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Our Train is Leaving the Station: Chinese High-Speed Rail and the American Multifamily Market
September 9, 2009 by Neil · 7 Comments
Chinese property developers backed by Wall Street are successfully raising billions of dollars to rescue investments that were on the precipice of collapse, in today’s WSJ story: Chinese Developers Race to Launch IPOs.
This begs two questions: (1) Why is Wall Street doing this? (2) Why is this not happening here in the United States?
Here is a big clue:
“A huge amount of the lending related to China’s economic stimulus has found its way into real estate,” allowing developers to restart projects that were languishing as well as making it possible for potential home buyers to get mortgages, says Peter Churchouse, a property investor in Hong Kong.
The Chinese government invested significant money in developing property and infrastructure. Their efforts to facilitate home-buying were on a far grander scope than paltry American efforts to encourage first-time homebuyers on a limited basis. The closest we have come to a grand plan was Martin Feldstein’s unimplemented suggestion to have the government work with lenders to modify loans and reduce principals.
The Chinese are able to encourage resettlement in certain areas because it is investing significant sums in its infrastructure. It is also developing a network of high-speed trains to connect cities with soon to be major cities. When China finishes its high-speed railroad in 2020, its 16,000+ miles of track will make it the largest in the world. You can bet that close proximity to a high-speed railroad station will bring more jobs, more people, and a greater demand for housing.
Stimulus money could be used to improve our mass transit system in a size and scope that Robert Moses imagined, and China implements, and refinance the growing stock of underwater homes. This would create more jobs, higher occupancies, diminishing vacancy rates, and higher rents. Instead of (or dare I dream, in addition to this), we could populate empty housing and multifamily stock with Chinese…and other immigrants.
Update: Here’s a cautionary note for Chinese exuberance, but the differences from our bubble are striking: massive infrastructure investment, and loosened credit standards (which admittedly played a huge role in our mess) that require a 40% downpayment from home-buyers.
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7 Responses to “Our Train is Leaving the Station: Chinese High-Speed Rail and the American Multifamily Market”Trackbacks
Check out what others are saying about this post...[...] This post was Twitted by multfaminvestor [...]
[...] Hindsight is 20/20, but perhaps Florida might have better put its money to use in Chinese infrastructure. [...]
[...] again, I think Marty Feldstein hit the nail on the head: the government has to get aggressively involved in the loan modifications. Even if homes are underwater, the government can assist in refinancing the mortgages at drastically [...]
[...] than 20% of the purchase price, free of gimmicks that get the downpayment kicked back at closing. That’s what the Chinese government is doing, to their success. Their income should be confirmed on their W-2s for at least two years. Sorry, fellow [...]
[...] I mentioned in an earlier post, China is spending enormous sums of capital on commodities and building equipment, while building up its infrastructure and mass transit. These actions create short-term jobs, and [...]
[...] site has been a vocal proponent of a form of Marty Feldstein’s proposal for the U.S. government to refinance residential mortgages of defau…. Many detractors complained that this would give these underwater folks a free pass, while [...]
[...] debt financing for commercial real estate. The predominant player among these lenders: Bank of China. Fannie Mae and Freddie Mac, along with life insurers, provide the overwhelming majority of the [...]