Question from Matthew W: Is China really buying up all our houses and debt and does it matter?
It is a common question and I’m going to break the answer into two posts, one on real estate and one on debt. Below are my thoughts on the the real estate part of the question:
On to the second half of the question: does it matter? Whether it matters or not depends on where you sit and what you care about, but it certainly has an impact.
Houses and buildings take time to develop and build. Unlike stock or bonds, buildings cannot just be printed to meet increased demand. When there is increased demand for a limited supply, prices increase. It is impossible to know how much of the recent real estate price rally is attributable to Chinese buyers, but it is certainly a factor. So I would say, yes, Chinese are buying a lot of US real estate and it’s contributing to price appreciation.
Perhaps implied in the question is a fear that “the Chinese are taking over” by buying up US property, from trophy assets in “A markets” to residential homes. The same fears existed in the 1980s, except people were afraid of the Japanese. In that episode, Japanese investors bought at extremely high valuations and often lost money when the cycle turned. The future may not unfold like the past, but I am not too concerned about Chinese property purchases at this point.
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