Chinese Investors Driving Up Metro Housing Prices

[Zassk]

Buying in Surrey is fine - if you also choose to live, shop, play, and ideally work near there too.

If you absolutely must buy your cakes from that bakery on Alma, or get your hair done on 4th Ave, or eat your sushi on Alberni Street, or keep your doctor near VGH, like one of my friends did after moving to Cloverdale - then it's a dumb idea to buy in Surrey.

City of Vancouver isn't the place for first-time buyers. Hasn't been for decades, but especially now. First time buyers will have to leave it (if they were lucky enough to live there in the first place), and set up a new life further out in the valley.

[SpongeG]

yeah but the point is we can't force people to live in dense highrises or townhouses in the region as much as its being planed single sprawling neighbourhoods continue to grow for the most part in surrey and langley because people want to buy houses still

developers are not going to stop building the houses and start urbanizing surrey and making parts of it the next yaletown or west end or whatever - which i think is a great idea, until buyers can either no longer buy houses because they have been outlawed or we run out of room which is probably gonna happen first but not enough at the moment to stop all the house building that continues to go on and the lack of tower building in the suburbs

[twoNeurons]

In my opinion... one of the BIGGEST problem the city has is that it turns a blind eye to multiple suites in Single Family Homes. It may not seem like a big thing... but when you have two or three suites in a home (and I am not kidding when I say that almost ALL new construction has 2 suites) it really increases the value of the house.

The house can now be sold for higher because the buyer can now "afford" more and get a bigger loan.

It's all greed. The second suite is always completed after inspection and the city does NOTHING to prevent it.

These are teeny tiny basement suites ranging from $750-$1100 each depending on how new the place is. It usually includes wireless internet, cable and (maybe) laundry. Most of these new landlords aren't experienced at all and think that the suites that they're renting out are part of their home (They ARE part of their house, but as soon as you rent it out, they're someone else's "home").

Single Family homes drive the market, as they're the gold standard.

Don't get me wrong, I'm all for density, but I think it should be done properly, rezoning areas for low-rises or fee-simple rowhouses. I don't know if it's legal, but I'd be a proponent for inexpensive 2-story or 3-story walk-ups. I know it's not politically correct to make a building that's not 100% accessible, but if it those extra costs mean a place won't get built, I say bring back the 3-story walk-ups.

[Zassk]

Originally Posted by SpongeG

yeah but the point is we can't force people to live in dense highrises or townhouses in the region as much as its being planed single sprawling neighbourhoods continue to grow for the most part in surrey and langley because people want to buy houses still

Yes, and so what we need to do is encourage people to look close to home for their services and other needs - and for entrepreneurs and governments to establish those things there.

When past generations bought houses in South Vancouver in 1950, the area had no stores, no malls, no doctors, few schools, few jobs, poor roads. Many of the neighbourhoods were still being freshly cut out of the forest belt that lay between downtown and New West.

South Vancouver was not urban at that time. Our ancestors buying there were not "affording" an urban location. They were buying into (and contributing to) the bleeding edge of suburban sprawl.

Today, that bleeding edge is way out in Surrey and Langley, and we can principally thank the Port Mann bridge for that.

60 years from now, these neighbourhoods in Surrey/Langley will be mature urban neighbourhoods with sick real estate prices, and our grandkids will be bemoaning the fact that we were so lucky to buy when it was cheap.

[whatnext]

Global had a story last night where Patsy Hui basically laid the blame for Richmond's crazy run-up in prices at the foot of Mainland Chinese investors.

We're talking a 20% increase in one year. 20%.

That's not healthy for the community.

[whatnext]

Another article in the Sun about this problem yesterday:
http://www.vancouversun.com/business...646/story.html

...As well, Macdonald Realty says, if current patterns hold, the number of $3-million-plus homes is expected to reach 550 this year, raising the spectre that in some neighbourhoods a $3-million home may no longer be considered particularly exclusive.

In 2000, just 10 properties in Metro Vancouver sold for over $3 million, none of them condominiums.

The market for luxury homes is now "insanely hot," with mainland Chinese buyers -who are also impacting the Richmond market in a big way -the primary purchasers, said Dan Scarrow, Macdonald Realty vice-president of corporate strategy...

..Alice Zhang, who moved from Hangzhou, China, to Vancouver two years ago, now lives in one of six properties that she and her husband have purchased in Vancouver since moving here.

Zhang, who has two children, is waiting to move into a new home they're constructing on a Shaughnessy lot that they bought for about $3.1 million. The house is expected to cost another $3 million, which Zhang believes is a good deal....

Now ask yourself how almost anyone living and working in Vancouver can compete with a family earning and sheltering their income offshore, who swoops in and effectively takes six properties off the market, that could have been bought by locals?

[slide_rule]

this whole thread started with a typically inane vancouver sun story. a story based on anecdotal evidence and filtered through several levels of people with a stake in the real estate industry. sadly there will always be people willing to harp on an easily identifiable scapegoat, and not bother seeing things from any critical perspective.

mrjauk, nova9, vanhattan, etc. have all provided salient counter arguments; but these seem to be ignored. instead even more retarded vancouver sun articles are being parroted.

here's the thing: the FIRE sector, including real estate and banking are the wealthiest, most politically powerful section of post-industrial canada. The boss of the vancouver sun, paul godfrey is the boss of a tax-avoidance real estate investment trust himself. the vancouver sun also makes lots of advertising revenue from its real estate section. then the banks also advertise in the vancouver sun, and they make lots of money from real estate. then some random real estate agent is interviewed. gee, do you think real estate agents have a stake in perpetuating a real estate bubble?

going on some seemingly endless crusade against a bunch of mostly amateur mainland chinese investors is akin to heckling a mediocre no-name comedian, but looking past the egregious sins of highly paid hacks like kathy griffin and margaret cho. the real players and biggest beneficiaries of the real estate bubble aren't some mainlanders purchasing houses for safe keeping. the ones with stakes in the real estate bubble are the real estate developers and the bankers, and then their sellout politician cronies.

you could argue against chinese real estate industry people... but ethnicity has little to no correlation with real estate itself. if you want to identify the real estate industry, you can look at paragon, omni, concord, rennie marketing systems. they're anglo, italian, jewish, chinese, east indian... basically reflective of the ethnic background of vancouverites in general. 'cept they have more in common with each other than with the hordes of people struggling out there. a lot of you guys are Gordo fans. well, guess how he got rich? you even have his decidedly inarticulate brother proferring crappy financial advice on tv! then you have the bankers. they're mostly WASPs who have come out of the university of windsor's crappy yet tightly connected business school.

next we need to examine how the nexus between real estate and banking have derived fat profits and have driven up the real estate price levels over the past 30 or so years. in the early 80s, "free" market philosophy reigned supreme. ronald reagan bullied the accounting profession to approve double declining depreciation, and he slashed the capital gains taxes. our political hacks followed suit. thus the real estate companies borrow as much money as possible, get a deduction for the interest expense (regular citizens including those vaunted chinese investors do not have this perk are not eligible for an interest expense deduction), then proceed to knock a huge depreciation expense, then after a few years after lots of paper expenses, the building is then sold at a profit (the past 30 years have seen the asset price rises), THEN the resulting capital gains are rolled over into further investments. the real estate companies then begin to start depreciating these buildings AGAIN! a building can be depreciated as many times as it is sold! the real estate industry is the largest borrower from the banks, and the banks make easy money from the mortgage interest.

now will you stop being laughably credulous and stop blindly following some crappy newspaper with an inherent conflict of interest?

[logan5]

Originally Posted by slide_rule

next we need to examine how the nexus between real estate and banking have derived fat profits and have driven up the real estate price levels over the past 30 or so years. in the early 80s, "free" market philosophy reigned supreme. ronald reagan bullied the accounting profession to approve double declining depreciation, and he slashed the capital gains taxes. our political hacks followed suit. thus the real estate companies borrow as much money as possible, get a deduction for the interest expense (regular citizens including those vaunted chinese investors do not have this perk are not eligible for an interest expense deduction), then proceed to knock a huge depreciation expense, then after a few years after lots of paper expenses, the building is then sold at a profit (the past 30 years have seen the asset price rises), THEN the resulting capital gains are rolled over into further investments. the real estate companies then begin to start depreciating these buildings AGAIN! a building can be depreciated as many times as it is sold! the real estate industry is the largest borrower from the banks, and the banks make easy money from the mortgage interest.

Bear with me here. How does this depreciation scheme work if condos and houses appreciate in value?

[Login650]

An interesting Globe and Mail article on the same topic:

http://www.theglobeandmail.com/repor...articlecontent

"A couple of kilometres east of Dunbar, in the old-money Shaughnessy neighbourhood, Lui is showing another home—a 1920 Georgian listed at a hair under $5 million. Here the seller is an immigrant from China who’s building a larger home. The buyer will likely be from China as well: Lui estimates that up to 80% of recent sales in this price range have been going to buyers from mainland China. "

[ckkelley]

Originally Posted by slide_rule

this whole thread started with a typically inane vancouver sun story. a story based on anecdotal evidence and filtered through several levels of people with a stake in the real estate industry. sadly there will always be people willing to harp on an easily identifiable scapegoat, and not bother seeing things from any critical perspective.

mrjauk, nova9, vanhattan, etc. have all provided salient counter arguments; but these seem to be ignored. instead even more retarded vancouver sun articles are being parroted.

here's the thing: the FIRE sector, including real estate and banking are the wealthiest, most politically powerful section of post-industrial canada. The boss of the vancouver sun, paul godfrey is the boss of a tax-avoidance real estate investment trust himself. the vancouver sun also makes lots of advertising revenue from its real estate section. then the banks also advertise in the vancouver sun, and they make lots of money from real estate. then some random real estate agent is interviewed. gee, do you think real estate agents have a stake in perpetuating a real estate bubble?

going on some seemingly endless crusade against a bunch of mostly amateur mainland chinese investors is akin to heckling a mediocre no-name comedian, but looking past the egregious sins of highly paid hacks like kathy griffin and margaret cho. the real players and biggest beneficiaries of the real estate bubble aren't some mainlanders purchasing houses for safe keeping. the ones with stakes in the real estate bubble are the real estate developers and the bankers, and then their sellout politician cronies.

you could argue against chinese real estate industry people... but ethnicity has little to no correlation with real estate itself. if you want to identify the real estate industry, you can look at paragon, omni, concord, rennie marketing systems. they're anglo, italian, jewish, chinese, east indian... basically reflective of the ethnic background of vancouverites in general. 'cept they have more in common with each other than with the hordes of people struggling out there. a lot of you guys are Gordo fans. well, guess how he got rich? you even have his decidedly inarticulate brother proferring crappy financial advice on tv! then you have the bankers. they're mostly WASPs who have come out of the university of windsor's crappy yet tightly connected business school.

next we need to examine how the nexus between real estate and banking have derived fat profits and have driven up the real estate price levels over the past 30 or so years. in the early 80s, "free" market philosophy reigned supreme. ronald reagan bullied the accounting profession to approve double declining depreciation, and he slashed the capital gains taxes. our political hacks followed suit. thus the real estate companies borrow as much money as possible, get a deduction for the interest expense (regular citizens including those vaunted chinese investors do not have this perk are not eligible for an interest expense deduction), then proceed to knock a huge depreciation expense, then after a few years after lots of paper expenses, the building is then sold at a profit (the past 30 years have seen the asset price rises), THEN the resulting capital gains are rolled over into further investments. the real estate companies then begin to start depreciating these buildings AGAIN! a building can be depreciated as many times as it is sold! the real estate industry is the largest borrower from the banks, and the banks make easy money from the mortgage interest.

now will you stop being laughably credulous and stop blindly following some crappy newspaper with an inherent conflict of interest?

Thanks for clearing all that up. lol

[LeftCoaster]

Originally Posted by logan5

Bear with me here. How does this depreciation scheme work if condos and houses appreciate in value?

Buildings depreciate in value, land's value is ambigious. Given this, the majority of firms will hold their land at its purchase value and at the time of sale record an extrodinary gain or loss. Contrastingly the buildings on the land will be depreciated as long as they are deemed to have a working life, usually in the neighbourhood of 40 years, but it is case specific and relates to your best judgement.

This issue can be transposed onto residential housing as residential land will function in much the same was, as do res buildings. Either houses will be knocked down at the end of their useful life, or if the building is too large, it will see a major renovation, recapitalizing it as an asset and beginning a new depreciation schedule. Obviously given the lack of sophistication of most residential investors the anaysis used by commercial developers or corporate firms is not used or generally needed, but the fundamentals driving the value are the same.

[twoNeurons]

Originally Posted by slide_rule

this whole thread started with a typically inane vancouver sun story. a story based on anecdotal evidence and filtered through several levels of people with a stake in the real estate industry. sadly there will always be people willing to harp on an easily identifiable scapegoat, and not bother seeing things from any critical perspective.

mrjauk, nova9, vanhattan, etc. have all provided salient counter arguments; but these seem to be ignored. instead even more retarded vancouver sun articles are being parroted.

here's the thing: the FIRE sector, including real estate and banking are the wealthiest, most politically powerful section of post-industrial canada. The boss of the vancouver sun, paul godfrey is the boss of a tax-avoidance real estate investment trust himself. the vancouver sun also makes lots of advertising revenue from its real estate section. then the banks also advertise in the vancouver sun, and they make lots of money from real estate. then some random real estate agent is interviewed. gee, do you think real estate agents have a stake in perpetuating a real estate bubble?

going on some seemingly endless crusade against a bunch of mostly amateur mainland chinese investors is akin to heckling a mediocre no-name comedian, but looking past the egregious sins of highly paid hacks like kathy griffin and margaret cho. the real players and biggest beneficiaries of the real estate bubble aren't some mainlanders purchasing houses for safe keeping. the ones with stakes in the real estate bubble are the real estate developers and the bankers, and then their sellout politician cronies.

you could argue against chinese real estate industry people... but ethnicity has little to no correlation with real estate itself. if you want to identify the real estate industry, you can look at paragon, omni, concord, rennie marketing systems. they're anglo, italian, jewish, chinese, east indian... basically reflective of the ethnic background of vancouverites in general. 'cept they have more in common with each other than with the hordes of people struggling out there. a lot of you guys are Gordo fans. well, guess how he got rich? you even have his decidedly inarticulate brother proferring crappy financial advice on tv! then you have the bankers. they're mostly WASPs who have come out of the university of windsor's crappy yet tightly connected business school.

next we need to examine how the nexus between real estate and banking have derived fat profits and have driven up the real estate price levels over the past 30 or so years. in the early 80s, "free" market philosophy reigned supreme. ronald reagan bullied the accounting profession to approve double declining depreciation, and he slashed the capital gains taxes. our political hacks followed suit. thus the real estate companies borrow as much money as possible, get a deduction for the interest expense (regular citizens including those vaunted chinese investors do not have this perk are not eligible for an interest expense deduction), then proceed to knock a huge depreciation expense, then after a few years after lots of paper expenses, the building is then sold at a profit (the past 30 years have seen the asset price rises), THEN the resulting capital gains are rolled over into further investments. the real estate companies then begin to start depreciating these buildings AGAIN! a building can be depreciated as many times as it is sold! the real estate industry is the largest borrower from the banks, and the banks make easy money from the mortgage interest.

now will you stop being laughably credulous and stop blindly following some crappy newspaper with an inherent conflict of interest?

Very well written and thought out post. Thank-you.

[logan5]

Originally Posted by LeftCoaster

Obviously given the lack of sophistication of most residential investors the anaysis used by commercial developers or corporate firms is not used or generally needed...

Can I conclude that a double declining depreciation scheme is not a factor in the Vancouver housing market?

Thanks.

[LeftCoaster]

No, it has absolutely nothing to do with housing prices, its simply a different depreciation method that discounts assets not at the linear pace more commonly used, but at a constant percentage of the assets remaining book value. Its been a while since I took an accounting course but that's the jist of it. To be honest it was kind of out of place in Siderule's rant, but then again a lot of what he said was. I wont really bother getting into that though, I think most of us took the valid points he made and disregarded the inaccuracies he decided to throw in.

[slide_rule]

Originally Posted by LeftCoaster

No, it has absolutely nothing to do with housing prices, its simply a different depreciation method that discounts assets not at the linear pace more commonly used, but at a constant percentage of the assets remaining book value. Its been a while since I took an accounting course but that's the jist of it. To be honest it was kind of out of place in Siderule's rant, but then again a lot of what he said was. I wont really bother getting into that though, I think most of us took the valid points he made and disregarded the inaccuracies he decided to throw in.

if you had access to several years of a real estate company's books, you'd be much less apt to list off my accusations as inaccurate. the real estate companies and the banks have a symbiotic relationship, their access and use of capital and friendly tax laws have allowed them to purchase more property and garner higher profits. they are the largest driver and ultimate winners of asset price inflation.

accelerated depreciation schedules, low capital gains taxes, interest expense deductibility DO impact real estate prices because they allow the real estate companies to purchase and effectively bid up property. a lower tax bill for bob rennie or whatever provides incentive and frees up more investment capital. lowered expenses (e.g. capital gains exemptions and higher depreciation rates) have the same impact as increased revenues. they both allow the real estate company to have more capital to engage in profit seeking activity.

the previous paragraph concentrated on the theory. in practice, we see real estate prices becoming detached from the traditional case-shiller (income to property cost) ratios starting around the early 80s, the same time the reagan/thatcher/university of chicago trickle down increased depreciation and lowered capital gains changes took place.

there are articles written by economists expounding on what i have said. they will provide more detail and and say it more eloquently.

[dreambrother808]

I'm still trying to figure out what "egregious sins" Kathy Griffin and Margaret Cho have committed!

[Hourglass]

I seem to recall the same headline-grabbing hysteria in the run-up to 1997 when Vancouver was overrun by a flood of investors from Hong Kong, tearing down old houses and building monster homes in their place.

Is this any different?

People should be careful what they wish for. Policies could be put into place to curb property speculation, but would it really make anyone happier? Austria levies a 50% tax on the sales price of a property if it is sold within 5 years of purchase. Consequently, property prices in a city like Vienna (which regularly competes with Vancouver for the title of world's most livable city) have gone up maybe 25% in ten years. If you are a homeowner, would that make you happy? Would that be good for government revenues? I don't think so.

Because for all the angst about affordability, there is a bit of hypocrisy here -- as pointed out by slide_rule. We love the money that these people bring to the table. But we hate the side effects and changes that come as a result. As a homeowner, I want to see my property continue to increase in value.

What can be done? So far I've seen a lot of heated discussion about the problem but relatively few people have talked about solutions. But I don't anyone wants to see Vancouver going the way of London or Hong Kong, where people of limited means have little or no hope of getting on the property ladder.

So here are a few random thoughts to get things started.

- Residency requirements as proposed by Trofiren don't work IMO. Too hard to police and too easy to circumvent (anyone who has done business in PR China knows that rules are made to be broken). And so far, residency requirements have failed to make any significant impact in cities like Hong Kong.
- How about a punitive stamp duty that kicks in if the property is flipped within 2-3 years, with proceeds to be directed at affordable housing projects in and around Metro Vancouver?
- How about government assisted social housing similar to the HDB programme in Singapore to allow people to get onto the property ladder? This could be targeted at not just specific income groups but to give relief to specific segments such as caregivers and teachers.

Other thoughts?

[delboy]

Originally Posted by Hourglass

I seem to recall the same headline-grabbing hysteria in the run-up to 1997 when Vancouver was overrun by a flood of investors from Hong Kong, tearing down old houses and building monster homes in their place.

Is this any different?

People should be careful what they wish for. Policies could be put into place to curb property speculation, but would it really make anyone happier? Austria levies a 50% tax on the sales price of a property if it is sold within 5 years of purchase. Consequently, property prices in a city like Vienna (which regularly competes with Vancouver for the title of world's most livable city) have gone up maybe 25% in ten years. If you are a homeowner, would that make you happy? Would that be good for government revenues? I don't think so.

Because for all the angst about affordability, there is a bit of hypocrisy here -- as pointed out by slide_rule. We love the money that these people bring to the table. But we hate the side effects and changes that come as a result. As a homeowner, I want to see my property continue to increase in value.

What can be done? So far I've seen a lot of heated discussion about the problem but relatively few people have talked about solutions. But I don't anyone wants to see Vancouver going the way of London or Hong Kong, where people of limited means have little or no hope of getting on the property ladder.

So here are a few random thoughts to get things started.

- Residency requirements as proposed by Trofiren don't work IMO. Too hard to police and too easy to circumvent (anyone who has done business in PR China knows that rules are made to be broken). And so far, residency requirements have failed to make any significant impact in cities like Hong Kong.
- How about a punitive stamp duty that kicks in if the property is flipped within 2-3 years, with proceeds to be directed at affordable housing projects in and around Metro Vancouver?
- How about government assisted social housing similar to the HDB programme in Singapore to allow people to get onto the property ladder? This could be targeted at not just specific income groups but to give relief to specific segments such as caregivers and teachers.

Other thoughts?

i don't entirely disagree with you but many countries around the world put limits on foreign investment with respect to real estate to limit exactly what is happening here. As for how it benefits the economy, my feeling is that with more affordable housing and less costs to the owner, then the surplus cash can be spent back into the economy.

And it is a misconception that London is unaffordable. Central London yes, but out of the city, I would suggest that London maybe more affordable than Vancouver, espcially when you factor in higher wages.

One saving grace here is the fact that the rental rates here are relativley affordable when compared to the overall cost of real estate. One can typically afford to rent a property that they would not be able to buy.

I struggle with the housing costs here, and it is the constant niggle that makes me ponder leaving. I had more buying power when I was in my mid to late twenties than I do now.

[Zassk]

Originally Posted by delboy

And it is a misconception that London is unaffordable. Central London yes, but out of the city, I would suggest that London maybe more affordable than Vancouver, espcially when you factor in higher wages.

But that is also true here. When people say "I can't afford Vancouver", what most of them mean is "I won't settle for a condo in Aldergrove". Because they could afford the outer areas of the region, but they aren't satisfied with that. First time buyers don't buy in Central London, and they shouldn't be trying to buy in "central" Metro Vancouver either.

[Login650]

Originally Posted by Hourglass

What can be done? So far I've seen a lot of heated discussion about the problem but relatively few people have talked about solutions. But I don't anyone wants to see Vancouver going the way of London or Hong Kong, where people of limited means have little or no hope of getting on the property ladder.

So here are a few random thoughts to get things started.

- Residency requirements as proposed by Trofiren don't work IMO. Too hard to police and too easy to circumvent (anyone who has done business in PR China knows that rules are made to be broken). And so far, residency requirements have failed to make any significant impact in cities like Hong Kong.
- How about a punitive stamp duty that kicks in if the property is flipped within 2-3 years, with proceeds to be directed at affordable housing projects in and around Metro Vancouver?
- How about government assisted social housing similar to the HDB programme in Singapore to allow people to get onto the property ladder? This could be targeted at not just specific income groups but to give relief to specific segments such as caregivers and teachers.

Other thoughts?

Additional property tax for non-owner occupied units (I'm primarily concerned with empty units). The Province of New Brunswick does this already - there's an additional property tax levied by the province on top of the municipal tax which effectively doubles the tax you pay. It's just a cost investors factor in when purchasing. Gives the government $$ to build housing.