$1.7B Dollar SF deal collapse won’t stop Chinese money flooding into real estate

A $1.7 billion Chinese loan deal to fund development of Treasure Island (pictured) and Hunters Point has collapsed.

 A $1.7 billion Chinese loan deal to fund development of Treasure Island (pictured) and Hunters Point has collapsed.

Chinese money has flooded the Bay Area real estate market — and you can expect more, tons more. Investors in Asia have plenty of reasons to put their capital in the United States and with our economy still recovering from the 2008 recession, domestic capital for projects is still relatively hard to come by.

On Wednesday, developers of Oak to Ninth in Oakland’s Brooklyn Basin announced a $1.5 billion commitment from a Chinese investor making it the second, large-scale, master planned development project to secure funding from the far east

Those deals are just a sampling, or a harbinger of what’s to come.

At the macro level, China holds more than $1 trillion of U.S. debt, but the dollar has been weak since the recession, so investing in assets is much more attractive. In the last few years, the Chinese government has made it easier for investors to borrow money from the government to invest in foreign countries. In the U.S., the motivation is clear — the better our economy, the more the dollar and thus, the value of China’s holdings go up.

A lot of people see (investing in the U.S.) as a hedge opportunity because everyone believes the U.S. dollar will rebound at some point

Aside from that, because of the recession, real estate values in America took a big hit and while prices have risen in the last few years, many investors see plenty of upside for U.S. properties. Assets like office towers in places like San Francisco and New York are expensive for the U.S. market — but cheap compared with similar buildings in Tokyo or Shanghai.

Also, as China has moved toward a market economy in the last three decades, there is a new class of entrepreneurs and in some cases, U.S.-raised or educated investors who want to have a stake in America for themselves or their families.

“The China market is hitting a bit of a bottleneck. The real estate market has been red hot for the last 15 to 20 years,” RE Analyst Qiu said. “Many Chinese markets are overbuilt. For lots of developers, it’s harder to make big profits and they want to diversify. I’ve seen a lot of those big players come this way.”

The flood of Chinese money shows no sign of stopping, Qiu said.

Chinese Money is Dominating the Residential Real Estate Market as well. One Important tangible to note strong public high schools are the areas that are seeing the highest Chinese influence RE: Los Altos, CA Mountain View CA, Cupertino CA and of Course the Flag Ship City- PALO ALTO

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