When Hong Kong was returned to China by the British, millionaires escaped and heavily invested in real estate in Australia and that was the beginning of the bubble in prices for goods. It never went down and also helped the Japanese build a strong yen against the US dollar. Basically the US government has helped sell American land to the Japanese and the Chinese and those holding large reserves of US dollars from years of trade deficits.
When American citizens go about buying a house, they really stick it to you make a slave out of you for the banks for the rest of your working life — that is, after all, why they call it a “mortgage” because in French, that means “deat contract.” No house or property should cost 3 or 4 times the value of what you originally paid for it (that’s interest, folks).Now with the materials we use today, the time you or your children have finished paying, the house is ready for demolition.
Today, the upper end of the market 15 million dollars plus lost 45% of its sales value.You have the power to crush the market and depress prices: just rent for the rest of your life and you have the liberty to move at will while the property owner must pay usurious interest to the banks.
Multi family housing starts drop 67 percent
The U.S. Treasury and Federal Reserve even with virtually interest free money cannot stimulate demand in an overbuilt market. Single family starts are down 8.7 year over year. But multi family starts? Try a stunning 67.4 percent. Many of these projects are financed with commercial loans and you can see that the demand is virtually gone. This is one of those unintended consequences that Wall Street and the government fail to notice.
With a tunnel vision focus on propping up the residential housing market, demand for homes has increased. People are buying up foreclosures and financing their purchase with historically low interest rates courtesy of the Federal Reserve. The government has also sweeten the pot with the $8,000 poorly targeted tax credit. But what the Fed fails to see is that vacancy rates were already high for both residential and commercial buildings in the form of say, apartments. So what happens? You shift demand from lower priced rental units to homes. Good news right? Not at all. Now what you have is an increase in defaults for commercial loans instead of residential loans because of even higher vacancy rates (Source: mybudget360)
China may buy distressed US real estate assets
China is looking to invest in the distressed real estate assets in the U.S., UK and Middle East. So far, the China Investment Corp, or CIC, is planning to use $2 billion of their $200 billion sovereign-wealth fund to fund the PPIP (Public-Private Investment Plan), a U.S. government program that was created to get rid of toxic mortgage-backed securities from banks’ balance sheets. The U.S. Treasury and Federal Reserve is supposed to give subsidies to the investors for the purchase of the assets, which will allow the banks to be free of capital; they will then be able to make loans.
The Chinese are perfect investors because they have the funding to help out with the real estate issues. China sees a lot of benefit in investing in the U.S. because when the economy reestablishes itself, they will make loads of money. They are buying real estate at bargain prices and will be able to resell them when the market is back up, for at least two to three times the amount it was bought, possibly more. The Chinese predict that the U.S. economy will be back up during the 2nd quarter of 2010 (Source Robin Trehan).