Hacker News Reader

Comment by stock_toaster | Hacker News Reader

Hasn't the Chinese government been clamping down more and more on "capital flight"? I read articles a few years ago how that [capital flight] was driving up rents in some markets. However, I imagine that would only have some impact in the so called "hot investment cities", but not /nationwide/. Any idea what the macroeconomic causes are?

View on HN

So, I've also been told that rich Chinese people were buying up condos and letting them sit empty.

That's the thing, though, I kinda don't believe it. I mean, sure, people from China buying US real estate; I can totally believe that one (and that would increase demand and thus put upwards pressure on sale prices)

The part I have a hard time swallowing is the idea that they'd let them sit empty. The real estate agent they bought from would be super happy to hook them up with a full service property mangement company that could deal with renting the things out; I'm sure said agent could (for a hefty cut, of course) set it up so the owner need not be bothered at all.

I mean... I guess there could be something I'm missing, but the idea of people buying up some of the most valuable realestate in the world and then letting it sit empty (and supposedly paying somene to come by and check on it, etc...) just seems really unlikely vs. buying and renting it out.

It's a thing in Seattle. One of my friends lives in a wonderful neighborhood in South Bellevue. Multi million dollar homes. At least 40% sitting empty.

It's similar to owning a Ferrari, and then not actually driving it day-to-day. People don't want to suspect their priced possessions to wear and tear.

Except that unlike a car, a house can be rented more easily and income gathered rather than sitting empty.

To rent out your Ferrari you'd have to run an agency and couldn't use it as you wanted to. Which kind of defeats the purpose of a luxury good.

I think it's more than just wear-and-tear... There are a lot of legal protections that make it hard to displace existing renters. Presumably most of these unoccupied homes are owned as rainy day assets, to either be sold or occupied in an emergency, and renters would limit this ability.

(It's hard to find data on how prevalent this is... From one article, it looks like a Palo Alto realtor estimated in 2015 that about 20% of home sales were to Chinese investors, with about half of these leaving the house unoccupied: http://sanfrancisco.cbslocal.com/2015/04/28/realtors-printin... )

Interest rates. The reversal of quantitative easing. Both have been propping up asset bubbles across the US (including, you guessed it: tech investment) -- which are now beginning to slowly deflate.

I think that's a fine point! Interest rates going up is def going to cool off investment. However, there can be more than one cause for an economic effect. Seattle had very low inventory and I'd be surprised if hundreds of new units coming online didn't put downward pressure on prices.

But yeah, I haven't done the digging to attempt to quantify that effect.

My second point remains, however. Building more housing does not inflate prices. (and yes, I know it's not quite as simple as econ 101 supply and demand, but)

I knew someone in Seattle who worked closely with some of the big housing agencies (like Pillar and the like). He tried to tell me a lot of these larger property managers were held by Chinese companies, and they intentionally kept a lot of completed or renovated units empty to drive up the price.

Apparently they'd keep enough of these units off that they could keep the 1 bedroom price around $2k, but not too many so the city wouldn't catch on.

I couldn't find anything else though, either in the news or other people in knew in real estate, to corroborate that; so maybe he was blowing smoke or taking tokes.

Reply on news.ycombinator.com