Chinese Investors Driving Up Metro Housing Prices

[trofirhen]

The same Chinese investment has exploded house prices much in the way it has in Vancouver.
Small suburban houses now going for a 4million or up. Wealthy districtricts off the map, price-wise.
As far as I know, governments at whatever level haven't done much to slow it.
Feeble as it may have seemed, that 15 % tax in Vancouver, seemed to have partially done the trick.
Sales dropped dramatically, it seems, and that burst of indignant rage from the Chinese Envoy was delicious!!!

[whatnext]

Analysis of sale trends since the foreign ownership tax. House $2 - 4 million hot hardest. Hopefully we will see some of those start to drop below $2 mil. in the new year.
http://vancitycondoguide.com/impact-foreign-buyers-tax/

[twoNeurons]

Originally Posted by trofirhen

The same Chinese investment has exploded house prices much in the way it has in Vancouver.
Small suburban houses now going for a 4million or up. Wealthy districtricts off the map, price-wise.
As far as I know, governments at whatever level haven't done much to slow it.
Feeble as it may have seemed, that 15 % tax in Vancouver, seemed to have partially done the trick.
Sales dropped dramatically, it seems, and that burst of indignant rage from the Chinese Envoy was delicious!!!

Well, it wasn't the tax that did it... it was the idea of the tax. It sent out a signa that maybe the government was going to attack the boogeyman investor, whether it's the cause or not.

Property prices had been cooling before the tax went into place, the tax sent a message to constituents that made regular joes hold off on purchasing. Even with the asinine decision to try to spark real estate by giving away 37,000 right before the election next spring... it's likely we're going to see a nasty spring next year.

Could be wrong, but I think buyers are playing the wait an see game. Inventory is still low, so prices have only come down about 14%. If we have a bad spring, it may combine with raising rates to open the flood gates for a long bleed-out of equity in real estate.

Interestingly, I just got back from Phoenix and talked to a relative that flips houses there. He was considering a deal that would have allowed him to buy and resell 9 apartments ( each currently renting for about $550, $170 in condo fees each ) for about ~$350k. The owner of these apartments... an older guy who originally bought 19 units for $1.5 million in 2006. So, originally paid ~$78k each... now worth $36k...

To put some numbers in perspective...

$79k/unit original price. 9 left averaging about $35k.

If you bought them now as an investor today, you could probably have a decent ROI, even after hiring a property manager, and paying the monthly fees.

Even with the increases in price in Phoenix, it's still a decent market where you can make money... and it does illustrate that some owners just hold on as long as they can afford to waiting.... and waiting...

We suspected he's worried about rising rates affecting the buying market there. I'm not saying Vancouver = Phoenix, but it does illustrate what can happen when things get out of control.

[Jebby]

Yeah, blame the Chinese completely for rising prices.

Don't blame restrictive zoning policies, expensive LEED requirements, and NIMBYs.

Oh and especially don't blame excesively low interest rates:


http://www.financialwisdomforum.org/...8871&start=125

And this absolutely can't be to blame either:

http://www.huffingtonpost.ca/2015/11...n_8650202.html

[twoNeurons]

Originally Posted by Jebby

Yeah, blame the Chinese completely for rising prices.

Don't blame restrictive zoning policies, expensive LEED requirements, and NIMBYs.

Oh and especially don't blame excesively low interest rates:


http://www.financialwisdomforum.org/...8871&start=125

And this absolutely can't be to blame either:

http://www.huffingtonpost.ca/2015/11...n_8650202.html

Whoa whoa whoa... are you saying that when money is cheaper to borrow, people borrow more?

[Jebby]

Originally Posted by twoNeurons

Whoa whoa whoa... are you saying that when money is cheaper to borrow, people borrow more?

No that would as insane as saying that when you flood a market with cheap money prices go up.

[whatnext]

Originally Posted by Jebby

Yeah, blame the Chinese completely for rising prices.

Don't blame restrictive zoning policies, expensive LEED requirements, and NIMBYs.

Oh and especially don't blame excesively low interest rates:

The problem with that theory is that everywhere in the Western world had similar policies, yet only Vancouver and a handful of select cities saw such runaway house price inflation. The common denominator in almost all of them was foreign money.

One only has to look at how Vancouver's market slumped with the intro of the foreign buyers tax while Toronto's boomed to connect the dots.

[Jebby]

Originally Posted by whatnext

The problem with that theory is that everywhere in the Western world had similar policies, yet only Vancouver and a handful of select cities saw such runaway house price inflation. The common denominator in almost all of them was foreign money.

Except that's not true. Where we saw similar results of cheap money are the US subprime mortgage crisis, Spain's real estate bubble, China's real estate bubble, Japan's asset price bubble...the common denominator in all of these is cheap easy money.

You don't see the same things in a country like Germany which despite having low interest rates, require down payments of at least 20% and have very extensive requirements that need to be met before a mortgage is issued.

Yes, there is the foreign money part of the equation but it's not the whole story. You see this happening in Vancouver because there is a lot of demand to live in Vancouver. That said, housing prices have gone up substantially even in secondary Canadian markets:

[240glt]

^ Jebby, if you'd lived in Vancouver in the late '90s you'd remember when China took control over Hong Kong and anyone who had money in Hong Kong was looking for a place to shelter it from the Chinese government. Vancouver became a very popular place for people from Hong Kong to park money in real estate, and it's never really stopped despite the unrealized fears of the government taking all their money

Yes Vancouver is an attractive place to live, but it is most definitely foreign ownedship that drove things out of control. i am very happy to see finally some action by the BC government to finally try to curb the chinese money coming in and being parked in vacant real estate

[whatnext]

Originally Posted by 240glt

^ Jebby, if you'd lived in Vancouver in the late '90s you'd remember when China took control over Hong Kong and anyone who had money in Hong Kong was looking for a place to shelter it from the Chinese government. Vancouver became a very popular place for people from Hong Kong to park money in real estate, and it's never really stopped despite the unrealized fears of the government taking all their money

Yes Vancouver is an attractive place to live, but it is most definitely foreign ownedship that drove things out of control. i am very happy to see finally some action by the BC government to finally try to curb the chinese money coming in and being parked in vacant real estate

Indeed. This story was front page in the Richmond News a couple week ago:

Ghost City: Realtor finds large number of City Centre condos vacant Ghost cities built on speculation

....He <the realtor> narrowed his focus to the Brighouse neighbourhood in Richmond’s City Centre area, where many of the new blacked-out condos appear. Between January and October of this year he found that 46 per cent of condo sales were sold as vacant.

Saretsky accounted for new construction by searching units that were at least one year old.

He also acknowledges the number of vacant listings should be higher than actuality, as sellers are more likely to vacate their homes for sale purposes or out of practicality.

“Many times it can make a sale easier. But still, 46 per cent?” exclaimed Saretsky, who has dubbed Richmond the “Ghost City.”

By comparison, the rate of Vancouver condo sales sold as vacant was 25 per cent and current listings, at the time of his research, showed vacant listings in Vancouver sat at 27 per cent, the same number of vacant listings in Richmond, excluding Brighouse, noted Saretsky....

...
Less data and more anecdotes abound outside the City Centre, in Richmond’s single-family home neighbourhoods. The Monds, as they are known to many in West Richmond, is a dyke-side neighbourhood enclosed by Francis, Williams and No.1 roads. Theeps Theeparajah, vice-president of West Richmond Community Association, recently sold his home of 37 years, after raising children near Dixon elementary school, a school that is in danger of closing, partly due to a declining number of children within the school district catchment. Theeparajah toured the neighbourhood in a car with the Richmond News in August. Speaking about each house as he slowly drove by, Theeparajah pointed to few houses occupied by families, most occupied by aging empty-nesters and many that appeared unoccupied..

. - See more at: http://www.richmond-news.com/news/we...wZEPLQ2Q.dpuf-

It is clear that speculation is causing a huge amount of units to be built that aren't required for local use. Those units were built purely to satisfy speculative demand and as anybody who took Economics 101 knows, speculation fuels price bubbles. It is no surprise Richmond, with the highest concentration of Mainland Chinese is repeating the pattern seen in China of massive speculative overbuilding.

[Jebby]

Originally Posted by 240glt

^ Jebby, if you'd lived in Vancouver in the late '90s you'd remember when China took control over Hong Kong and anyone who had money in Hong Kong was looking for a place to shelter it from the Chinese government. Vancouver became a very popular place for people from Hong Kong to park money in real estate, and it's never really stopped despite the unrealized fears of the government taking all their money

Yes Vancouver is an attractive place to live, but it is most definitely foreign ownedship that drove things out of control. i am very happy to see finally some action by the BC government to finally try to curb the chinese money coming in and being parked in vacant real estate

Yes, I lived in Vancouver throughout the 90s and early 2000s and saw the huge influx of purchasers from Hong Kong.

I've never said that foreign buyers are not one of the causes, but I reject the argument that they're a main reason why prices have gone up so much.

Unless and until the issue of extremely low interest rates, low down payments, and relatively lax requirements under control, the bubble will continue to build up. It may have a few pops along the way, but easy money will re-inflate it continuously.

[240glt]

^ well there is quite a snowball effect, as folks who owned homes saw their values increase as well and in turn moved to more expensive properties. But I'd still call the influx of asian money into the city as the primary driver. BC's economy has always been tepid, so it can't be the economy thst drove housing prices, and yes Vancouver is s very nice picturesque city with a nice climate snd great ammenities but those factors alone would not have driven priced to any appreciable degree.

I turned down a spectacular job offer in Van a few years ago, mainly due to housing costs. We'd love to live there as the city overall is miles nicer than Edmonton but we just could not justify the major change in quality of life compared to what we get in Edmonton despite all its warts

[whatnext]

Canadian Press names "foreign investor" as Business Newsmaker of the Year:

http://www.timescolonist.com/foreign...year-1.5539313

[whatnext]

China takes stronger moves to stop outflow of money, likely to cool the Vancouver housing market even further:

...At the outset of 2017, however, China imposed a series of new documentation requirements on currency transactions and punishments for using money in ways the rules don’t allow.

Before, changing yuan into loonies could be done with the tap of a smartphone screen. Now, banks have begun requiring paperwork that entails submitting for approval the reason a person wants to obtain foreign currency and when it will be used. A new rule then holds people liable for what they do with that money – and could bar them from exchanging money for up to three years if they are found to have used it improperly, such as for the purchase of a home.

The rich, with corporate assets and access to sophisticated market tools for stealthily routing money around the world, are unlikely to feel much difference from the change.

But for the middle class, which has become an important force in property markets in places such as Canada, the United States and Australia, “it will have a big impact,” Mr. Xie said...
http://www.theglobeandmail.com/real-...ticle33485996/

[whatnext]

Looks like China's capital controls are biting on hard on people trying to stash money out of China. Richmond, the West Side and West Van all took huge hits in SFH sales in January! Great to think we might actually be getting residential areas back for real residents!

There’s nothing I love more than debating the impact of foreign capital distorting the Vancouver real estate market. Not that more evidence was needed, but recent changes in the Vancouver real estate market highlight some eye opening January stats.

Recently China implemented new capital controls forbidding citizens from exporting cash to purchase international real estate. (The Chokehold). The timing could not have come at a worse time as sales were already slowing from a 15% foreign buyers tax.

So what happens when you turn off the tap?

In January, Richmond detached sales fell 66% year over year, Vancouver West fell 72%, while West Vancouver sales fell 74%. For Vancouver West and West Vancouver it was the worst January on record. It was the second worst January for Richmond sales, trailing only January 2009 (Financial crisis)...

http://vancitycondoguide.com/chinas-...-luxury-sales/

[whatnext]

I forgot to add, I guess Golden Week sales were a bust this year, as we didn't get all the breathless media hype as in previous years.

[retro_orange]

Golden week sales?

[WarrenC12]

Originally Posted by whatnext

I forgot to add, I guess Golden Week sales were a bust this year, as we didn't get all the breathless media hype as in previous years.

Why do you have such hate for China and Chinese people?

[mezzanine]

It's easy to have a hate-on when you view people one-dimensionally

[trofirhen]

Originally Posted by WarrenC12

Why do you have such hate for China and Chinese people?

Originally Posted by mezzanine

It's easy to have a hate-on when you view people one-dimensionally

I'm going to stick my neck out here in defence of WHATNEXT. I don't think he hates China and Chinese people. My sense is that he feels that we're selling ourselves out,
though the 15% sales tax slowed things a bit - and that we're being priced waaay out of the market in our hometown. If one is from Vancouver, as I am, we all grew up with Chinese & Asian schoolmates and possibly neighbours.
I think (and correct me if I'm wrong, WHATNEXT) that he feels we're being swamped, and blocked out of our own market. There may be a tinge of resentment you're picking up.
But I don't think it's hate, as such.