities, highly educated workforce, etc.  The government might call their economic structure "communistic" but if your weren't aware of their governmental structure, you'd think they were the goddamned Ferengi with decent taste.  China is thriving while most of the U.S. is devolving to resemble Detroit.

 

agentsmith308's picture

Fuck them! get packing.

Megaton Jim's picture

Fuck the Jew bastards selling them the property!

Pigeon's picture

Asset price bubble?

Express elevator to hell, going DOWN.

gdpetti's picture

Trying to avoid the example set by the Japanese... this concern has become rather large in the last few years.... and peaked out until the Party finally decided to tame it, before it rushes over the cliff... again that Japanese example looms large in their minds.

raybies's picture

Over on Weibo the Chinese are pissing themselves with how farking stupid you wide eye folk are... seriously. They invent money, set it's value (it's not flaoting, is it!?), go shopping for real assets in your country and you accept it... go to admit you are seriously dumb.