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The Canadian Housing Boom Fueled by China’s Billionaires

182 points by dataminer 10y ago

hoodoof 10y ago
A disaster for people who believe Canadian citizens and permanent residents should be able to afford to buy a home in their own city. Great for those who own real estate and sell it.
- et-al 10y ago
  It seems like the Canadian government is responding: > Foreign investors will have to pay an additional 15 percent in property-transfer tax as of Aug. 2 and city of Vancouver was given the authority to impose a new tax on empty homes. The additional tax on foreign investors is a good idea, but I wonder how it will be enforced, especially when ownership is often hidden behind trusts.
  - Zombieball 10y ago
    My instinct is that it will likely be a small source of income for the government. Will it help with affordability issues for locals? Unlikely.
  - goodcanadian 10y ago
    [edited for accuracy] Technically, it is a British Columbia provincial tax which applies only in the metro Vancouver area. I am curious to see what, if any, affect it has.
  - enraged_camel 10y ago
    >>and city of Vancouver was given the authority to impose a new tax on empty homes. I wonder how they will actually enforce this. I mean, one can furnish a home, have utilities remain active and leave a few lights on and make it look like someone is actually living there. Add some random noise generation (pretty easy to set up with home automation or other, similar methods) and you can fool basically anyone who isn't actively watching your door 24/7.
    - tempestn 10y ago
      IIRC they're planning to use a number of sources. Things like utilities - so at a minimum you'd have to pay for and use a reasonable amount of electricity, water, etc. in the home. Even garbage/recycling collection would be a give-away. Insurance companies will also be a source of info, as insurance rates differ based on occupancy, so the companies have an incentive to determine the same. Finally anonymous reporting (ie from neighbours). Sounds like it should be pretty effective to me. The last bit least so, but utilities + insurance should go a long way. It's going to be a lot easier to just find a decent tenant (easy to do when housing is in such short supply; charge slightly below market rent if you want your pick from many applicants) than to do all the work to fake occupancy.
    - hx87 10y ago
      > you can fool basically anyone who isn't actively watching your door 24/7 How easy is it to fool a surveillance camera pointed at your door 24/7 with an automated system trained to detect human movement watching it?
  - raquo 10y ago
    That tax is just a smokescreen. There are numerous loopholes and problems with it, so many that it's surely deliberately engineered for maximum buzz but minimum effect. BC and Vancouver have been playing hot potato with this issue for a while with no one doing anything to address the problem. For example, it very narrowly targets foreign citizens who are not permanent residents or citizens of Canada, completely missing "investors" who have just bought Canadian permanent residence for cheap, do not earn income in Canada, and are now buying property in their safe haven. This scenario is unfortunately all too common. About $100K in interest payments via Quebec's investor immigration program, no other requirements.
  - ayuvar 10y ago
    A huge portion of BC (and Canada's) economy since the oil price crash has been FIRE, so I would imagine there is no interest in bursting the real estate bubble. The foreign investor tax is a low-effort attempt to skate through another election and maybe pick up a few bucks on the other side. An actual solution to this problem will involve cooperation between the province and the feds at the very least to handle Canada's lax money laundering laws and the Quebec immigrant investor program, as other posters have said. And you are correct in that there have already been realtors caught and censured in BC for offering to help their clients sidestep this new tax using a white proxy buyer or a cut-out trust. However, an actual solution is likely to also tank real estate values, which is reasonable when you think about how the average single detached home in Van is selling for a huge multiple of average wage.
jackcosgrove 10y ago
The whole Pacific coast of North America is becoming a gated region, closed off from those without at least quarter of a million dollars saved up. Unfortunately I think the mild weather and beauty of that area mean prices will never go down. Middle class people are seemingly bound to live in places that are too hot, too cold, or too flat.
- cognivore 10y ago
  Quarter of a million?! Maybe in 2009. Now, 1/2 a million.
  - jackcosgrove 10y ago
    I'm figuring for the down payment.
    - cperciva 10y ago
      In Vancouver, $500k is more plausible. The minimum downpayment for >$1M properties is 20%, and the average selling price for a detached house in Metro Vancouver last month was $1.8M; in the City of Vancouver proper, it was well over $2M.
      - jholman 10y ago
        Hang on, I thought we were discussing whether the area is "closed off from those without at least quarter of a million dollars saved up". Isn't that the topic of this thread? First of all, someone buys the below-average homes, right? So it's hardly "closed off" just because someone can't afford the mean (or median?) detached home value. What's the twentieth-percentile home value? Second of all, what do detached home prices have to do with this? Live in a condo, like reasonable people do. The minimum down payment for a 2 bedroom 2 bath condo in my East Van building would be around $40k.
- mikhailfranco 10y ago
  It is interesting to look at the map of California and wonder at that huge gap between Carmel and Santa Barbara. No development, no population, its even hard for tourists to find a place to stay, or even a campsite. The tech industry pays all the state's bills, mostly captured by tenured public sector workers, in true socialist fashion. If there's a tech crash, and a few years pass without IPOs, the state will collapse into bankruptcy, and the impoverished residents will start to eye that empty coastline as their most valuable asset. When the tree-hugging hippies die off, 350km of the world's most valuable real estate will come onto the market.
icantdrive55 10y ago
I can't speak for Canada, but in the USA; all a foreigner needs to buy a home is cash, and a phone call. I'll get hammered for saying this, but I feel it's wrong on so many levels.
- jackcosgrove 10y ago
  Especially when that cash can come from dodgy loans in the home country.
- vivekd 10y ago
  I agree with you that there should be restrictions on foreign investors looking to housing as investment. . . at the same time, I am worried that they are being used as scapegoats to avoid addressing much larger structural economic and legislative problems behind the inflationary price increase. In fact I think these foreign investors are more being attracted by the already inflating prices than actually the culprit in the inflation.
  - a_bonobo 10y ago
    >Being used as scapegoats That's what it looks like for me with the Australian housing market where the Chinese are being blamed for increasing prices. China is the biggest foreign investor in the Australian housing market followed by the US with $12 billion out of $34 billion foreign investment in 2013-14 [1], but it can't be the only explanation. As a non-permanent resident you can only buy from the plan, no 'used' houses at all: 'If the FIRB feels that the residential real estate in question is only being purchased by a foreign citizen or company just for the purpose of renting it out, or because the purchaser wants to speculate on the property’s future value, permission to purchase will be refused.' [2] The reasons for the extreme prices are more complex and subsequent Australian governments refuse to change this: banks have been giving out record-low mortgages leading to massive debt and rising houseprices [3], and there's negative gearing, which allows people to overinvest because they can claim later and causes people to hold onto their property, thereby inflating prices [4]. Changing this broken system is detrimental to the parties parties as it would directly cut into income for the rich and the old, and so many blue-collar jobs in Australia depend on building houses. It will only change after the whole bubble implodes. [1] http://www.globalpropertyguide.com/Pacific/Australia/Price-History http://www.globalpropertyguide.com/Pacific/Australia/Price-H... [2] http://www.australia-migration.com/page/Foreign_Investors_Buying_property_as_a_foreigner_or_Temporary_Resident_in_Australia/178 http://www.australia-migration.com/page/Foreign_Investors_Bu... [3] http://www.abc.net.au/news/2016-02-29/verrender-housing-bubble-is-building/7206678 http://www.abc.net.au/news/2016-02-29/verrender-housing-bubb... [4] https://en.wikipedia.org/wiki/Negative_gearing#Australia https://en.wikipedia.org/wiki/Negative_gearing#Australia
happyslobro 10y ago
I think that the real problem is that so many people are trying to concentrate into the densest areas. That creates huge pressures, which are reflected in the price of space. Take a look at the cities with populations below 100K. You will find lots of people who live great lives, despite not being rich. For those of us who grew up in these little island towns, living in a place like Vancouver is downright depressing, regardless of the price.
- jackcosgrove 10y ago
  I used to think you had to live in an "it" city to make it. Then I realized that I could make my life whatever I wanted to be more easily in a less expensive place. The chains were in my head.
  - imh 10y ago
    Can I ask what you do for a living?
    - jackcosgrove 10y ago
      I write software.
  - dottedmag 10y ago
    Yes, until you have a family. Then suddenly you need a good school nearby (and good luck bringing children to school in car if they have serious case of motion sickness).
    - saiya-jin 10y ago
      Especially if you have a family, too big cities are a cr*ppy selfish choice of parents. kids will have plenty of time to go super urban in their adulthood if that is what they want. As a kid I always felt sorry for kids from big/capital cities, out of touch from nature, far more exposed to stressful fast-paced life. The gap when meeting some was stunning (but this is obviously my super-anecdotal experience).
FreedomToCreate 10y ago
A running joke in Canada is that BC stands for "Bring Cash". This is what happens in a completely unregulated market. Good in the short term, disastrous in the long.
- jmspring 10y ago
  It's racist, but after Hong Kong and Macau, Vancouver was readily referred to as Hongcouver. The money spilling in from Asia has been going on for a long time. 16+ years.
  - lpaone 10y ago
    The difference is that the first wave of foreign money that came into the city was from Hong Kong. Generally a lot of these immigrants started businesses in the city and contributed to the economy. This is not the case with the current influx of cash. Houses are sitting empty and there is evidence that it is really hurting the economy.
- deleted 10y ago
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- deleted 10y ago
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- ido 10y ago
  Isn't BC vast and mostly empty though? Last I looked purchase prices in Vancouver island (aside from Victoria maybe) were about the same as or lower than rural areas in Germany.
  - serge2k 10y ago
    So people should just go live in the woods?
    - fleitz 10y ago
      What do you think Vancouver was before we poured bitumen all over it? Also the idea that people in Yaletown/Gastown should go live in old factories and warehouses seems to have just fine.
engizeer 10y ago
Holy - I live 5 blocks from the C$64M home mentioned in the article and pay a rent of 1200$ every month.
- branchless 10y ago
  Rents are constrained by wages. Prices are constrained by money printing. Money printing is not constrained.
erdevs 10y ago
Isn't pretty much the same thing happening in San Francisco, too? Alongside all the other drivers of increased home prices there. I think SF has shot up the ranks to become one of the most expensive cities in the world now, right?
- roflchoppa 10y ago
  The hole bay area is like that. Ive heard of like whole housing projects getting bought out by foreign investors out in Santa Clara, stable place to keep money I suppose.
- aianus 10y ago
  You can work in SV and sort-of maybe afford a house in/around SF eventually. There is no industry in Vancouver except selling houses and cars to rich foreigners. A software developer in Vancouver earns less than US$60k.
thinkingkong 10y ago
The interesting parts about foreign buyers is that the best story always seems to highlight the super rich, but its not like mansions are the only things going up in price. I'm sure that a price increase in land results in a "rising tide" effect for all homes, but because someone is willing to spend 64M on a mansion, does it mean condo's should be worth more too? The city is pretty, but there aren't exactly a massive pile of high paying jobs, nor do we have much of an economy beyond resource extraction, satellite offices, etc.
- dgrant 10y ago
  I agree, this bothers me as well; the mansions seem to get way more press than they deserve. What gets under-reported is: -the non-foreigner/non-Chinese/locals that are hanging on to 2-3 properties -the person who can now afford that $1 million condo because they just sold their smaller condo for $500,000 and netted $250,000. -the fact that interest rates are at the lowest ever and some years ago amortization periods were pushed up to 40 years and down payments of 0-5% were allowed.
  - 1anh2kqowg 10y ago
    Investors who rent out their properties might change the price:rent ratio, but they don't contribute to the housing shortage.
    - linkregister 10y ago
      They contribute to the issue of renters being unable to buy. Each of those standalone houses are not available for purchase that otherwise would have been, unless the investor bought the land, applied for residential zoning, and built the property.
      - 1anh2kqowg 10y ago
        >They contribute to the issue of renters being unable to buy. But on the other hand, they give renters a good deal. Buying at a high price:rent ratio means a low cap rate, which makes for a bad investment. So the landlord is essentially giving ownership returns to the renter, while keeping price risk themselves. To the extent that rents are also high, this shows that the problem is not, in fact, investors but instead a limited supply of housing.
lpaone 10y ago
What isn't talked about in this article is the effect this is having on the other industries in the city aside from real estate. I believe that Vancouver has potential to be THE tech hub in Canada. Unfortunately, wages are very low compared to the cost of housing, and so the cost of living is super high. Combine that with extremely low vacancy rates, and it is very hard to attract talent from out of town. In fact, many young, smart and talented people just head south to Seattle or the valley because the wages are so much higher, and the economics of staying in Vancouver just don't make sense. The other industries that could be thriving and building up a real economy in city are some of the biggest casualties in this whole mess. Unfortunately, all of the politicians from municipal to provincial are in bed with the real estate industry, so nothing truly effective and meaningful will be done.
- Apocryphon 10y ago
  Perhaps Montreal can do the same, if the city finds some way to sidestep the provincial language laws.
  - Mikeb85 10y ago
    Nothing wrong with language laws, people just need to stop being lazy. Learning a second language isn't that hard.
    - piva00 10y ago
      It's still a big effort, learning a language properly is not something you do for 2 hours on the weekend and get proficient at it. Even more so if you don't plan to use that language for anything else afterwards. It isn't that hard but isn't that easy either.
      - ivoras 10y ago
        > It's still a big effort, learning a language properly is not something you do for 2 hours on the weekend and get proficient at it. There's a big difference between being really proficient and knowing enough to be productive. In any case, like other skills, everyone gets better by actually doing it, but they need to start first.
dottedmag 10y ago
> The 31-year-old paralegal and her husband, an apprentice plumber, live in a two-bedroom, 1,200-square-foot (111-square-meter) apartment They can't afford kids? I have lived in 83-square-meter apartment with my wife and two kids and a I had a friggin' separate home office room to work from home. It wasn't ideal (we have moved when the youngest turned 5, so we wanted to give them separate bedrooms), but it worked pretty well. Granted, it was in Norway, not US, but one can't help thinking that people just don't know how to use the space they have.
- eyqs 10y ago
  It's the bigger home with a bit of green space that they can't afford. You might be able to squeeze in a kid or two anywhere, but as you said, it wouldn't be ideal. I'm sure they're considering the trade-offs.
- deleted 10y ago
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- wyclif 10y ago
  Isn't the market telling that couple that they should move? I'm not being sarcastic at all. If you can't afford to live in a city because you're priced out, and you want a different lifestyle as well (signalled by the stated desire for children), why wouldn't you move?
jimjimjim 10y ago
It's happening to countries all around the pacific rim (well, without being too rude, all the stable countries). Chinese money is land-banking in Vancouver, US north west, Australia, and Auckland in nz. and countries don't dear stop it because it will tank the real-estate bubble too quickly (it'll go before the tech bubble anyway). But if it does it will actually be good for the economies because capital tied up in unused land is worthless to the economy.
- vorg 10y ago
  ex-IT workers who left these places say "My job went to India and my home went to China."
  - antisthenes 10y ago
    True globalization!
- mikhailfranco 10y ago
  Yes, insane property prices in Oz & NZ: http://www.acting-man.com/?p=46075 http://www.acting-man.com/?p=46075 Canada and Australia have been hit hard by the commodity collapse, and their currencies have crashed, so their property has inflated in local nominal prices, as foreigners have bought anything with a roof (or even without). But their internal economies have not reacted to the loss of export business and imported inflation for consumer goods. They keep high-taxes and high-welfare socialist economies which are sleep-walking off a cliff - this will not end well. NZ is in a slightly better position, because it produces more agricultural commodities than industrial minerals, and it restructured its taxes and regulations to become more friendly to businesses and individuals (no capital gains tax, no inheritance tax). But its real estate market is also in a crazy bubble, which will collapse if the foreign buyers disappear.
- lucaspiller 10y ago
  The same is true in London, mainly with investors from Russia, China and the Middle East. Compared to their countries, they see these as a 'safe haven' for their money. https://www.theguardian.com/society/2014/dec/26/londoners-miss-out-as-foreign-investors-buy-up-home-sites https://www.theguardian.com/society/2014/dec/26/londoners-mi...
steve_taylor 10y ago
It's happening in Australia too, but the few people willing to talk about it are crucified by the PC brigade.
- linkregister 10y ago
  The SMH and West Australian publish articles about Chinese real estate purchases every week. This is an oft-discussed issue.
serge2k 10y ago
> Surrey, a neighborhood about an hour’s drive Or a city of 500,000. It is part of the GVRD.
serge2k 10y ago
> The affordability measure is based on average household income of C$64,000 and a 25-year mortgage with a 25 percent downpayment. So if most houses are a million you only need 4 years salary for the downpayment. Ouch.
stana 10y ago
As mentioned in this article, in most cases, father and the business do not move, only part of the family. Apart for spending in property and luxury items, looks like wealthy migration are passive participants in the economy - not starting businesses employing people, or paying much tax.
- GreaterFool 10y ago
  I wonder, what are wealthy people more likely to do: (1) but a hand made leather bag from a local hipster workshop (which I would do) or (2) buy a 10x more expensive Louis Vuitton bag which was probably made in a giant factory in China? And generalize to other goods/services. (1) at least supports local economy while (2) supports limited number of middle men. I'm not saying (2) is bad, but if it's only wealthy people spending their money only on imported goods then it is not good.
  - bb101 10y ago
    Depends how recently the wealthy person came into money. Nouveau: head to the nearest Louis Vuitton or Goyard boutique and choose the bag with the most logos. Old money: handmade artisan bag with no labels.
ktRolster 10y ago
8 percent of the total housing market is being bought by billionaires, that's my understanding of the article.
decayy 10y ago
This is happening in Australia too. There are new apartment buildings going up by Chinese property developers aimed squarely at the growing Chinese population. As a matter of fact, construction management university students are told to study Chinese language and culture to help them get jobs after uni
- pedalpete 10y ago
  I'm from Canada (Whistler, north of Vancouver) and now live in Sydney, Australia. Australia is nowhere near as bad as Canada. I'm amazed this article glanced over the issues Vancouver is really struggling with. I believe the housing market in Sydney will come into trouble, but Canada is in for a very rude awakening. I'll post another comment re:these serious issues canada faces.
throwaway201607 10y ago
There are some simple fixes to people's issues. 1) Charge more for everything 2) If you cannot get a good deal, then leave. 3) Stop playing games where you sacrifice yourself trying to compete against people who sacrifice very little but have much. These billionaires are flippant about these things because it cost them nothing (personally) to get the wealth. When you make $64M a year, a $4M condo is nothing. But when a paralegal and a plumber scrimp and save to try and compete, it will cost them everything. Better to just move to another city and not play the game. Or charge the billionaire $400 an hour for plumbing.
- linkregister 10y ago
  Great, tell my relatives to say goodbye to their elderly parents they support. Also tell them to leave their clients behind. Oh! And hurt their school-age children socially by moving them to a different region. Not all people have the same mobility that you do. This is a situation that many people need to stand and address, not vote with their feet.
  - throwaway201607 10y ago
    The fact of the matter is that you/they cannot afford to keep things going, and the only way the market will correct is when people refuse to sacrifice more. Your family loves you and based on that I can securely tell you that if you have to leave they will continue to love you. And if they truly are dependent on your support, they will follow. Assuming you're not literally 100% broke (like $0 in the bank, $0 credit) you have the ability to travel somewhere close to make a less expensive life. Maybe Kamloops or more central like prince George?
- bb101 10y ago
  The governments of most western countries have betrayed their citizens with globalisation and loose regulation. Freedom to transfer money across borders, access to markets with little responsibility or accountability. Some make a fortune during the turbulence, others suffer poverty or virtual slavery. The peaks become higher and the troughs lower. I have trouble believing that this is the world foreseen by the original proponents of neoliberalism. Freedom is a wonderful thing, but not when it facilitates and entrenches unfairness. My grandfather, who lived through a similar period of financial disparity in the 1930s refers to it as "wild capitalism". No need for a crystal ball to predict what may happen next.
pedalpete 10y ago
Very surprised Bloomberg would put out such a fluff piece about the Vancouver Real Estate market. There are very serious issues in Vancouver, and some suspect Canada is in for a ruder awakening than the US. http://www.vice.com/en_ca/read/meet-the-wall-street-short-seller-betting-against-canadian-real-estate http://www.vice.com/en_ca/read/meet-the-wall-street-short-se... 1) Canadian Real Estate is being used as a money laundering facility http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-foreign-buyers_b_10329000.html http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-f... . 2) Canada also has a healthy (well, actually unhealthy) sub-prime lending market http://www.huffingtonpost.ca/2016/05/18/subprime-lending-canada-transunion_n_10011578.html http://www.huffingtonpost.ca/2016/05/18/subprime-lending-can... 3) Then there is the issue of occupancy. The reason the 15% tax was brought in is because money was coming in to purchase houses which then sat empty. Many have become derelict. When I lived in Vancouver, Yaletown was full of apartment towers, but where were all the people (I believe occupancy in that area has improved). http://www.theglobeandmail.com/real-estate/vancouver/poking-holes-in-vancouvers-housing-vacancy-study/article29181730/ http://www.theglobeandmail.com/real-estate/vancouver/poking-... 4) Lastly, the shadow flipping, again, mentioned in the article, but didn't get the attention it deserved http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouver-homes-sold-at-least-twice-since-2014-1.2769801 http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouve... Don't worry if you don't want to read the articles, it will be a movie in a few years along the lines of The Big Short.
- linkregister 10y ago
  Fluff piece? Did we read the same article? It covered at length the issue of the young couple essentially trapped in Surrey, unable to get enough space to have a child. The author really went out of the way to emphasize the wealth of the investors, describing the buyer wanting a nonexistent car. The only remotely fluffy portion was describing the ecosystem of luxury services associated with the lavish spending. I think the article did a good job of conveying the huge negative effect to the Vancouver economy and way of life.
  - tener 10y ago
    The requirements this young couple have is mind boggling. The have 111 sq meters and think they cannot have a kid in this space? A lot of my friends live in ~40 sq meters and are happy to have their own place at all. With a kid, even two. Surely they would like to move to a bigger places, but this isn't a showstopper. They would love to have 111 sq meters place. Rising prices of properties is a real issue, but this particular couple is way above the standards I am used to. What is the socially accepted minimal living standard for a couple with kids in the US / Canada?
Aoyagi 10y ago
Yeah, this is working so well for the real estate market in New Zealand...
Hondor 10y ago
Are there examples of very lightly regulated housing markets in developed countries? Does that really lead to bad things like people say? I know it can cause slums in poor countries. But would California or Vancouver somehow fail if they allowed unlimited high density construction and development in what's currently undeveloped land? Are there examples of that happening before?
- MarchHare 10y ago
  My understanding is the Vancouver has light regulation in some aspects, hence the term Vancouverism: https://en.wikipedia.org/wiki/Vancouverism https://en.wikipedia.org/wiki/Vancouverism
RandyRanderson 10y ago
As a vancouverite, and a person that's lived in Toronto for over a decade, I can say that while vancouver has about half the population (of T.O.) it has maybe 1/4 or 1/8 of the tech jobs. Also Canada is not like, say, the US, where there are many different industrial centers (ie Entertainment in LA or Finance in NY). In Canada, most corp headquarters are in Toronto and a small fraction are in Calgary and that's it. Vancouver has little significant industry that isn't tied to real estate. Even if a crash does happen, the largest crashes to date have only been maybe 30% in '82 (prices recovered in 7 years) and 15% in '08 (prices recovered in 1 year). What could change the course of the current deluge of chinese capital? 1 Canadian Regulatory change - the federal liberals and the provincial liberals have significant political contributions from real estate agents (look it up). They won't impl any meaningful changes. This new 15% tax will affect few and change little; it is just election season and our Premier, Christi has to look active. 2 Interest rates - The US basically sets our rates and the US is likely going to reduce the rates driving more capital to look for better returns. 3 Chinese cash - are you going to stop buying chinese shit? No, in fact most can only afford chinese made products these days. 4 Chinese Regulatory change - This could happen but most of the cash used to buy homes in BC is likely illegally moved out of china anyhow so... TL;DR- In the 1-2 year timeframe tho, my advice - mortgage your house and buy as much BC real estate as you can afford. Good luck on finding 25%+ yoy low risk returns anywhere else.
- havetocharge 10y ago
  Your mind frame displayed in your tl;dr is precisely what is responsible for the rate of housing price increases in your region.
  - RandyRanderson 10y ago
    My guess would be that the van housing prices mostly correlated to the outflow of cash from china. These investors likely don't care about the return - just that they don't lose the capital. So, I respectfully disagree.
- allengeorge 10y ago
  The city of Vancouver's population is 600K, while Toronto's is 2.6M - over 4x as large. Are you talking about their CMA populations? (That seems more likely: ~2.6M vs. 5.6M)
cia48621793 10y ago
Chinese new moneys' are nothing good but harmful. They see housing as an investment, not an asset, or something that can live with. They just want to rock more money and everybody is suffering with huge housing price after all.
narrator 10y ago
All the trillions of dollars that got sent out the trade deficit since the 80s are finally making their way back to the developed economies. We can only export our inflation for so long.
- Canada 10y ago
  Yeah. Nobody will talk about this. Trillions of dollars went to China in exchange for things purchased legally and voluntarily. Now, people throw around terms like "money laundering" as if the Chinese are a bad ass cartel that's been selling us cocaine all this time.
- hx87 10y ago
  If would could only find a way to tax that in order to pay off the fiscal deficits we had to accrue in order to make perpetual trade deficits less painful...
dagaci 10y ago
This type of money (rich and super rich) has always been invested in the nice, stable democratic world, places where they can safely park their money, friends, families and educate their children. Places they are go to in case of an uprising or regime change.. The difference now is that this class of person is not just coming from the oil-baron gravy train and political kleptocracy. But is also coming from the booming business-class that is China So many of those new rich who make it big certainly want their families and especially their children to the chance to live and be educated in a free and democratic society.
skylan_q 10y ago
The Chinese buyers are paying on average $900k for a house, which is what the average Canadian is buying. The percentage of Chinese buyers is anywhere from 4% to 8% in the market. What upsets me here more than anything else is that no one mentioned the CMHC. I suppose people would be more willing to believe that aliens are using mind control on people to drive a real estate frenzy rather than believe that there are institutions creating moral hazard within Canada.
- hifumi 10y ago
  What is the "CMHC"?
  - skylan_q 10y ago
    Canadian Mortgage and Housing Corporation. They insure the banks against mortgage default. People pay a small premium on their monthly mortgage payments so that if they default, the bank is insured for the cash difference of the outstanding amount on the mortgage. As a result, banks in Canada face no risks from mortgage default so there's no reason to deny a mortgage. Over 90% of mortgages made in the past decade are CMHC-insured.
    - mrtron 10y ago
      I get what you are saying, but so far things are going very well. By 2010 CMHC had an annual financial surplus of more than $2 billion.[6] CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009. If you think this insurance can cause Canadian banks to be more risky in their lending - I don't think that is currently the case.
      - 49para 10y ago
        So $26B in holdings to insure $1.372T in outstanding mortgages, that seem pretty low but since the taxpayers will cover the rest, I guess it's fine to continue handing out subprime mortgages.
mark_l_watson 10y ago
Isn't the cause of rapidly rising real estate prices also caused by devaluations of currencies, so people with a lot of money are looking for relatively safe places to park it? In the USA real inflation is much higher than our government admits.
- roymurdock 10y ago
  > In the USA real inflation is much higher than our government admits Care to explain?
- arenaninja 10y ago
  Do you have any supporting evidence to your claim that real inflation is much higher? I'm not trying to prove you wrong, I'm genuinely curious. My impression has been that inflation has been relatively low, with the exception of housing. Though housing has gone up much faster in large metros than the rest of the country
  - mark_l_watson 10y ago
    I have read that our government stresses consumer items like TVs in calculating the inflation index because tech product prices decrease rapidly. Food, housing and medical costs are increasing rapidly and get discounted in the CPI. If the true rate of inflation were admitted, then cost of living increases for social security, etc. would be more expensive, right?
    - hx87 10y ago
      If that were true, wouldn't it make more sense to sink money into funds targeting the food, real estate, and medical sectors instead of directly in real estate? After all, there is no reason that (residential) real estate prices track food and medical prices, and owning real estate outright is a horribly lumpy, illiquid, and undiversified investment.
msie 10y ago
I'm disgusted/saddened by the biased reporting that's taken place over this issue. This article points out how Bloomberg and other media are attracted to the "foreign buyers" narrative: http://www.straight.com/news/735161/revisiting-real-estate-race-and-how-foreign-buyers-narrative-came-dominate-vancouver http://www.straight.com/news/735161/revisiting-real-estate-r... Study finds foreign buyers impact Vancouver real estate but likely can't account for sky-high prices: http://www.straight.com/news/720471/study-finds-foreign-buyers-impact-vancouver-real-estate-likely-cant-account-sky-high http://www.straight.com/news/720471/study-finds-foreign-buye...
- easytiger 10y ago
  Same in London. In everything except extremely high end property. But it is a common narrative for political purposes because people "feel" it to be right.
- ijamj 10y ago
  Not to mention perfectly valid non-speculative buyers. Scenario for you: international student completed UBC and started working full-time on local tech company. After struggle to save, put a deposit on a place after saving from working part-time during later years of degree and about to close deal in a couple weeks (when new place is ready). Now, BAM! Gotta have to pony up 15% on home price agreed upon nearly a year earlier. More than original deposit! Tell me how that encourages qualified tech workers to stick around... They aimed at a particular kind of "foreign buyers" in a crowd, but used a shotgun...
gmisra 10y ago
A lot of commenters concerned about Bloomberg's potential editorial bias in running this piece, but it is interesting that it comes just a few days after they published "End of an Era as China’s Love Affair With U.S. Real Estate Fades" [1] https://www.bloomberg.com/news/articles/2016-07-26/end-of-an-era-as-china-s-love-affair-with-u-s-real-estate-fades https://www.bloomberg.com/news/articles/2016-07-26/end-of-an...
ygmelnikova 10y ago
Where else can you park your cash these days and get these kinds of returns? This is about making your money work for you. Speculate and accumulate. (Just to add, I've lived in Vancouver for over 50 years, and helped pioneer the net here back in '93)
pascalxus 10y ago
This situation can be turned around into a positive. The higher real estate boom could be used for a massive building boom to reduce unemployment and boost wages in the construction industry. I doubt every last bit of land has been used up, I don't think their density is anywhere near that of Hong Kong. On a broader scale, I don't understand why (other than politics and legal) this massive multi nationwide demand for housing hasn't created opportunities in the construction industry: building out with existing technologies as well as incentives to produce more efficient methods and tech. Whatever happened to big problems leading to big opportunities? I mean we're talking about a multi-trillion dollar industry begging to be disrupted. I can't name a single unicorn company that's involved in this right now.
- ficklepickle 10y ago
  They make it look like they live in the homes to pay no capital gains tax. These homes generally aren't used as homes but investments. It takes a lot of work and luck to even rent a small apartment. Source: I was just reno-victed I had a front row seat. My new apartment had been available for 30 minutes when I put the deposit down. It was pure luck that I found somewhere to live . It's not sustainable.
jonesalice34 10y ago
Canada is the fifth most popular country with Chinese property investors who is interested in purchasing condos for their children near universities. As a result, single-detached homes move further into luxury budget territory leaving first-time buyers with funds enough for a condo. Source https://tranio.com/canada,new_zealand,australia,united-kingdom,usa/analytics/top_five_countries_for_chinese_property_investments_5131/ https://tranio.com/canada,new_zealand,australia,united-kingd...

182 points by dataminer 10y ago

A disaster for people who believe Canadian citizens and permanent residents should be able to afford to buy a home in their own city. Great for those who own real estate and sell it.

et-al 10y ago
It seems like the Canadian government is responding: > Foreign investors will have to pay an additional 15 percent in property-transfer tax as of Aug. 2 and city of Vancouver was given the authority to impose a new tax on empty homes. The additional tax on foreign investors is a good idea, but I wonder how it will be enforced, especially when ownership is often hidden behind trusts.
- Zombieball 10y ago
  My instinct is that it will likely be a small source of income for the government. Will it help with affordability issues for locals? Unlikely.
- goodcanadian 10y ago
  [edited for accuracy] Technically, it is a British Columbia provincial tax which applies only in the metro Vancouver area. I am curious to see what, if any, affect it has.
- enraged_camel 10y ago
  >>and city of Vancouver was given the authority to impose a new tax on empty homes. I wonder how they will actually enforce this. I mean, one can furnish a home, have utilities remain active and leave a few lights on and make it look like someone is actually living there. Add some random noise generation (pretty easy to set up with home automation or other, similar methods) and you can fool basically anyone who isn't actively watching your door 24/7.
  - tempestn 10y ago
    IIRC they're planning to use a number of sources. Things like utilities - so at a minimum you'd have to pay for and use a reasonable amount of electricity, water, etc. in the home. Even garbage/recycling collection would be a give-away. Insurance companies will also be a source of info, as insurance rates differ based on occupancy, so the companies have an incentive to determine the same. Finally anonymous reporting (ie from neighbours). Sounds like it should be pretty effective to me. The last bit least so, but utilities + insurance should go a long way. It's going to be a lot easier to just find a decent tenant (easy to do when housing is in such short supply; charge slightly below market rent if you want your pick from many applicants) than to do all the work to fake occupancy.
  - hx87 10y ago
    > you can fool basically anyone who isn't actively watching your door 24/7 How easy is it to fool a surveillance camera pointed at your door 24/7 with an automated system trained to detect human movement watching it?
- raquo 10y ago
  That tax is just a smokescreen. There are numerous loopholes and problems with it, so many that it's surely deliberately engineered for maximum buzz but minimum effect. BC and Vancouver have been playing hot potato with this issue for a while with no one doing anything to address the problem. For example, it very narrowly targets foreign citizens who are not permanent residents or citizens of Canada, completely missing "investors" who have just bought Canadian permanent residence for cheap, do not earn income in Canada, and are now buying property in their safe haven. This scenario is unfortunately all too common. About $100K in interest payments via Quebec's investor immigration program, no other requirements.
- ayuvar 10y ago
  A huge portion of BC (and Canada's) economy since the oil price crash has been FIRE, so I would imagine there is no interest in bursting the real estate bubble. The foreign investor tax is a low-effort attempt to skate through another election and maybe pick up a few bucks on the other side. An actual solution to this problem will involve cooperation between the province and the feds at the very least to handle Canada's lax money laundering laws and the Quebec immigrant investor program, as other posters have said. And you are correct in that there have already been realtors caught and censured in BC for offering to help their clients sidestep this new tax using a white proxy buyer or a cut-out trust. However, an actual solution is likely to also tank real estate values, which is reasonable when you think about how the average single detached home in Van is selling for a huge multiple of average wage.

jackcosgrove 10y ago

The whole Pacific coast of North America is becoming a gated region, closed off from those without at least quarter of a million dollars saved up. Unfortunately I think the mild weather and beauty of that area mean prices will never go down. Middle class people are seemingly bound to live in places that are too hot, too cold, or too flat.

cognivore 10y ago
Quarter of a million?! Maybe in 2009. Now, 1/2 a million.
- jackcosgrove 10y ago
  I'm figuring for the down payment.
  - cperciva 10y ago
    In Vancouver, $500k is more plausible. The minimum downpayment for >$1M properties is 20%, and the average selling price for a detached house in Metro Vancouver last month was $1.8M; in the City of Vancouver proper, it was well over $2M.
    - jholman 10y ago
      Hang on, I thought we were discussing whether the area is "closed off from those without at least quarter of a million dollars saved up". Isn't that the topic of this thread? First of all, someone buys the below-average homes, right? So it's hardly "closed off" just because someone can't afford the mean (or median?) detached home value. What's the twentieth-percentile home value? Second of all, what do detached home prices have to do with this? Live in a condo, like reasonable people do. The minimum down payment for a 2 bedroom 2 bath condo in my East Van building would be around $40k.
mikhailfranco 10y ago
It is interesting to look at the map of California and wonder at that huge gap between Carmel and Santa Barbara. No development, no population, its even hard for tourists to find a place to stay, or even a campsite. The tech industry pays all the state's bills, mostly captured by tenured public sector workers, in true socialist fashion. If there's a tech crash, and a few years pass without IPOs, the state will collapse into bankruptcy, and the impoverished residents will start to eye that empty coastline as their most valuable asset. When the tree-hugging hippies die off, 350km of the world's most valuable real estate will come onto the market.

icantdrive55 10y ago

I can't speak for Canada, but in the USA; all a foreigner needs to buy a home is cash, and a phone call. I'll get hammered for saying this, but I feel it's wrong on so many levels.

jackcosgrove 10y ago
Especially when that cash can come from dodgy loans in the home country.
vivekd 10y ago
I agree with you that there should be restrictions on foreign investors looking to housing as investment. . . at the same time, I am worried that they are being used as scapegoats to avoid addressing much larger structural economic and legislative problems behind the inflationary price increase. In fact I think these foreign investors are more being attracted by the already inflating prices than actually the culprit in the inflation.
- a_bonobo 10y ago
  >Being used as scapegoats That's what it looks like for me with the Australian housing market where the Chinese are being blamed for increasing prices. China is the biggest foreign investor in the Australian housing market followed by the US with $12 billion out of $34 billion foreign investment in 2013-14 [1], but it can't be the only explanation. As a non-permanent resident you can only buy from the plan, no 'used' houses at all: 'If the FIRB feels that the residential real estate in question is only being purchased by a foreign citizen or company just for the purpose of renting it out, or because the purchaser wants to speculate on the property’s future value, permission to purchase will be refused.' [2] The reasons for the extreme prices are more complex and subsequent Australian governments refuse to change this: banks have been giving out record-low mortgages leading to massive debt and rising houseprices [3], and there's negative gearing, which allows people to overinvest because they can claim later and causes people to hold onto their property, thereby inflating prices [4]. Changing this broken system is detrimental to the parties parties as it would directly cut into income for the rich and the old, and so many blue-collar jobs in Australia depend on building houses. It will only change after the whole bubble implodes. [1] http://www.globalpropertyguide.com/Pacific/Australia/Price-History http://www.globalpropertyguide.com/Pacific/Australia/Price-H... [2] http://www.australia-migration.com/page/Foreign_Investors_Buying_property_as_a_foreigner_or_Temporary_Resident_in_Australia/178 http://www.australia-migration.com/page/Foreign_Investors_Bu... [3] http://www.abc.net.au/news/2016-02-29/verrender-housing-bubble-is-building/7206678 http://www.abc.net.au/news/2016-02-29/verrender-housing-bubb... [4] https://en.wikipedia.org/wiki/Negative_gearing#Australia https://en.wikipedia.org/wiki/Negative_gearing#Australia

happyslobro 10y ago

I think that the real problem is that so many people are trying to concentrate into the densest areas. That creates huge pressures, which are reflected in the price of space. Take a look at the cities with populations below 100K. You will find lots of people who live great lives, despite not being rich. For those of us who grew up in these little island towns, living in a place like Vancouver is downright depressing, regardless of the price.

jackcosgrove 10y ago
I used to think you had to live in an "it" city to make it. Then I realized that I could make my life whatever I wanted to be more easily in a less expensive place. The chains were in my head.
- imh 10y ago
  Can I ask what you do for a living?
  - jackcosgrove 10y ago
    I write software.
- dottedmag 10y ago
  Yes, until you have a family. Then suddenly you need a good school nearby (and good luck bringing children to school in car if they have serious case of motion sickness).
  - saiya-jin 10y ago
    Especially if you have a family, too big cities are a cr*ppy selfish choice of parents. kids will have plenty of time to go super urban in their adulthood if that is what they want. As a kid I always felt sorry for kids from big/capital cities, out of touch from nature, far more exposed to stressful fast-paced life. The gap when meeting some was stunning (but this is obviously my super-anecdotal experience).

FreedomToCreate 10y ago

A running joke in Canada is that BC stands for "Bring Cash". This is what happens in a completely unregulated market. Good in the short term, disastrous in the long.

jmspring 10y ago
It's racist, but after Hong Kong and Macau, Vancouver was readily referred to as Hongcouver. The money spilling in from Asia has been going on for a long time. 16+ years.
- lpaone 10y ago
  The difference is that the first wave of foreign money that came into the city was from Hong Kong. Generally a lot of these immigrants started businesses in the city and contributed to the economy. This is not the case with the current influx of cash. Houses are sitting empty and there is evidence that it is really hurting the economy.
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ido 10y ago
Isn't BC vast and mostly empty though? Last I looked purchase prices in Vancouver island (aside from Victoria maybe) were about the same as or lower than rural areas in Germany.
- serge2k 10y ago
  So people should just go live in the woods?
  - fleitz 10y ago
    What do you think Vancouver was before we poured bitumen all over it? Also the idea that people in Yaletown/Gastown should go live in old factories and warehouses seems to have just fine.

engizeer 10y ago

Holy - I live 5 blocks from the C$64M home mentioned in the article and pay a rent of 1200$ every month.

branchless 10y ago
Rents are constrained by wages. Prices are constrained by money printing. Money printing is not constrained.

erdevs 10y ago

Isn't pretty much the same thing happening in San Francisco, too? Alongside all the other drivers of increased home prices there. I think SF has shot up the ranks to become one of the most expensive cities in the world now, right?

roflchoppa 10y ago
The hole bay area is like that. Ive heard of like whole housing projects getting bought out by foreign investors out in Santa Clara, stable place to keep money I suppose.
aianus 10y ago
You can work in SV and sort-of maybe afford a house in/around SF eventually. There is no industry in Vancouver except selling houses and cars to rich foreigners. A software developer in Vancouver earns less than US$60k.

thinkingkong 10y ago

The interesting parts about foreign buyers is that the best story always seems to highlight the super rich, but its not like mansions are the only things going up in price. I'm sure that a price increase in land results in a "rising tide" effect for all homes, but because someone is willing to spend 64M on a mansion, does it mean condo's should be worth more too? The city is pretty, but there aren't exactly a massive pile of high paying jobs, nor do we have much of an economy beyond resource extraction, satellite offices, etc.

dgrant 10y ago
I agree, this bothers me as well; the mansions seem to get way more press than they deserve. What gets under-reported is: -the non-foreigner/non-Chinese/locals that are hanging on to 2-3 properties -the person who can now afford that $1 million condo because they just sold their smaller condo for $500,000 and netted $250,000. -the fact that interest rates are at the lowest ever and some years ago amortization periods were pushed up to 40 years and down payments of 0-5% were allowed.
- 1anh2kqowg 10y ago
  Investors who rent out their properties might change the price:rent ratio, but they don't contribute to the housing shortage.
  - linkregister 10y ago
    They contribute to the issue of renters being unable to buy. Each of those standalone houses are not available for purchase that otherwise would have been, unless the investor bought the land, applied for residential zoning, and built the property.
    - 1anh2kqowg 10y ago
      >They contribute to the issue of renters being unable to buy. But on the other hand, they give renters a good deal. Buying at a high price:rent ratio means a low cap rate, which makes for a bad investment. So the landlord is essentially giving ownership returns to the renter, while keeping price risk themselves. To the extent that rents are also high, this shows that the problem is not, in fact, investors but instead a limited supply of housing.

lpaone 10y ago

What isn't talked about in this article is the effect this is having on the other industries in the city aside from real estate. I believe that Vancouver has potential to be THE tech hub in Canada. Unfortunately, wages are very low compared to the cost of housing, and so the cost of living is super high. Combine that with extremely low vacancy rates, and it is very hard to attract talent from out of town. In fact, many young, smart and talented people just head south to Seattle or the valley because the wages are so much higher, and the economics of staying in Vancouver just don't make sense. The other industries that could be thriving and building up a real economy in city are some of the biggest casualties in this whole mess. Unfortunately, all of the politicians from municipal to provincial are in bed with the real estate industry, so nothing truly effective and meaningful will be done.

Apocryphon 10y ago
Perhaps Montreal can do the same, if the city finds some way to sidestep the provincial language laws.
- Mikeb85 10y ago
  Nothing wrong with language laws, people just need to stop being lazy. Learning a second language isn't that hard.
  - piva00 10y ago
    It's still a big effort, learning a language properly is not something you do for 2 hours on the weekend and get proficient at it. Even more so if you don't plan to use that language for anything else afterwards. It isn't that hard but isn't that easy either.
    - ivoras 10y ago
      > It's still a big effort, learning a language properly is not something you do for 2 hours on the weekend and get proficient at it. There's a big difference between being really proficient and knowing enough to be productive. In any case, like other skills, everyone gets better by actually doing it, but they need to start first.

dottedmag 10y ago

> The 31-year-old paralegal and her husband, an apprentice plumber, live in a two-bedroom, 1,200-square-foot (111-square-meter) apartment They can't afford kids? I have lived in 83-square-meter apartment with my wife and two kids and a I had a friggin' separate home office room to work from home. It wasn't ideal (we have moved when the youngest turned 5, so we wanted to give them separate bedrooms), but it worked pretty well. Granted, it was in Norway, not US, but one can't help thinking that people just don't know how to use the space they have.

eyqs 10y ago
It's the bigger home with a bit of green space that they can't afford. You might be able to squeeze in a kid or two anywhere, but as you said, it wouldn't be ideal. I'm sure they're considering the trade-offs.
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wyclif 10y ago
Isn't the market telling that couple that they should move? I'm not being sarcastic at all. If you can't afford to live in a city because you're priced out, and you want a different lifestyle as well (signalled by the stated desire for children), why wouldn't you move?

jimjimjim 10y ago

It's happening to countries all around the pacific rim (well, without being too rude, all the stable countries). Chinese money is land-banking in Vancouver, US north west, Australia, and Auckland in nz. and countries don't dear stop it because it will tank the real-estate bubble too quickly (it'll go before the tech bubble anyway). But if it does it will actually be good for the economies because capital tied up in unused land is worthless to the economy.

vorg 10y ago
ex-IT workers who left these places say "My job went to India and my home went to China."
- antisthenes 10y ago
  True globalization!
mikhailfranco 10y ago
Yes, insane property prices in Oz & NZ: http://www.acting-man.com/?p=46075 http://www.acting-man.com/?p=46075 Canada and Australia have been hit hard by the commodity collapse, and their currencies have crashed, so their property has inflated in local nominal prices, as foreigners have bought anything with a roof (or even without). But their internal economies have not reacted to the loss of export business and imported inflation for consumer goods. They keep high-taxes and high-welfare socialist economies which are sleep-walking off a cliff - this will not end well. NZ is in a slightly better position, because it produces more agricultural commodities than industrial minerals, and it restructured its taxes and regulations to become more friendly to businesses and individuals (no capital gains tax, no inheritance tax). But its real estate market is also in a crazy bubble, which will collapse if the foreign buyers disappear.
lucaspiller 10y ago
The same is true in London, mainly with investors from Russia, China and the Middle East. Compared to their countries, they see these as a 'safe haven' for their money. https://www.theguardian.com/society/2014/dec/26/londoners-miss-out-as-foreign-investors-buy-up-home-sites https://www.theguardian.com/society/2014/dec/26/londoners-mi...

steve_taylor 10y ago

It's happening in Australia too, but the few people willing to talk about it are crucified by the PC brigade.

linkregister 10y ago
The SMH and West Australian publish articles about Chinese real estate purchases every week. This is an oft-discussed issue.

serge2k 10y ago

> Surrey, a neighborhood about an hour’s drive Or a city of 500,000. It is part of the GVRD.

serge2k 10y ago

> The affordability measure is based on average household income of C$64,000 and a 25-year mortgage with a 25 percent downpayment. So if most houses are a million you only need 4 years salary for the downpayment. Ouch.

stana 10y ago

As mentioned in this article, in most cases, father and the business do not move, only part of the family. Apart for spending in property and luxury items, looks like wealthy migration are passive participants in the economy - not starting businesses employing people, or paying much tax.

GreaterFool 10y ago
I wonder, what are wealthy people more likely to do: (1) but a hand made leather bag from a local hipster workshop (which I would do) or (2) buy a 10x more expensive Louis Vuitton bag which was probably made in a giant factory in China? And generalize to other goods/services. (1) at least supports local economy while (2) supports limited number of middle men. I'm not saying (2) is bad, but if it's only wealthy people spending their money only on imported goods then it is not good.
- bb101 10y ago
  Depends how recently the wealthy person came into money. Nouveau: head to the nearest Louis Vuitton or Goyard boutique and choose the bag with the most logos. Old money: handmade artisan bag with no labels.

ktRolster 10y ago

8 percent of the total housing market is being bought by billionaires, that's my understanding of the article.

decayy 10y ago

This is happening in Australia too. There are new apartment buildings going up by Chinese property developers aimed squarely at the growing Chinese population. As a matter of fact, construction management university students are told to study Chinese language and culture to help them get jobs after uni

pedalpete 10y ago
I'm from Canada (Whistler, north of Vancouver) and now live in Sydney, Australia. Australia is nowhere near as bad as Canada. I'm amazed this article glanced over the issues Vancouver is really struggling with. I believe the housing market in Sydney will come into trouble, but Canada is in for a very rude awakening. I'll post another comment re:these serious issues canada faces.

throwaway201607 10y ago

There are some simple fixes to people's issues. 1) Charge more for everything 2) If you cannot get a good deal, then leave. 3) Stop playing games where you sacrifice yourself trying to compete against people who sacrifice very little but have much. These billionaires are flippant about these things because it cost them nothing (personally) to get the wealth. When you make $64M a year, a $4M condo is nothing. But when a paralegal and a plumber scrimp and save to try and compete, it will cost them everything. Better to just move to another city and not play the game. Or charge the billionaire $400 an hour for plumbing.

linkregister 10y ago
Great, tell my relatives to say goodbye to their elderly parents they support. Also tell them to leave their clients behind. Oh! And hurt their school-age children socially by moving them to a different region. Not all people have the same mobility that you do. This is a situation that many people need to stand and address, not vote with their feet.
- throwaway201607 10y ago
  The fact of the matter is that you/they cannot afford to keep things going, and the only way the market will correct is when people refuse to sacrifice more. Your family loves you and based on that I can securely tell you that if you have to leave they will continue to love you. And if they truly are dependent on your support, they will follow. Assuming you're not literally 100% broke (like $0 in the bank, $0 credit) you have the ability to travel somewhere close to make a less expensive life. Maybe Kamloops or more central like prince George?
bb101 10y ago
The governments of most western countries have betrayed their citizens with globalisation and loose regulation. Freedom to transfer money across borders, access to markets with little responsibility or accountability. Some make a fortune during the turbulence, others suffer poverty or virtual slavery. The peaks become higher and the troughs lower. I have trouble believing that this is the world foreseen by the original proponents of neoliberalism. Freedom is a wonderful thing, but not when it facilitates and entrenches unfairness. My grandfather, who lived through a similar period of financial disparity in the 1930s refers to it as "wild capitalism". No need for a crystal ball to predict what may happen next.

pedalpete 10y ago

Very surprised Bloomberg would put out such a fluff piece about the Vancouver Real Estate market. There are very serious issues in Vancouver, and some suspect Canada is in for a ruder awakening than the US. http://www.vice.com/en_ca/read/meet-the-wall-street-short-seller-betting-against-canadian-real-estate http://www.vice.com/en_ca/read/meet-the-wall-street-short-se... 1) Canadian Real Estate is being used as a money laundering facility http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-foreign-buyers_b_10329000.html http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-f... . 2) Canada also has a healthy (well, actually unhealthy) sub-prime lending market http://www.huffingtonpost.ca/2016/05/18/subprime-lending-canada-transunion_n_10011578.html http://www.huffingtonpost.ca/2016/05/18/subprime-lending-can... 3) Then there is the issue of occupancy. The reason the 15% tax was brought in is because money was coming in to purchase houses which then sat empty. Many have become derelict. When I lived in Vancouver, Yaletown was full of apartment towers, but where were all the people (I believe occupancy in that area has improved). http://www.theglobeandmail.com/real-estate/vancouver/poking-holes-in-vancouvers-housing-vacancy-study/article29181730/ http://www.theglobeandmail.com/real-estate/vancouver/poking-... 4) Lastly, the shadow flipping, again, mentioned in the article, but didn't get the attention it deserved http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouver-homes-sold-at-least-twice-since-2014-1.2769801 http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouve... Don't worry if you don't want to read the articles, it will be a movie in a few years along the lines of The Big Short.

linkregister 10y ago
Fluff piece? Did we read the same article? It covered at length the issue of the young couple essentially trapped in Surrey, unable to get enough space to have a child. The author really went out of the way to emphasize the wealth of the investors, describing the buyer wanting a nonexistent car. The only remotely fluffy portion was describing the ecosystem of luxury services associated with the lavish spending. I think the article did a good job of conveying the huge negative effect to the Vancouver economy and way of life.
- tener 10y ago
  The requirements this young couple have is mind boggling. The have 111 sq meters and think they cannot have a kid in this space? A lot of my friends live in ~40 sq meters and are happy to have their own place at all. With a kid, even two. Surely they would like to move to a bigger places, but this isn't a showstopper. They would love to have 111 sq meters place. Rising prices of properties is a real issue, but this particular couple is way above the standards I am used to. What is the socially accepted minimal living standard for a couple with kids in the US / Canada?

Aoyagi 10y ago

Yeah, this is working so well for the real estate market in New Zealand...

Hondor 10y ago

Are there examples of very lightly regulated housing markets in developed countries? Does that really lead to bad things like people say? I know it can cause slums in poor countries. But would California or Vancouver somehow fail if they allowed unlimited high density construction and development in what's currently undeveloped land? Are there examples of that happening before?

MarchHare 10y ago
My understanding is the Vancouver has light regulation in some aspects, hence the term Vancouverism: https://en.wikipedia.org/wiki/Vancouverism https://en.wikipedia.org/wiki/Vancouverism

RandyRanderson 10y ago

As a vancouverite, and a person that's lived in Toronto for over a decade, I can say that while vancouver has about half the population (of T.O.) it has maybe 1/4 or 1/8 of the tech jobs. Also Canada is not like, say, the US, where there are many different industrial centers (ie Entertainment in LA or Finance in NY). In Canada, most corp headquarters are in Toronto and a small fraction are in Calgary and that's it. Vancouver has little significant industry that isn't tied to real estate. Even if a crash does happen, the largest crashes to date have only been maybe 30% in '82 (prices recovered in 7 years) and 15% in '08 (prices recovered in 1 year). What could change the course of the current deluge of chinese capital? 1 Canadian Regulatory change - the federal liberals and the provincial liberals have significant political contributions from real estate agents (look it up). They won't impl any meaningful changes. This new 15% tax will affect few and change little; it is just election season and our Premier, Christi has to look active. 2 Interest rates - The US basically sets our rates and the US is likely going to reduce the rates driving more capital to look for better returns. 3 Chinese cash - are you going to stop buying chinese shit? No, in fact most can only afford chinese made products these days. 4 Chinese Regulatory change - This could happen but most of the cash used to buy homes in BC is likely illegally moved out of china anyhow so... TL;DR- In the 1-2 year timeframe tho, my advice - mortgage your house and buy as much BC real estate as you can afford. Good luck on finding 25%+ yoy low risk returns anywhere else.

havetocharge 10y ago
Your mind frame displayed in your tl;dr is precisely what is responsible for the rate of housing price increases in your region.
- RandyRanderson 10y ago
  My guess would be that the van housing prices mostly correlated to the outflow of cash from china. These investors likely don't care about the return - just that they don't lose the capital. So, I respectfully disagree.
allengeorge 10y ago
The city of Vancouver's population is 600K, while Toronto's is 2.6M - over 4x as large. Are you talking about their CMA populations? (That seems more likely: ~2.6M vs. 5.6M)

cia48621793 10y ago

Chinese new moneys' are nothing good but harmful. They see housing as an investment, not an asset, or something that can live with. They just want to rock more money and everybody is suffering with huge housing price after all.

narrator 10y ago

All the trillions of dollars that got sent out the trade deficit since the 80s are finally making their way back to the developed economies. We can only export our inflation for so long.

Canada 10y ago
Yeah. Nobody will talk about this. Trillions of dollars went to China in exchange for things purchased legally and voluntarily. Now, people throw around terms like "money laundering" as if the Chinese are a bad ass cartel that's been selling us cocaine all this time.
hx87 10y ago
If would could only find a way to tax that in order to pay off the fiscal deficits we had to accrue in order to make perpetual trade deficits less painful...

dagaci 10y ago

This type of money (rich and super rich) has always been invested in the nice, stable democratic world, places where they can safely park their money, friends, families and educate their children. Places they are go to in case of an uprising or regime change.. The difference now is that this class of person is not just coming from the oil-baron gravy train and political kleptocracy. But is also coming from the booming business-class that is China So many of those new rich who make it big certainly want their families and especially their children to the chance to live and be educated in a free and democratic society.

skylan_q 10y ago

The Chinese buyers are paying on average $900k for a house, which is what the average Canadian is buying. The percentage of Chinese buyers is anywhere from 4% to 8% in the market. What upsets me here more than anything else is that no one mentioned the CMHC. I suppose people would be more willing to believe that aliens are using mind control on people to drive a real estate frenzy rather than believe that there are institutions creating moral hazard within Canada.

hifumi 10y ago
What is the "CMHC"?
- skylan_q 10y ago
  Canadian Mortgage and Housing Corporation. They insure the banks against mortgage default. People pay a small premium on their monthly mortgage payments so that if they default, the bank is insured for the cash difference of the outstanding amount on the mortgage. As a result, banks in Canada face no risks from mortgage default so there's no reason to deny a mortgage. Over 90% of mortgages made in the past decade are CMHC-insured.
  - mrtron 10y ago
    I get what you are saying, but so far things are going very well. By 2010 CMHC had an annual financial surplus of more than $2 billion.[6] CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009. If you think this insurance can cause Canadian banks to be more risky in their lending - I don't think that is currently the case.
    - 49para 10y ago
      So $26B in holdings to insure $1.372T in outstanding mortgages, that seem pretty low but since the taxpayers will cover the rest, I guess it's fine to continue handing out subprime mortgages.

mark_l_watson 10y ago

Isn't the cause of rapidly rising real estate prices also caused by devaluations of currencies, so people with a lot of money are looking for relatively safe places to park it? In the USA real inflation is much higher than our government admits.

roymurdock 10y ago
> In the USA real inflation is much higher than our government admits Care to explain?
arenaninja 10y ago
Do you have any supporting evidence to your claim that real inflation is much higher? I'm not trying to prove you wrong, I'm genuinely curious. My impression has been that inflation has been relatively low, with the exception of housing. Though housing has gone up much faster in large metros than the rest of the country
- mark_l_watson 10y ago
  I have read that our government stresses consumer items like TVs in calculating the inflation index because tech product prices decrease rapidly. Food, housing and medical costs are increasing rapidly and get discounted in the CPI. If the true rate of inflation were admitted, then cost of living increases for social security, etc. would be more expensive, right?
  - hx87 10y ago
    If that were true, wouldn't it make more sense to sink money into funds targeting the food, real estate, and medical sectors instead of directly in real estate? After all, there is no reason that (residential) real estate prices track food and medical prices, and owning real estate outright is a horribly lumpy, illiquid, and undiversified investment.

msie 10y ago

I'm disgusted/saddened by the biased reporting that's taken place over this issue. This article points out how Bloomberg and other media are attracted to the "foreign buyers" narrative: http://www.straight.com/news/735161/revisiting-real-estate-race-and-how-foreign-buyers-narrative-came-dominate-vancouver http://www.straight.com/news/735161/revisiting-real-estate-r... Study finds foreign buyers impact Vancouver real estate but likely can't account for sky-high prices: http://www.straight.com/news/720471/study-finds-foreign-buyers-impact-vancouver-real-estate-likely-cant-account-sky-high http://www.straight.com/news/720471/study-finds-foreign-buye...

easytiger 10y ago
Same in London. In everything except extremely high end property. But it is a common narrative for political purposes because people "feel" it to be right.
ijamj 10y ago
Not to mention perfectly valid non-speculative buyers. Scenario for you: international student completed UBC and started working full-time on local tech company. After struggle to save, put a deposit on a place after saving from working part-time during later years of degree and about to close deal in a couple weeks (when new place is ready). Now, BAM! Gotta have to pony up 15% on home price agreed upon nearly a year earlier. More than original deposit! Tell me how that encourages qualified tech workers to stick around... They aimed at a particular kind of "foreign buyers" in a crowd, but used a shotgun...

gmisra 10y ago

A lot of commenters concerned about Bloomberg's potential editorial bias in running this piece, but it is interesting that it comes just a few days after they published "End of an Era as China’s Love Affair With U.S. Real Estate Fades" [1] https://www.bloomberg.com/news/articles/2016-07-26/end-of-an-era-as-china-s-love-affair-with-u-s-real-estate-fades https://www.bloomberg.com/news/articles/2016-07-26/end-of-an...

ygmelnikova 10y ago

Where else can you park your cash these days and get these kinds of returns? This is about making your money work for you. Speculate and accumulate. (Just to add, I've lived in Vancouver for over 50 years, and helped pioneer the net here back in '93)

pascalxus 10y ago

This situation can be turned around into a positive. The higher real estate boom could be used for a massive building boom to reduce unemployment and boost wages in the construction industry. I doubt every last bit of land has been used up, I don't think their density is anywhere near that of Hong Kong. On a broader scale, I don't understand why (other than politics and legal) this massive multi nationwide demand for housing hasn't created opportunities in the construction industry: building out with existing technologies as well as incentives to produce more efficient methods and tech. Whatever happened to big problems leading to big opportunities? I mean we're talking about a multi-trillion dollar industry begging to be disrupted. I can't name a single unicorn company that's involved in this right now.

ficklepickle 10y ago
They make it look like they live in the homes to pay no capital gains tax. These homes generally aren't used as homes but investments. It takes a lot of work and luck to even rent a small apartment. Source: I was just reno-victed I had a front row seat. My new apartment had been available for 30 minutes when I put the deposit down. It was pure luck that I found somewhere to live . It's not sustainable.

jonesalice34 10y ago

Canada is the fifth most popular country with Chinese property investors who is interested in purchasing condos for their children near universities. As a result, single-detached homes move further into luxury budget territory leaving first-time buyers with funds enough for a condo. Source https://tranio.com/canada,new_zealand,australia,united-kingdom,usa/analytics/top_five_countries_for_chinese_property_investments_5131/ https://tranio.com/canada,new_zealand,australia,united-kingd...