WALL STREET & THE CHINESE GOV’T ACCOUNT FOR ALL THE CASH PURCHASES OF HOUSES

As the mainstream corporate media, controlled by Wall Street and the government, continues to spout off about a housing recovery, the data proves that average people are NOT buying homes. Average real people must get a mortgage when they buy a home. Mortgage applications are at 15 year lows and going lower. The talking heads and mouthpieces for the oligarchy conveniently ignore this FACT as they generate their feel good propaganda and publish on-line and in their newspapers.

The number of cash purchases of homes is at a record high. As detailed previously, a huge chunk of these purchases are by Blackrock and the other Wall Street shyster firms as they attempt to drive prices higher and relieve the insolvent balance sheets of the Too Big To Trust Wall Street Cabal. Their buy and rent scheme was developed in conjunction with the Federal Reserve and the U.S. Treasury Dept. Bernanke, Yellen, Geithner, Lew, and Obama have conspired with Dimon, Fink, Blankfein and the rest of the Wall Street criminals to keep young people from ever purchasing a home at a fair price.

The other piece of the cash buying puzzle is detailed below by Mike Krieger. The Chinese central authorities have surpassed even the Federal Reserve in blowing epic bubbles with their easy money cronyism. They have blown an epic real estate bubble in China that is in the process of bursting. The hoard of government connected millionaires and billionaires in China have switched their sights to the U.S., just as the Japanese did in the late 1980’s. We all know how well that worked out for the Japanese.

These Chinese buyers are temporarily rich and they are stupid. They do not care about value. They are just attempting to convert their ill-gotten cash into hard assets. They don’t care about price. The result is that prices, especially on the West Coast, have been driven higher. All the price statistics put out by the NAR, Case Shiller, and the Census Bureau are worthless in assessing the true health of the housing market. The entire “recovery” is a government created fraud.

This central bank created bubble will end just as all their previous bubbles have ended – with tears and wealth destruction on an epic scale. Meanwhile, the well connected cronies on Wall Street and in Beijing utilize the free money to enrich themselves and impoverish savers, the young, and anyone foolish enough to purchase at these prices. So it goes.

Via Mike Krieger

Chinese Purchases of U.S. Real Estate Jump 72% as The Bank of China Facilitates Money Laundering

Screen Shot 2014-07-09 at 12.01.36 PMAmerican citizens already have a hard enough time affording a home. Squeezed out by financial oligarchs buying tens of thousands of properties for rental income, and faced with real wages that haven’t budged since the mid-1970s, the demographic of U.S. citizens that historically dominated the new home market has been forced to live in their parents’ basements. Just to kick em’ when they’re down, Americans now face the impossible task of competing with laundered Chinese money.

Of course, this isn’t a new trend. I first covered it in January 2013 in the post: Corrupt Chinese Politicians are Buying Billions in U.S. Real Estate. This was then followed up a couple of months ago in the piece: Zillow Opens the Floodgates to Chinese Buyers in Order to Keep Housing Bubble 2.0 Inflated.

 

While this trend may not be new, it is certainly accelerating. According to the National Association of Realtors in its annual report on foreign home purchases, transactions from Greater China (includes Hong Kong and Taiwan) were up 72% in the past year to $22 billion. In some California communities, 90% of real estate buyers are from China. Yes, 90%. Naturally, many of them are buying multi-million dollar homes in “all cash” transactions.

Bloomberg reports that:

Henry Nunez, a real estate agent in Arcadia, California, met with so many homebuyers from China that he bought a Mandarin-English translation app for his phone.

The $1.99 purchase paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one designed for smoky wok cooking. The buyers were a Chinese couple who paid $3.5 million in cash.

Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the year through March, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.

Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales.

Publicly traded builders are responding by catering to Chinese buyers in areas with high demand.Brookfield Residential Properties Inc. staged feng shui blessing ceremonies before beginning work on projects in Anaheim and Foothill Ranch communities in Orange County, south of Los Angeles. The New Home Co. consulted with a feng shui master on the land plan for its Orchard Park development in San Jose, California, that opened in April.

Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.

“About 90 percent of my buyers are from China,” said Peggy Fong Chen, a broker with Re/Max Holdings Inc., who sold 80 homes in Arcadia last year. “They want new construction. They want two levels. In China, it is considered a mansion if it has two levels.”

Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and ’80s, tearing them down and erecting sprawling houses like the one Nunez sold for $3.5 million, which has a double-height entry hall and wood-paneled library.

“Local people really cannot afford these most of the time,” Chen said.

Since when did anyone care about the interests of the average American citizen anyway?

“A Chinese national bought one of our houses at Arcadia in Irvine after reading about it on a blog,” Tri Pointe CEO Doug Bauer said in a telephone interview. “It was a Chinese blog. We couldn’t even read it.”

Some wealthy Chinese have come up with ways to evade the yearly $50,000 per-person limit on taking money out of the country so they can buy U.S. real estate, Yu said. Methods include laundering money through Macau casinos and cooking the books of import-export companies, he said.

More on this later…

“A lot of people over-invoice export proceeds, so they can park some money outside,” Ha Jiming, chief investment strategist for Goldman Sachs Group Inc.’s China investment management division, said at a Los Angeles conference in April.

“It’s just the beginning of a tidal wave,” he said in a telephone interview.

Overseas buyers are changing Arcadia, according to Nunez, 55, who has lived in the city since he was 6 years old.

“You drive every street and there are three or four new houses being built,” he said. “It’s just incredible, the demand.”

It appears the only people not buying American real estate are Americans needing a place to live.

So what is the fuel behind this demand? As suspected, it appears much of it comes from Chinese laundering dirty money. They are scrambling to get it out of the country before the authorities crack down on the source of these funds. It appears The Bank of China is playing a central role in this money laundering, which may be angering Chinese authorities. We learn from Bloomberg that:

Bank of China Ltd. denied a report by the state broadcaster alleging it broke the nation’s foreign-exchange rules by providing services that help clients move “dirty money” abroad.

Reports by China Central Television and other media “contain discrepancies with and misunderstanding of the facts,” the Beijing-based lender said in a statement on its website late yesterday. “References to an ‘underground bank’ and ‘money laundering’ are inconsistent with the facts.”

CCTV said Bank of China Ltd. was among lenders that circumvented the foreign-exchange regulations. Customers at the country’s fourth-largest lender by market value can convert unlimited amounts of yuan into other currencies through a product called “Youhuitong,” CCTV said in the 20-minute broadcast yesterday, which included interviews with several unidentified employees of the bank.

“Bank of China introduced a cross-border yuan transfer service in 2011 that only allows money to be moved for immigration and overseas property investment purposes,” the lender said. The company has strict and robust operational procedures for its cross-border yuan transfer business, it said.

Youhuitong targets customers who wish to invest in or migrate to North America, Australia and some European countries, CCTV said, referring to documents shown by unidentified Bank of China employees.

Now just imagine what will happen to the U.S. real estate market in these areas when Chinese authorities decide to turn off the spigot…

In Liberty,
Michael Krieger

21 thoughts on “WALL STREET & THE CHINESE GOV’T ACCOUNT FOR ALL THE CASH PURCHASES OF HOUSES”

  1. True story:

    Had a friend trying to find and buy a home in Belmont, Mass. It’s a wealthy suburb – upscale with good schools.

    Every home they tried to buy was purchased for $100K over the asking price in all cash – Chinese. They are throwing money into real estate in the desirable towns with good schools.

    They are driving up the prices like crazy.

     
  2. I was going to purchase a Spanish speaking program, as I’d like to go back to Argentina hunting next year if that country doesn’t implode from inflation and debt, maybe I should purchase a Chinese speaking program instead…..

    Nǐ hǎo línjū

    (hello neighbor)

     
  3. Shhhh! Don’t tell em’ it sucks!
    Remember how the Japanese bought everything in the 80s, then collapsed? Same thing. Buying US property is as poisonous for them as it is for us!

     
  4. Yohimbo,
    We are finishing up a development in Belmont at McLean’s Hospital and we have sold several million plus dollar condominiums to Chinese buyers, always cash. One buyer purchased two. Same with our Burlington development, about a third of the final phase were sold to Chinese buyers. Massachusetts is a magnet for Chinese buyers as well as Indian. A lot of hot money flowing out of Asia, and it is definitely pushing up prices in the better town with the most sought after school systems.
    Bob.

     
  5. China has printed even more money than the Fed, and Japan’s printing press has been on fire. All that liquidity being converted to high end property, with the Hedges buying up all the distressed, foreclosed, and everything else they can get their mitts on with free Fed no-interest cash. Who the fuck cares? The fucking rich always win, the game is rigged, the stock market is rigged, the gold/silver market is rigged, commodities are rigged, LIBOR is rigged, everything is rigged, and if your not on the inside, you get fucked.

    The “regular” housing market is finished. Kid’s live in mom’s basement, deeply in debt with student loans, can’t buy a house or anything else, and as our economy continues to collapse, jobs are going to be gone, or turned part time because of Obamacare, and our trade deficit continues to climb off the charts. Not much positive news.

     
  6. Well, I hope that these Chinese buyers enjoy paying top dollar property taxes so that they can pay for the “education” of obese American children. Those overpriced homes mean overpriced property taxes.

    I was wondering who the last sucker in this chain of fraud was going to be – now we know.

     
  7. What I don’t get is the citizenship angle. Is the U.S. now selling the right to live here? Just buy a house, get your papers sort of thing? Or are all these houses being bought as investment?

     
  8. Did China Just Crush The US Housing Market?

    Submitted by Tyler Durden on 07/10/2014 14:50 -0400

    A few days ago we finally closed the door on any argument who the marginal buyer in the US luxury housing segment was – the answer: Chinese oligarchs, scrambling to launder their “hot” domestic money abroad (as we predicted first two years ago) and now that Switzerland is no longer a safe offshore venue where one can park cash, they picked US luxury housing as the best money laundering alternative.

    This means that far from indicating a recovery, as the recent surge in the high end of the US housing segment had long been touted, all the relentless move higher in ultraluxury properties prices was simply a recycling of China’s hot money, which unlike in the US, never made its way into the Chinese stock market (explaining why the Shanghai Composite has barely budged in years) and merely ended up in US real estate. If anything, this is simply another confirmation of the epic capital misallocation, and the complete lack of “trickle down” resulting from failed global central banking policies.

    So now that the “who” has been answered, just one question remained: “how?”

    How did millions of Chinese “buyers” manage to get tens of billions of yuan or dollars out of the mainland – a country which as is well-known has strict capital controls when it comes to individual and corporate offshore outflows? Under Chinese law, citizens are allowed take only the equivalent of US$50,000 out of the country each year: hardly enough to buy a storage closet in any of New York City’s Central Park West duplexes.

    Today we learn the answer and it has to do with officially sanctioned “money laundering” services by not one but two of China’s largest banks: Bank of China and also Citic.

    As Hong Kong’s SCMP reports, A day after Bank of China (BOC) was accused by China’s state broadcaster of breaking foreign exchange rules by helping people take money out of the country, it has emerged a second state bank has also been offering the service.

    And the biggest irony is that Citic is ultimately controlled by none other than the “State Council” or China itself. In other words, while China was prohibiting the outflow of hot money with one hand, with the other it was providing the very services it had previously forbidden!.

    Industry sources told the South China Morning Post yesterday that China Citic Bank – controlled by the Citic Group, which in turn is directly controlled by the State Council, China’s cabinet – also facilitated the movement of currency overseas, including Hong Knog. “It is definitely not an illegal business,” said one source.

    “Both BOC and Citic Bank have been able to do this business only after they got approval from the Guangzhou branch of the People’s Bank of China. So the PBOC definitely knows what the business is about,” said the source, who declined to be named as he was not authorised to speak to the media.

    “If there is any problem, it should not be a problem about whether this business is legal or illegal but more about how exactly the business is done, especially about internal risk controls and customer background checks at those banks.”

    On Wednesday, CCTV aired footage showing an employee of a BOC branch in Guangdong coaching an undercover journalist on how to channel large sums of money overseas.

    CCTV accused the bank of “blatantly offering money laundering services” and fabricating information through its money transfer platform Youhuitong.

    BOC said the Youhuitong service was part of a legal pilot scheme launched in 2011. It said the CCTV report “deviated from the facts” and had a “biased understanding” of Youhuitong.

    What is disturbing is the implication that the PBOC not only was aware of these secretive and law-breaking deals, but was effectively encouraging them:

    On the sidelines of the Sino-US Strategic and Economic Dialogue in Beijing yesterday, PBOC Governor Zhou Xiaochuan said the central bank would need more time to investigate the situation.

    Analysts cast doubt on whether such a scheme that allowed for free currency exchange could exist. “The government is very concerned about hot money flows,” said Teo Weechoon, a forex analyst at Nomura in Singapore. “If there was a pilot programme like this, I don’t think the limit would be much higher than it already is.”

    Industry sources said BOC and Citic Bank were chosen by the Guangzhou branch of the central bank in late 2011 and late 2012 respectively to join the pioneer programme, which was part of Beijing’s efforts to better manage its huge foreign exchange reserves – the world’s largest at over US$4 trillion.

    And sure enough, where two of the largest Chinese banks were involved, many other were sure to follow: “a report by the official Shanghai Securities News yesterday said China Construction Bank offered similar services.” We expect to learn soon that virtually every domestic bank was breaking regulations, with the PBOC’s blessing of course, and allowing residents to quietly transfer their funds from China to the US, London, Zurich and any other venue where Chinese oligarchs wanted to park their cash.

    Finally, “why”?

    Well, from the individual’s standpoint taking money away from China’s corrupt system and “investing” it in the US housing market certainly seems like far more safe proposition.

    But why would the PBOC agree to quietly bless this activity which it has, at least openly, blasted vocally in the past?

    Simple – to keep inflation in check.

    Recall that China is a country which creates nearly $4 trillion in bank deposits every year. Also recall that back in 2011 China nearly chocked when inflation briefly soared out of control, leading to sporadic “Arab Spring” type riots in various cities. And since China simply can not reduce the pace of its loan creation at the macro level without crushing the economy, what it needs is to find outlets – legal or otherwise – that permit the outflow of funds.

    Which is why it is not at all surprising that as SCMP reports, the scheme was launched in 2011, just as China’s scary encounter with soaring inflation was unfolding and Beijing needed a fast way to solve the overabundance of domestic liquidity. Basically at that point the central bank agreed to keep its eyes shut as wealthy oligarchs transferred funds to developed world nations, something the US government and NAR were delighted by as it kept real estate prices (if only at the very top) soaring, dragging the entire housing market higher with them. Furthermore recall: the one thing the Fed has wanted more than anything for the past several years is inflation. And since the US economy is nowhere near strong enough to create the kind of inflation needed, with the bulk of the Fed’s reserves ending up in the capital markets and the latest and greatest credit bubble, the Fed would be more than happy to import some of China’s inflation from it, even if that means a housing market which at the upper end is no longer accessible to anyone but the 0.0001%.

    Indeed, this summary explains everyone’s intentions to keep the scheme afloat for as long as possible, at least until CCTV busted it and laid it out for all 1+ billion Chinese, most of whom are not oligarchs and can’t take advantage of the PBOC-sanctioned loophole.

    So what happens next? Assuming there is the anticipated resulting backlash and crackdown on Chinese banks, which will finally enforce the $50K/year outflow limitation, this could well be the worst possible news not only for Chinese inflation, which suddenly – no longer having a convenient outlet for the unprecedented liquidity formed in the country every month – is set to soar, but also for the ultra-luxury housing in the US.

    Because without the Chinese bid in a market in which the Chinese are the biggest marginal buyer scooping up real estate across the land, sight unseen, and paid for in laundered cash (which the NAR blissfully does not need to know about due to its AML exemptions), watch as suddenly the 4th dead cat bounce in US housing since the Lehman failure rediscovers just how painful gravity really is.

     
  9. Well shit oh dear! The Chinese Bankers have out corrupted the Western Bankers! Who would’ve thunk! Unlike westerners, the Chinese think long-term, like owning a sizeable chunk of the U.S. Oh sure, they will acquire some financial losses, but losses they are willing to accept. 10-15 years from now when your mortgage payment is sent off (electronically) it will be going to a Chinese Financial Institution.

     
  10. I guess the Chinese figured that when their economy implodes having a billion chink-bucks will only buy you a bowl of fish heads and rice

     
  11. Big fancy houses are expensives to maintain and attract unwanted attention. Best would be a small house with a nice basement to build a PM vault. One thing for sure, I would not keep assests in China.

     
  12. Admin – great article. China is also going through a power struggle at the moment. The Party wants to phase out state-owned enterprises (SOE’s) in favour of private enterprise, but a lot of the higher-up officials have made out like bandits under the SOE system and don’t want to see it end. One official said, “If we arrested all of the Party officials involved in corruption in China, there’d be no one left to run the government.” It’s that corrupt.

    I think the last few leaders (with their five-year plans) looked the other way because they were ALL in on the take. As long as their growth/GDP numbers stayed up, no one complained. I was surprised at how few actually belong to the Communist Party (it’s a small percentage). These people are like the 1% we love to hate in our countries. It’s a big club. It would be like Geithner allowing Blankfein to get his money out of the country. I don’t know if it had anything to do with trying to keep inflation down in China. I just think they got filthy rich very quickly, and they knew the new plans were for change. They’re fleeing rats. They want a place to park their money (a lot went to offshore tax havens), want their families out of China in case someone comes after them for corruption, and if they get some asset appreciation, that’s a bonus.

    They’re going everywhere: Australia, New Zealand, Spain, Portugal, England, Canada, Germany, Sweden, Singapore, France, etc. Our equally corrupt governments allow them in with open arms. It’s disgusting.

    The peasants in China are starting to get very angry at the corruption, and the Chinese government is having to act (at least act like they’re doing something). Go after corruption of the higher officials and you no longer have a Party; don’t go after corruption and you don’t have a country (because the peasants will revolt). It’s a fine line.

    Thanks, Admin.

     
  13. P.S. You can bet that a lot of the Canadians who are buying U.S. assets now are the newly-arrived Chinese-Canadians. Just last year the Canadian government agreed to help China find this corrupt money in Canada (probably all P.R. just to make it look good), but that no doubt has sent some money down South.

     
  14. Backwardsevolution,

    You are spot on, and it is worse than you think. I had to deal with the upper crust children who go to school in the U.S. 350,000 Chinese students in 2013, and they are scum of earth and have no understanding of ethics or fair play.

     
  15. The Unites States government has every thing to blame as the corrupt Chinese system. This whole money laundering scheme isn’t news to US media. So why are American citizens continually priced out of their own right to land ownership? Its because American politicians are every bit as corrupt and greedy as Chinese oligarchs are, if not worse than them because they are polticians in a country that should know better. I think American citizens should voice out their opinions and stand up for their rights! The Canadians woke up! But our stupid politicans are dumb enough to believe that protecting Chinese criminals from facing justice is the same thing as protecting human rights! Stupiid politicians. The common Chinese citizen back in China are viewing USA as a place where criminals can live happily ever after wit their dirty wealth and mistesses

     
  16. Lose faith in USA. These filthy cash buyers are buying local citizens out of the most desirable cities. Can’t believe that this country has declined to this level in which the corrupt buy their right to ownership of land. True the Chinese money launderers are immoral. But USA government should do its part to stop this illegal flow of cash into its borders.not only are local citizens priced out of homes, we also have to live around with these Chinese criminals. Just think about what kind of bad habits and immoral charcter they bring to our country. In China, high rank officials and people with connections get their way whenever they want wherever they like. Their spoiled brats speeding in their ferraris are areflection of their bad parenting. No morals. No ethics. They bring all these into our neighborhoods just the way they are in China. Our most desirable cities we aspire to live in today will be where these crooks dominate and pollute quickly if USA continues this illegal cash buying uncurbed

     
  17. A person who is rich by his own means is worthy to be admired. But a corrupt individual who flaunts his or her illgotten wealth and looks down on others like their trash is a thief and trash. Ive seen plenty of these corrupt Chinese oligarchs, “tigers” and “flies” as the CCP labels them, hangin about the popular spots in SGV,sporting their ferraris, mercedes, bmw, LVs, pradas and looking down on the locals like we’re all trash, yea cuz us average Americans aint rich enough to afford a million dollar condo all cash. Cmon, these trash need to be kicked back to China to labor camp, instead of polluting my beloved Sab Gabriel valley restaurants, plazas and neighborhoods. Each time I hang out in these places, these filthy scumbags make it feel like i just walked into a mafia den. Cuz theygotta have these illegal connections to rob all this cash to afford mansions here and to pay for their mistresses fancy luxury handbags and clothes

     
  18. Some may recall my little story about my neighbors across the street. They moved in about 3 years ago. They are both Chinese scientists … I believe they work for a fragrance company, possibly Loreal.

    Anyway, they’re moving. They put the house up for sale, asking $739,000. It’s SOLD … in one week, for $730,000.

    What fuckin’ recession??

    This is is.
    3164759_0.jpg

    http://www.weichert.com/53855901/

     

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