As reported in the Zero Hedge, the tightening of money in China is impacting North American real estate, with the Wall Street Journal estimating that more than 1 billion dollars of property has been dumped in the United States as Beijing moves investors into debt-reduction regulations.
In the third quarter of 2018 “Chinese investors dumped $1.05 billion worth of prime US real estate in the third quarter while purchasing only $231 million of property, according to data firm Real Capital Analytics. This marks the second consecutive quarter where investors were net sellers of US commercial real estate, and the first time investors sold more US property than they bought since the 2008 crash.”
This is a major change in Chinese investment which has been concentrated in the largest cities in the United States. While never a major buying block in that country, those investors paid very high prices in the real estate market. That seems to have ended because of Chinese governmental restrictions on capital leaving the country. While there is still Chinese interest in American real estate investment, the capital to invest can no longer flow without intense scrutiny. A development site purchased by a Chinese development group in Beverly Hills California four years ago for $420 million was sold for the same price this year, despite the high carrying costs.
Because of the high amount of credit borrowing in China, credit creation is difficult in China, suggesting why assets are being liquidated in the United States. I have written about the fact that 22 percent of bought units in China are vacant, representing a million units. Those speculative buyers could be impacted if a selling frenzy commences, dropping the prices of those held units. In the interim as credit becomes tighter in China, “Prepare for a global slowdown in 2019, one which has already hit the US housing market hard.”