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Bruce Banner

What, If Any, Effect Will China's Woes Have On The London Housing Market?

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I can't get my head around it.

We are now hearing, on the news channels, that Chinese investors have been buying stocks with borrowed money, using their homes as collateral (shades of US 1920s).

We have been hearing for many months that a lot of London property has been bought by Chinese investors. With borrowed money?

So, if the Chinese stock market continues to fall, will Chinese investors sell their London properties, buy more, or will it have no effect?

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Shades of the dotcom bubble as well - when UK house prices weren't such a certainty but dotcoms were ;)

Presumably they were doing that (homes as collateral) with stocks on the way up (doing it in the past not wanting to miss the apparently certain rapid up moves) but it'll be less likely now when persistently on the way down. Likely it's in the news now because investors are complaining they're having to sell their houses to meet commitments or just complaining to the media that they've lost money but still have to pay the mortgage/loan?

There was an article that a lot of sellers were retail so how likely were they to be buying London property - some successful ones might. Are Chinese companies going bankrupt so that rich owners with their wives and children have to sell London properties.

No doubt London estate agents will be claiming it's good for London but then according to them most everything is whatever happens.

From memory in the 80s boom didn't some Japanese companies pay massive amounts for landmark London offices with their "wall of money" but when the bear market arrived they had to sell up. Could something similar happen with Chinese investment in London housing/property.

Apparently the Chinese are investing in New York and Australia and likely plenty other places as well. Isn't it like any other investment if it doesn't look good or they're stretched they'll sell it and put it elsewhere.- somewhere like New York or Australia or even invest it in a different sector. For instance New York is supposed to be relatively cheap compared to London - London being 2nd only to Monaco.




http://

www.worldcrunch.com/business-finance/will-china-repeat-japan-039-s-1980s-foreign-real-estate-bust-/mitsubishi-estate-hony-capital-bright-food-economy-business/c2s17348/

Will China Repeat Japan's 1980s Foreign Real Estate Bust?
The recent purchase of the Waldorf Astoria by a Chinese company recalls Japanese companies' buying sprees 30 years ago. And that didn't end well.


http://

english.caixin.com/2014-11-10/100749137.html

Those who study the overseas investments of Chinese enterprises are starting to get jitters. Japanese companies went on a foreign real estate buying spree in the 1980s that ended in serious losses, and the question now is whether China will repeat the same mistake.

[the links above are mainly about Japan-New York but Japan-London was similar)

Sometimes it seems like all the Chinese housing equity will have been invested in London and UK property as well as all the HtB stuff etc ;)

Edited by billybong

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Hey Bruce

Good question. I fancy that we'll see some selling, for sure. In fact, given that so much of the money blowing the London bubble has come from the BRICS or petro-nations, I'd be astounded if there wasn't a significant downward pressure exerted by recent market moves. The Chinese share index is just one part of that - falling commodity prices will squash interest from Russia, Arabia and SE Asia too.

In fact, I'm looking out of my office window at the moment wondering how much longer these cranes will be active.

I can't get my head around it.

We are now hearing, on the news channels, that Chinese investors have been buying stocks with borrowed money, using their homes as collateral (shades of US 1920s).

We have been hearing for many months that a lot of London property has been bought by Chinese investors. With borrowed money?

So, if the Chinese stock market continues to fall, will Chinese investors sell their London properties, buy more, or will it have no effect?

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Chinese property prices are still relatively firm thanks to relentless govt intervention. When that goes the same way as the stock market it will be smackdown for real estate bubbles all around the world. Months rather than years, I'd suggest.

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We have been hearing for many months that a lot of London property has been bought by Chinese investors. With borrowed money?

So....who lent these Chinese investors the money? Chinese banks? So Chinese banks will own these properties if the properties are reposessed?

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The sheer scale of luxury(by price at least) newbuild under construction is immense in relation to number sold, hotairmail spells it out.

What is a typical payment scenario for one of these, after initial deposit? Pay upon completion, or in several instalments? Guess these 'paper' houses will be up for sale as repayment deadlines loom if the option buyer is not good for the rest.

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Lets see....London mega bubble blown by the chinese and russian investors ( supposedly ) and FLS ( pre MMR ).

The only conclusion is that the London mega bubble is doomed.

It's most likely already collapsing and the MSM refuse to admit it.

Give it a month.

The worst thing about the london mega bubble has been all the smug ****s saying it's different this time and look how nive their house outside of London is that they've just paid 50% too much for relative to any sane measure.

To say these people are utterly and totally f**ked is an understatement.

I have to say though, it is different this time....it is much worse.

Edited by TheCountOfNowhere

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Answer: None

The Chinese government will come up with ways to re-inflate their markets. Unfortunately they will keep markets irrational for decades to come.

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Apart from anything, I had wondered if there could be an effect on the pound Sterling should we not be sucking money in to buy flats in London to pay for food and other imports.

I think it was Chris Giles who felt these sales should really form a part of our export line in the balance of payments rather than the capital/investment inflow.

EDIT: Ahhh yes...

If flats are to be considered as exports then shouldn't anything that overseas people buy in the UK be considered as exports including factories (those that remain) and any infrastructure - maybe it already is but wouldn't it give a very misleading picture. It's still selling the UK to overseas and allowing rich overseas to set prices (that's if it's not just UK hedge funds/banks doing all the buying to support their own balance sheets - is it possible they use Asian front buyers in Asia on behalf of UK hedge funds/banks).

It's still helping to ruin UK worker's competitiveness. Wasn't accountancy once upon a time used to give management/investors a true picture of how an entity was performing rather than like now used to disguise how badly it's performing.

If Chinese people come on holiday and buy some of their own exported stuff that could be accounted to come under UK exports as well (and the UK saves on transport) - maybe it should even be duty free or sold at Chinese tax rates.

Edited by billybong

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Surely it depends on if the property in London is declared? Would a Chinese court be able to take ownership from one of its citizens or would the Chinese have to file legal papers here to claim the property?

Do the Chinese own enough property to upset the market?

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One interesting thing I found out today. It turns out that there's an annual 50K USD (approx) limit for Chinese citizens taking money out of the country. That implies that the vast majority of Chinese people buying property outside of China are doing so illegally from the perspective of the Chinese state at least. If the Chinese government cracked down on that, the effect could be pretty big.

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One interesting thing I found out today. It turns out that there's an annual 50K USD (approx) limit for Chinese citizens taking money out of the country. That implies that the vast majority of Chinese people buying property outside of China are doing so illegally from the perspective of the Chinese state at least. If the Chinese government cracked down on that, the effect could be pretty big.

Surely a significant number of those taking money out of the country are party insiders? In which case any govt crackdown is likely to be a strenuous as Cameron's efforts to curb immigration.

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London is ######.

that is all.

As are various historically overpriced areas anywhere within reasonable commuting distance of a city. They're still overpriced and anecdotally there MAY be some difficulty in prior shifting then...

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If the Chinese industrialists need to repatriate their money from London, then quite a number of mansions may come on the market with few buyers.

Imagine a hair jelled EA trying to tell certain Chinese that his valuation of £5 million was over optimistic.

He would probably quickly find out what 14k, Wo shi Wo and Shui Fong mean.

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As are various historically overpriced areas anywhere within reasonable commuting distance of a city. They're still overpriced and anecdotally there MAY be some difficulty in prior shifting then...

nothing was selling in Northants before the London mega bubble and fls/htb madness hence why I keep saying when London goes the shires fail.

the idiot London buyers big problem is that if no one is moving out of London with a massive free wad of cash then who is going to buy the house they've just overpaid for. local wages can hardly support 50% of some of the crazy sale prices I've witnessed.

sounds like the end is here.

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nothing was selling in Northants before the London mega bubble and fls/htb madness hence why I keep saying when London goes the shires fail.

the idiot London buyers big problem is that if no one is moving out of London with a massive free wad of cash then who is going to buy the house they've just overpaid for. local wages can hardly support 50% of some of the crazy sale prices I've witnessed.

sounds like the end is here.

We've been saying that for so long tho. In the interim zirp and qe have allowed people who bought in the dips to pay off their mortgages and also maintain their house prices at high levels. Whilst I expected a steady move towards a normal economy and more realistic interest rate levels, against a backdrop of falling house prices, we got the opposite, and many a leverage gamble was handsomely rewarded. Making fools out of hpc. Edited by Si1

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Surely a significant number of those taking money out of the country are party insiders? In which case any govt crackdown is likely to be a strenuous as Cameron's efforts to curb immigration.

Could well be, it's really hard to tell. The Chinese communist party isn't averse to purges though, so anything could happen.

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I've asked a couple of HK friends about this and it turns out that there's currently a big deliberate loophole in the arrangements. People on the Chinese mainland are free to transfer cash to HK banks, since they're in China. You generally have to go to HK to open an account, but that's not a problem for anyone with enough money to care about this. Once the cash is in HK you can then send it anywhere without restriction. That would be a very easy loophole to close.

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We've been saying that for so long tho. In the interim zirp and qe have allowed people who bought in the dips to pay off their mortgages and also maintain their house prices at high levels. Whilst I expected a steady move towards a normal economy and more realistic interest rate levels, against a backdrop of falling house prices, we got the opposite, and many a leverage gamble was handsomely rewarded. Making fools out of hpc.

Bought in the dips since when? I doubt many people will have paid off recent mortgages already.

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Bought in the dips since when? I doubt many people will have paid off recent mortgages already.

. I sense an implication that that has happened for a small number bought around 2010ish, but now the tune is changing and they're just saying they're GOING to pay off their mortgages very early, so misinformation from the braggarts there. of course if house prices fall and or mortgage rates rise then the maths may change very quickly, as may the terms of their mortgage, hitherto subsided by zirp and qe

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