Here's The Most Alarming Sign Yet That Manhattan Real Estate Is Heading For A Crash

The Chinese government’s latest crackdown on capital outflows and corporate leverage is intensifying, and that’s bad news for Manhattan’s property market.

According to a report by Morgan Stanley cited by Bloomberg, new restrictions being imposed on the most acquisitive Chinese companies will likely lead to an 84% drop in Chinese overseas property investment this year, and a further 18 percent drop in 2018.

The markets most vulnerable to this slowdown, according to MS, are the US, UK, Hong Kong and Australia, with commercial properties the most vulnerable.

Manhattan commercial real-estate prices could fall sharply.

“Manhattan is a particular worry, with about 30 percent of transactions in the borough that’s home to Wall Street involving Chinese parties in 2017. In Australia, China is the largest foreign real estate investor, accounting for as much as 25 percent of office property transactions in the last two to three years, according to Morgan Stanley.”

As we reported on Tuesday, the Chinese government is pushing Chinse insurance company Anbang – the company that was in talks with Jared Kushner to buy his company’s stake in 666 Fifth Ave. -  to liquidate most of its overseas holdings and repatriate the proceeds of the sale. The company, whose chairman was detained by Chinese authorities in June, responded by saying it has no plans to comply...but we think the Communist Party will find a way to convince the company’s executives that deleveraging is in their best interest.

Chinese authorities appear to be trying to reverse the global M&A binge that helped aggravate capital outflows, leading to a massive drawdown of the country’s foreign-exchange reserves.

Back in June, China’s Banking Regulatory Commission dealt an embarrassing blow to Anbang and three of the country’s other top conglomerates by demanding that banks examine “systemic risks” posed by Anbang, HNA, Dalian Wanda and Fosun International before lending to them. The announcement triggered a sharp drop in the share prices of companies controlled by these conglomerates.

Since 2015, the four companies completed a combined $55 billion in overseas acquisitions, 18% of Chinese companies’ total.

Anbang also got caught up in a crackdown on “improper innovation” in the securities markets after it helped finance its expansion with sales of lucrative wealth-management products that offered among the highest yields compared with peers, a key spoke of China's $9 trillion shadow banking universe. The move forced regulators to implement restrictions on high-yield, short-term investments.

Weakening demand from Chinese individuals and corporations represents another headwind for real-estate markets in the most expensive US cities, which are facing a boom of new supply in the coming quarters. Commercial real-estate sales in New York fell to a six-year low during the first quarter in anticipation, as we’ve previously reported.

Residential real-estate markets are already feeling the pinch of the Communist Party’s efforts to suppress foreign real-estate deals with new capital controls. Already, New York City is seeing fewer apartments sell for above the listing price, a sign that demand in one of the world’s hottest residential markets is cooling. In a nightmare scenario for New York real-estate developers: Demand is ebbing just as an influx of new supply is hitting the market. You can probably guess what kind of impact that will have on prices.


Clock Crasher Creepy_Azz_Crackaah (not verified) Wed, 08/02/2017 - 20:17 Permalink

Die? No. Just priced out of certain markets.  Basement dwelling at its finest.You can't buy a house in NY metro unless your paying cash.  My buddy was house shopping for 18 months non stop. He would put a bid in then get out bid by cash buyers.  He eventually got a loan from his pops who leveraged his life savings to transfer to him so he could make a cash offer himself.  Then after a month refi the home and pay back the dad.Thats how business gets done here.But no one is going to die.  Just be underwater when rates rise.. but I capitulated so I see rates rising so time next never.Ma! The meatloaf! We want it NOW!

In reply to by Creepy_Azz_Crackaah (not verified)

Clock Crasher Clock Crasher Wed, 08/02/2017 - 20:12 Permalink

I had been gone from the states H1 2017.  I drove into the city from PA for the first time a few weeks ago and noticed for the first time these two monstrosities.  I thought to myself "well that makes sense" considering the real estate bubble 2.0Fort Lee is.. Meh. dont get me wrong is a step up from a lot of other near by neighborhoods but two gaudy sky scrapers?  They are post modern dead-tech to quote Heat

In reply to by Clock Crasher

Clock Crasher JackT Wed, 08/02/2017 - 20:33 Permalink

definite glare hazard and possible air craft hazard.  They blend in with the sky so well. There is a move theater around the block with a row of what I can only describe as a leather BED with a table, then a second row with what I can only describe as 10,000 dollar leather recliners with a table and a menu for expensive wines n tickets in those seats are 35 a pop and the beds in the front row are point blank close to the screen, you have to break your neck to look up and even then you cant see too well.status.

In reply to by JackT

Son of Loki Wed, 08/02/2017 - 20:14 Permalink

The #1 foreign buyers for residential are actually Canadians with Chinese a close second. But there are local variations such as in Cali where the #1 are Chinese but in Flordia the #1 by far are Canadians, #2 Chinese and #3 Swedes, #4 South Americans.That's what I have read anyway.

DaBears Wed, 08/02/2017 - 20:44 Permalink

What good is Chinese "money" if you can't spend it the way you want to? If I want to blow my wad hiring 100 hookers every night and renting out Trump tower until I'm broke, it's my fucking business! That's what I call freedom asshats, nobody need a communist babysitter commanding anyone on how to waste their issued toilet paper. Fuck China.

chosen (not verified) Wed, 08/02/2017 - 22:44 Permalink

Finally getting the chinks out of our home real estate markets.  We now need to confiscate all homes of foreigners not lived in by the owner of the home.

sinbad2 Thu, 08/03/2017 - 01:20 Permalink

Americans are pissed, because the Chinese are doing what Americans used to do.Americans used to swagger around the world, flashing their great wealth, now the Chinese are doing it in America.What goes around comes around.

Ross123 Thu, 08/03/2017 - 04:40 Permalink

I'm old enough to remember when the Japanese were going crazy buying Manhatten property (and many other parts of the US). History repeating itself.