I think these articles are kind of missing the main point. I don't really care who buys the multi-million dollar houses since I'm never going to be in that market anyway.
The issue that we are seeing is investors (Chinese and otherwise) who are just plonking money in the real-estate market for normal homes. The homes we are seeing right now are pretty basic in the sense that a first-time home buyer would not be considering them if they had a million dollars cash in the bank. Yet these homes are going for all cash or 50% down -- I think the main reason is people with extra money have few options to park their cash; since asset prices across the board (and across the globe) are at all-time-highs.
You're right - the class of investor has shifted away from professionals and people wanting to leave China (the aspirational Chinese migrants we are used to) to extremely wealthy corrupt officials who are dumping their money everywhere they can put it.
Because property supply is constrained but their capital is seemingly unlimited, we are seeing properties fetch prices that are totally disconnected to reality. This is happening in Melbourne, Australia too where entire suburbs that used to be 'family friendly' at $800K are now seeing properties regularly sell for $1.5M to investors on the phone.
New York Magazine called it out for what it is - money laundering.
That was a very interesting piece to read when it was published recently, and it led me to follow the author, Neil Irwin, on other pieces he has written since (many others, here are two [1] and [2])
I have wondered if Neil Irwin and others are tiptoeing, insinuating, and getting close to but not quite saying, that inflation is taking place. Are the top dollars that we, programmers and hackers, earn today simply not worth as much as we think they are worth? That's probably an insufficient definition of inflation, but it's maybe as practical as it gets for someone who's just starting out. Perhaps I should move my (small pile) of hard earned savings into a thing before the cash value evaporates?
I have these same thoughts. My problem is I grow complacent, maybe "this" is the new normal. Then I remind myself that what goes must come down. Always does. The boom and bust cycle is very reliable.
There is clearly too much money so it seems likely that it or its value will get destroyed at some point. Buying a productive asset is never a bad thing but they take work.
The issue isn't that new housing isn't going to be built; in Vancouver, there are condo developments all over the place. The issue is that the vast majority of the housing in Vancouver consists of condo developments that are essentially unaffordable.
As a married, well-paid tech worker with a wife working a union job for a solid wage, we could live extremely well anywhere else, but in Vancouver the idea of buying a home is laughable. At our current combined income, we could 'afford' to buy a place if we had fifty thousand dollars in the bank, but most of the places we could buy are cheap, tiny condos that are barely large enough for the two of us, let alone a cat, a dog, and a baby on the way.
The current state of Vancouver is that it's cheaper to rent than buy, and the new developments going in aren't going to solve that problem at all. The new Vancouver House development in downtown Vancouver is being sold overseas first – to the wealthy elite in Singapore, for example – because it's essentially unaffordable to all but Vancouver's most wealthy (and they already have pricey condos downtown or sprawling mansions in the suburbs).
We rented a two-bedroom condo twenty minutes' walk from the downtown core for about $200 less than a reasonable mortgage would cost (assuming a down-payment larger than we have), but when you add strata fees and maintenance on top of that, it's far more cost-effective to own. It's possible to argue equity, but friends of mine who recently sold their condo to move to the UK approximately broke even on the five years they owned it. Others have lost money on condos they've purchased, but which haven't even finished being built yet.
Owning a home in Vancouver is unaffordable for most, and renting is slightly less unaffordable, but my rent in Vancouver was twice as much as my rent was in Montreal, and my salary certainly hasn't kept pace, and that won't change until more housing is built to appeal to the locals, and not the rich Asian investors/embezzlers and the rich Emirati – but that won't happen until it's more financially viable, and it's difficult to arrange that situation without inconveniencing (and angering) a lot of people, and having to field accusations of racism against Chinese immigrants (rather than classism against the rich elite who care nothing for Vancouver beyond its potential for real estate speculation).
Indeed. And SF residents push hard against building upward, unfortunately.
I live in Lower Pac Heights and recently got a notice in the mail that was urging people to oppose a new construction in the area. With the main reason being that it would be taller than the current height limit and establish a "dangerous precedent".
The issue that we are seeing is investors (Chinese and otherwise) who are just plonking money in the real-estate market for normal homes. The homes we are seeing right now are pretty basic in the sense that a first-time home buyer would not be considering them if they had a million dollars cash in the bank. Yet these homes are going for all cash or 50% down -- I think the main reason is people with extra money have few options to park their cash; since asset prices across the board (and across the globe) are at all-time-highs.
http://www.nytimes.com/2014/07/08/upshot/welcome-to-the-ever...