It is two months since The Mainlander hosted a story on new Chinese housing policy that is exporting real estate investment pressures — especially to favored locations like Vancouver.
Vancouver Real Estate Frenzy
Aspects of the situation have taken interesting turns, beginning with a big story on Chinese surge that appeared the very next day in the Vancouver Sun. That article found irony in the fuel that Chinese “crackdown” on real estate speculation is pouring on Vancouver’s price fire. According to entrepreneur Cam Good, “There are literally planeloads of Chinese coming here to buy real estate.”
Over a month later, Vancouver business publisher and former municipal politician Peter Ladner called for action “to discourage overseas property speculators” — and mentioned “spreading high single-family lot land costs over two or three homes on the same property [to] drive down the unit price of the new (smaller) homes and discourage the trophy homes on large lots beloved by so many overseas investors.”
The April 5 Ladner article sparked an immediate response from Vancouver City Councillor Geoff Meggs: a tout of Vision Vancouver’s controversial STIR giveaways to incentivize developers.
A week later Ethan Baron reacted with a weird equation: that Canadian purchase of Chinese goods (cheap here because of offshored worker exploitation) somehow means that Vancouver then owes a wide-open real estate market to the fortunes made by the overlords of those workers!
A few days after that, developer mouthpiece Bob Ransford pushed back at Ladner with what amounted to a call to develop as much as possible as fast as possible: “We need to focus on removing all the barriers that stand in the way of supplying the housing stock that is required to meet the demand.” In other words, whatever the degree of speculation, it must be sated, and attendant profits realized, regardless of any consequence to anything else. (Ransford also digressed to claim that the 1988 giveaway of the huge Expo 86 site to Li Ka-shing has been so good for Vancouver.)
Within a week, Cam Good — protagonist marketer in the February Vancouver Sun story — weighed in with a head-on assault against the Ladner protectionism that might impair the profits he is realizing from his Beijing office and his planeloads of buyers. After all, “in meccas like Richmond, 98 per cent of the hundreds of homes we’ve sold are to buyers who are Chinese.” Toward the end of his piece, this promoter went on to promise, “real estate is the best investment you’ll ever make.”
That promoter also cited a March 29 Wall Street Journal article, digging through cautionary freight to latch onto this sentence: “Chinese buyers have stampeded in to Vancouver and to Toronto, two of Canada’s hottest markets.” The unmentioned sobering part of that same article tots up these three factors: “the now-inflated ratio of house prices to income [which means] Canadian housing prices could be in for a 25% drop in the next three years,” a “debt-to-disposable-income ratio for Canadian households [that] rose to 148.9% last fall … surpassing U.S. borrowing for the first time since 1998,” and “Canadian recourse law [that] makes it harder for buyers to walk away from bad debt.”
Following in the footsteps of the Wall Street Journal, Gord Goble responded to Cam Good by highlighting a Vancouver unaffordability ratio of ten times income, a figure that points to the mania that precedes a broken bubble.
Near the end of April, David Ebner quantified the situation in broad and simple terms:
There are nearly 600,000 high-net people worth at least $1.5-million in China this year, according to the consultancy Bain & Co. About 10 per cent of them have already left, another 10 per cent are planning to apply for immigration, and about 30 per cent are considering it.
It remains to be seen whether China will continue to permit this flight of entrepreneurs and capital.
On May 2 Jay Bryan waved red flags about general real estate overvaluation in Canada and attributed the exceptionalism of “the rocket-propelled Vancouver market” — current annual increase of 13.4% — to “a flood of wealthy Asian buyers [that] continues to support sky-high prices.” He concludes with the obvious: “Few seem confident that the Vancouver market is stable.”
Three Telling Sidelights
One. Weeks after hitting the panic button on January 20 to abort the agenda set for city council, Vision Vancouver eventually handed Chinatown over to developer interests after five nights of hearing from the public why they should not. Who can resist the offshore money that stands poised to dehistoricize the core of Vancouver through “revitalization” with condos — especially after massive parking structures failed to do the job? (See Vancouver approves Chinatown condo for an overview.)
Two. In an April 19th marathon, all morning and all evening at Council, Vision Vancouver cobbled together some trailblazing last-minute repression into a bylaw that requires permits for protest structures and threatens to levy thousands of dollars in fines for infraction. In the lead-up to this decision — a decision deplored by the BC Civil Liberties Association — city officials admitted to direct involvement with the Chinese consulate.