Chinese developers remaking downtown LA

[LosAngelesSportsFan]

Its already happening, just not at the scale of the Chinese. There are at least 5 highrises (24 - 35 stories tall) currently under construction downtown that are being built by american companies.

[whatnext]

Originally Posted by mhays

It's also about much longer profit horizons and a buy-hold or build-hold mentality. Nothing wrong with that.

Required reading for all who hold the idea that China is guided by shrewd economic managers, and why it's dangerous to link your city's economy too closely. It's too late for Vancouver, don't let it happen to you.

...China is not a clone-in-the-making of America’s $18 trillion consume till you drop economy—-even if that model were stable and sustainable, which it is not. China is actually sui generis—–a historical freak accident that has no destination other than a crash landing.

It’s leaders are neither wise nor deft economic managers. In fact, they are a bunch of communist party political hacks who have an iron grip on state power because China is a crude dictatorship. But their grasp of the fundamentals of economic law and sound finance can not even be described as negligible; it’s non-existent.

Indeed, their reputation for savvy and successful economic management is an unadulterated Wall Street myth. The truth is, the 25 year growth boom in China is just a giant, credit-driven Ponzi. Any fool can run a central bank printing press until it glows white hot.

At the end of the day, that’s all the Beijing suzerains of red capitalism have actually done. They have not created any of the rudiments of viable capitalism. There are no honest financial markets, no genuinely solvent banks, no market driven allocation of capital and no financial discipline which comes from the right to fail as well as succeed.

There are, for instance, 287 million equity trading accounts in China, most of them opened within the last year and overwhelmingly held by retail punters with sub-high school educations. In less than 12 months they took down upwards of $1 trillion of margin debt through official brokerage channels and a massive network of shadow banking sources including dodgy peer-to-peer lending arrangements...

...In due course, China will be aflame with campaigns against corruption and “enemies of the state” as it seeks to cope with its collapsing financial bubbles and endless herds of economic white elephants. Chairman Mao’s axiom as to where state power really comes from——that is, the barrel of a gun—-will become the increasingly evident modus operandi of the communist party rulers.

The resulting deflationary spiral will suck the global economy into its vortex. And Wall Street will go down for the count because this time the Fed will be utterly powerless to reverse the tide.

http://davidstockmanscontracorner.co...tle-the-world/

[ChargerCarl]

^crap article

[mhays]

Why is that relevant to my post? I'm talking about market dynamics in the US and this guy thinks something about China is relevant?

[dabcom]

Whatnext, the article you posted is completely devoid of facts and is simply expressing someone's opinion. There is no analysis whatsoever, it's meaningless.

[whatnext]

Originally Posted by dabcom

Whatnext, the article you posted is completely devoid of facts and is simply expressing someone's opinion. There is no analysis whatsoever, it's meaningless.

If you don't like that one, how about The Economist, or are you going to try and dismiss that as well?

The coming debt bust

It is a question of when, not if, real trouble will hit in China

CHINA was right to turn on the credit taps to prop up growth after the global financial crisis. It was wrong not to turn them off again. The country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown.

China will not be an exception to that rule. Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending. The reality is grimmer. Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax. China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis. With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years. But not for ever....

http://www.economist.com/news/leader...ming-debt-bust

[whatnext]

Originally Posted by mhays

Why is that relevant to my post? I'm talking about market dynamics in the US and this guy thinks something about China is relevant?

No, you were trying to imply Chinese investment was guided by some long term wise plan. It's not, it's created by a huge credit bubble and the desperation of Chinese to get their money out of China. How is that not relevant to the discussion?

Take it from someone living at ground zero of this issue, you do not want to see LA overtaken by this. DTLA will develop just fine, albeit more slowly, left to local market judgement. Just because a building is taller doesn't means it makes for a better neighbourhood, especially if it's empty. Left unchecked it does not stop at DT highrises, it moves out to SFH neighbourhoods driving prices to ridiculous heights. It washes over affordable rentals and demolishes them in favour of yet more glitzy, empty condos. To the immature the bright and shiny might seem attractive but it creates horrendous problems.

[ChargerCarl]

LA already has ridiculous prices, our problem isn't foreign demand it's NIMBYism.

[whatnext]

Originally Posted by ChargerCarl

LA already has ridiculous prices, our problem isn't foreign demand it's NIMBYism.

Trust me, you don't know the definition of ridiculous prices until you live in a city where Mainland Chinese money has taken hold of your real estate market:

http://www.vancitybuzz.com/2013/12/v...n-real-estate/

http://www.cbc.ca/news/canada/britis...gain-1.3426147

I only harp on this because I don't want to see other cities in North America go through what we have.

[ChargerCarl]

LA is a much larger market, less possibility for any particular buyer to affect the price level.

I still think the best possible solution is to rezone and allow a shit ton of housing to be built. Let chinese investment flow into the hands of domestic firms and workers.

[mhays]

Originally Posted by whatnext

No, you were trying to imply Chinese investment was guided by some long term wise plan. It's not, it's created by a huge credit bubble and the desperation of Chinese to get their money out of China. How is that not relevant to the discussion?

Take it from someone living at ground zero of this issue, you do not want to see LA overtaken by this. DTLA will develop just fine, albeit more slowly, left to local market judgement. Just because a building is taller doesn't means it makes for a better neighbourhood, especially if it's empty. Left unchecked it does not stop at DT highrises, it moves out to SFH neighbourhoods driving prices to ridiculous heights. It washes over affordable rentals and demolishes them in favour of yet more glitzy, empty condos. To the immature the bright and shiny might seem attractive but it creates horrendous problems.

Have you even read my posts? I'm talking about DEVELOPERS choosing to develop in US cities, and the attributes those developers often have. You're talking about home buying.

[whatnext]

Originally Posted by mhays

Have you even read my posts? I'm talking about DEVELOPERS choosing to develop in US cities, and the attributes those developers often have. You're talking about home buying.

I did read your posts have you read mine? Trust me, the two go hand in hand. In recent multifamily developments by Chinese companies here, the offshore owners have paid way more for a development site than a rational local company would. So right off the bat cost of that housing goes up. Add in the fact that many units are marketed first to offshore buyers looking to move cash out of China, and locals get screwed again.

I'm not sure why some of you get so defensive about this. In Vancouver we have been down this road, it is not pretty. Don't fall into the same trap.

[chris08876]

Originally Posted by ChargerCarl

LA already has ridiculous prices, our problem isn't foreign demand it's NIMBYism.

That and zoning. A lot of people just want something affordable, and would settle for 550-700 sq ft. IDK why they can't build units of this size in mass. Not just LA but in other cities. We could solve the housing crisis, but its almost like nobody does anything about it.

But in terms of architecture, you will suffer a decrease in quality. Not saying commie blocks here, but something of the sort will be required for certain cities. Generic looking towers essentially to house all of the new units. More expensive a tower is, the more the units will be. If we want tons of affordable housing, expect a decrease citywide in terms of architectural quality. At the end of the day, developers need to make a profit, otherwise nothing gets built. I'd love for the government to get involved, but thats a whole other debate in terms of federal spending (making cuts somewhere else to make housing feasible, ect).

[ChargerCarl]

Well its not like our city's dingbats, small apartment buildings, and single family homes are winning any architectural awards.

[LosAngelesSportsFan]

Originally Posted by whatnext

Trust me, you don't know the definition of ridiculous prices until you live in a city where Mainland Chinese money has taken hold of your real estate market:

http://www.vancitybuzz.com/2013/12/v...n-real-estate/

http://www.cbc.ca/news/canada/britis...gain-1.3426147

I only harp on this because I don't want to see other cities in North America go through what we have.

you do realize that LA has the biggest Chinese pop on the west coast of North America, if not all of the US right? There are dozens of cities where the Chinese have taken over. This is nothing new for us, its been happening for a long time and due to the dynamics and size of our market, it hasnt hurt us as much because there is so much overwhelming demand. Look up Chinese investments in Arcardia (went froma typical foothills community to the Beverly HIlls of the San Gabriel valley in about 15 years all due to Chinese money), Pasadena, La Canada, San Gabriel, Monterey Park, etc for more info

[mhays]

Originally Posted by whatnext

I did read your posts have you read mine? Trust me, the two go hand in hand. In recent multifamily developments by Chinese companies here, the offshore owners have paid way more for a development site than a rational local company would. So right off the bat cost of that housing goes up. Add in the fact that many units are marketed first to offshore buyers looking to move cash out of China, and locals get screwed again.

I'm not sure why some of you get so defensive about this. In Vancouver we have been down this road, it is not pretty. Don't fall into the same trap.

The cost of housing is what the market will bear. And "rational" is your opinion, from the sidelines I'd guess.

PS, what makes you think several bigger US cities would be dominated like one smaller city?

[whatnext]

Originally Posted by LosAngelesSportsFan

you do realize that LA has the biggest Chinese pop on the west coast of North America, if not all of the US right? There are dozens of cities where the Chinese have taken over. This is nothing new for us, its been happening for a long time and due to the dynamics and size of our market, it hasnt hurt us as much because there is so much overwhelming demand. Look up Chinese investments in Arcardia (went froma typical foothills community to the Beverly HIlls of the San Gabriel valley in about 15 years all due to Chinese money), Pasadena, La Canada, San Gabriel, Monterey Park, etc for more info

The latest figure I could find for LA County population of Chinese origin is 377k. Vancouver is 411k.

[barney82]

Originally Posted by whatnext

The latest figure I could find for LA County population of Chinese origin is 377k. Vancouver is 411k.

LA has a very diverse Asian population, with Chinese being just one among many large groups, like Koreans, Vietnamese, and Filipinos. In the US, I would say NY definitely has a larger Chinese population than LA. Don't know about the SF Bay Area.

LA's Asian population also seems more "legacy". Metro LA immigration has actually trailed off a lot in the past 10 years, compared to other places, and it's not getting nearly as many Asian or other immigrants as metro NY, or on a per capita basis, as the Bay Area.

2014
https://www.dhs.gov/sites/default/fi...202014_508.pdf
(see page 4 for state and page 5 for metro stats)

compare to 2004
https://www.dhs.gov/sites/default/fi...idents2004.pdf
(see page 5 for state and metro stats, and remember to combine Orange County with LA in this report, to compare to 2014, where the two are already combined)

[barney82]

LA is the most affordable of the world's global megacities, at least in the developed world, I would guess. It also offers a car-centric lifestyle that, while increasingly unfashionable in the Western world, is quite different than what wealthy Asians are used to, and that might appeal to some. A detached house with a yard (or otherwise a relatively spacious condo with suburban-style amenities), quiet, lots of space, beautiful weather, and the amenities of a global city.

[Buckeye Native 001]

Originally Posted by LosAngelesSportsFan

you do realize that LA has the biggest Chinese pop on the west coast of North America, if not all of the US right? There are dozens of cities where the Chinese have taken over. This is nothing new for us, its been happening for a long time and due to the dynamics and size of our market, it hasnt hurt us as much because there is so much overwhelming demand. Look up Chinese investments in Arcardia (went froma typical foothills community to the Beverly HIlls of the San Gabriel valley in about 15 years all due to Chinese money), Pasadena, La Canada, San Gabriel, Monterey Park, etc for more info

To add to that, there's entire swaths of cities in the San Gabriel Valley and East LA County where all the storefronts and businesses are Chinese and/or Japanese (Diamond Bar and Industry immediately come to mind).

I did some work out there for the Princeton Review when I lived in Southern California and I was late to a couple of meetings in Diamond Bar because I couldn't find the business location at which I was supposed to be present (this was in the days before the prevalence of smart phone GPS). For the record, I'm a dumbass white boy from Ohio, so there's that working against me.

And then there's one of the more embarrassing/racist nicknames for the University of California-Irvine, down near where I lived: "University of Chinese Immigrants"