The Rising Influence of Rising Affluence

[wow_happens28]

Oakes, A falling dollar would be good for US jobs that export. But it would take time to rebuild. But, higher commodities would take money out of American family pockets? If the dollar falls most commodities are now world traded and would cost more in the US?I am not a world renown economist. And history never repeats, but it does rhyme, Mark Twain arguably said that. It looks a bit scary to me as stocks rise, but bonds fall. The news carries "Dow sets new highs" almost daily the last month, but the NASDAQ 100 is not>>>

http://www.finviz.com/futures_charts.ashx?p=d1&t=NQ

It's a mess, just saw a sort of connected storuy a couple of minutes ago>>>

Chinese Developers Rethink U.S. Real Estate Projects: "I See Danger...U.S. Real Estate Is Peaking"

http://www.zerohedge.com/news/2016-12-02/chinese-developers-rethink-us-real-estate-projects-i-see-dangerus-real-estate-peakin

For months we've been warning that real estate markets in NYC and San Francisco, among others, are getting ready to rollover as the market is about to be flooded with new supply of luxury apartments (see here and here). Real estate in both markets are just starting to show signs of cracking as the apartments sales cycle is getting stretched out and pricing growth has stalled.

Now, per an article from the Wall Street Journal, wealthy Chinese real estate investors are admitting that the jig is up in large cities like New York and are running for the hills. With a substantial amount of capacity expected to come online over the next several quarters and a growth cycle that is entering its 8th year, one Chinese real estate investor admits "you get a sense now that it’s peaking."

Swelling supply of high-end New York condominiums could result in losses for some Chinese developers, analysts said. A push to partner with U.S. developers on other projects, meanwhile, has brought unexpected legal spats and other delays.

“I see a danger in the real-estate market in the U.S.,” said John Liang, Xinyuan Real Estate’s managing director of U.S. operations. “With its seven- to eight-year cycle, you get a sense now that it’s peaking.” He added that he sees value in middle-tier residential properties in Manhattan and Queens.

“Right now the prices are really high,” said Zhang Xin, chief executive of Soho China, whose family invested in a stake in Manhattan’s General Motors Building in 2013. “I would be very cautious if I were to make a large investment in New York’s real estate today.”

Of course, Manhattan isn't the only Burrough experiencing a supply glut. Forest City Realty was just forced to take a $300mm impairment charge on a joint venture with a Shanghai-based development company after "unprecedented rental supply in downtown Brooklyn" forced the copanies to delay development.

CL Investment, which has three other high-end residential projects in Manhattan, plans to keep the office space as part of efforts to diversify, according to a person with knowledge of the matter.

In Brooklyn, N.Y., a deal between Shanghai-based, state-owned conglomerate Greenland Holding Group and Forest City Realty Trust on a 22-acre, 15-building mixed-use project in various stages of construction is facing stiff headwinds.

Forest City earlier this month said it took a $307.6 million impairment charge for the project, called Pacific Park Brooklyn, and said it plans “to delay future vertical development.”

“We revised the schedule due to a number of factors, including almost unprecedented concentrations of new rental supply in downtown Brooklyn, which will take time for the market to absorb,” said Forest City CEO David LaRue.
Just to add insult to injury, the softening real estate market is coming just as China is once again looking to tighten rules on capital investments outside of China.

The headwinds come at a time when Beijing once again is planning to tighten its rules on Chinese investment capital leaving the country.

The Chinese State Council is expected to soon announce new reviews of foreign acquisitions of $10 billion or more and property investments by state-owned firms of more than $1 billion, according to people with direct knowledge of the matter and documents reviewed by The Wall Street Journal.

Total Chinese direct investment in U.S. real-estate and hospitality assets is nearly $12.6 billion, accounting for nearly a fifth of total Chinese investment in the U.S. since 1990, according to a recent report from the Rhodium Group and the National Committee on U.S.-China Relations. Most of the activity has taken place since 2010 and is concentrated in areas such as New York, Los Angeles and San Francisco.
Of course, no matter what kind of capital controls are put in place, just like the Vancouver and Sydney real estate markets, we suspect that when Chinese money needs to be laundered, people will find a way. The only question is now that yet another bubble has run its course, where subsequent bubbles will emerge.

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For those who missed it, below is what we recently wrote after 3Q16 apartment closings plunged 18.6% in NYC.

New York City apartment owners should take note of the latest 3Q16 "Elliman Report" on Manhattan real estate sales because the market looks to be in free fall. In fact, the number of apartment closings plunged 18.6% YoY while apartments sat on the market an average of 8.2% longer. Inventory also spiked with re-sale inventory up 8.2% YoY and new development inventory up a massive 27.2%.

"The number of re-sales has fallen year over year in each of the last four quarters at an increasing rate. Listing inventory reflected significant differences in the rate of growth between re-sale and new development. Re-sale inventory expanded 8.2% to 5,290 while new development inventory surged 27.2% to 973 respectively from the same period a year ago."
Median sales prices did increase YoY by 7.6% but collapsed QoQ despite a massive surge in pricing on the luxury end of the market.

See link for charts>>
http://www.zerohedge.com/news/2016-12-02/chinese-developers-rethink-us-real-estate-projects-i-see-dangerus-real-estate-peakin