Manhattan: Chinese are #1 Buyers of Real Estate.

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Wealthy Chinese buyers have officially surpassed wealthy Russians as the top purchasers of real estate in Manhattan, especially as recent tensions between Russia and the U.S. have made it more difficult for Russians to make purchases. The Chinese tide groweth.

On Yahoo! News, we read:

Wealthy Chinese are pouring money into real estate in New York and some other major cities around the world, including London and Sydney, as they seek safe havens for their cash and also establish a base for their children to get an education in the West.

Reuters asked five of the top real estate brokerages for their ranking of foreign buyers in New York City. The Chinese ranked first in both volume and value of sales in all their estimates.

Many Chinese buyers are switching their interest away from markets like Shanghai, Hong Kong and Singapore amid fears that prices have soared to frothy levels in those cities. Luxury apartments cost between $4,100 and $5,000 per square foot in Hong Kong, while in Manhattan and Sydney they cost half that, ranging from about $2,100 to $2,500, according to Knight Frank’s Prime International Residential Index. London is also cheaper, at $3,300 to $4,100 per square foot.

China is currently in the midst of what may be the most severe real estate bubble in history. I have discussed this here. The rich Chinese who continue to invest in wildly inflated Chinese properties are clueless. They are going to lose a fortune when the bubble pops. The rich Chinese who are looking to buy overseas are not. They are looking for safe places to squirrel away capital.

The brokers say that many Chinese buyers are also investing abroad so they can own property near major educational institutions. Some are buying homes near top colleges – even though their children are so little they can’t walk yet. More than 80 percent of wealthy Chinese want to send their children overseas to school, according to the Hurun Report, a Shanghai-based publication.

“By far and away, the Chinese are the fastest growing demographic,” said Dean Jones, a U.S.-based broker with Sotheby’s International. “They are the top consumer for real estate, and New York is front and center.”

China is the foremost hotbed of Crony Capitalism on the globe. They have the illusion of capitalism and a free market, and the illusion of a prosperous middle class. The Chinese bureaucrats want everyone to think that they’ve accomplished this through government mandates and finaggling with the economy through the Central Bank. The Communist Party (in-name-only) wants everyone to believe they’ve found a way to manipulate the free market and ride it like a horse and saddle. Concepts like “price discovery” and “rate of interest” have been distorted beyond recognition. Investors in China can no longer make informed decisions on how to properly allocate resources. Economically speaking, it’s like stepping through the looking glass into a crazy fantasy world where nothing makes sense.

At some point, the whole charade will end. I cannot say precisely when, but I personally think it will be somewhat soon. The free market is going to reassert itself in China. The massive bubble known as “China” is going to pop. Many rich Chinese know this. That’s why they’re fleeing China and buying property in western nations. They aren’t fooled by the government charade. They want out.

My prediction: When the Chinese bubble pops, they will be swept by a large recession. I think this may lead to some market liberalization in China. Prices in China are going to fall. This will spur foreign investment and business growth. Any Westerner who commits themselves to learning Chinese at least somewhat fluently is going to have an invaluable skill at this time.

My reccomendation: Learn Chinese.

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