Chinese Investors Driving Up Metro Housing Prices

[Jebby]

Originally Posted by whatnext

Time and time again, study after study has shown what the "market" wants is single family houses. Not condos.

I'd like to see some of those studies.

The market likely is demanding more options in terms of family-sized units and since the vast majority of condo projects are skewed towards a larger offering of 1-bed and 2-bed units the only other option for people needing more space is single family housing.

That said, if you look at the amount of condos the market has absorbed in the past 5 to 10 years, you'll see there is a very healthy market for condos, even of those in the lower square-footage range.

Further, the selling price per square foot of condos is pretty much in line with that of single family houses. Let's take the numbers posted earlier in this thread:

Average selling price of condos: $562k
Average selling price of detached homes: $1,599k

Let's take an average of 900 square feet for condos (I believe the average is even smaller than that), giving us $624 per square foot.

The average lot size in Vancouver is 33' x 122' giving us 4026 square feet. RS-1 allows an FSR of 0.6, giving us 2416 square feet. That gives us an average of $661 per square foot of buildable space.


So we don't have a big disparity in purchase price per square foot. What we have is a large disparity in unit sizes. People are purchasing condos because that's what the market is offering in terms of new builds.

What we need here is more larger sized options in new build housing. It doesn't all have to be condos, townhouses would be a fantastic option of increasing density and lowering prices for family-sized units compared to RS-1 zoning.

Personally, I'd love to see a blanket increase of 1 FSR to all RS-1 zoned lots and allow townhouses/rowhouses. On a typical residential low you could fit 2 3-bedroom townhouses with a 2-bedroom laneway house where you currently have just one house.

Reduce the scarcity of family-sized units and you'll reduce the cost. It's Economics 101.

Originally Posted by whatnext

So given that, the selling of even one house to foreign buyers is ridiculous.

Why? Just because the owner is foreign doesn't necessarily mean the house is necessarily off the market for locals. In fact, it gives the opportunity for a local to rent that house. Since most people can't (and shouldn't) take on a $1.5 to 2 million mortgage, renting is a much better option.

That said, again a solution for this is to increase density and allow more family-sized units to be built in current detached single family zoned areas.

Originally Posted by whatnext

If we were short on water would you sell it all to offshore buyers?

That's a very silly analogy. Real estate is immovable property. Water is movable and usually wasted once used. It's not like foreigners are buying property and taking it to China...

[djmk]

Originally Posted by twoNeurons

didn't the kids of baby boomer starting buying homes around 2004? that would be a huge amount of demand

[Pinion]

Originally Posted by djmk

didn't the kids of baby boomer starting buying homes around 2004? that would be a huge amount of demand

Kids of baby boombers (ie me) never could afford a detatched home west of Surrey. I bought a condo in 2005 with my eventual wife, most of my high school classmates never bought - we were too late, just like milennials.

That was when the mainland China migration happened. Before that, basically every Chinese in Vancouver was from Hong Kong.

[whatnext]

Originally Posted by Jebby

I'd like to see some of those studies.

The market likely is demanding more options in terms of family-sized units and since the vast majority of condo projects are skewed towards a larger offering of 1-bed and 2-bed units the only other option for people needing more space is single family housing.

That said, if you look at the amount of condos the market has absorbed in the past 5 to 10 years, you'll see there is a very healthy market for condos, even of those in the lower square-footage range....

Homebuyers take condos as a poor substitute for the house they can no longer afford. Condos are absorbed thanks to that and to investors.

Studies:
A single-family home is at the top of the shopping list for the majority of first-time home buyers in Canada, says a new research report conducted by the Environics Research Group on behalf of Genworth Canada...
http://www.calgarysun.com/2015/04/17...e-family-homes

Originally Posted by Jebby

That's a very silly analogy. Real estate is immovable property. Water is movable and usually wasted once used. It's not like foreigners are buying property and taking it to China...

It's a similar thing, in fact given your argument it is even more absurd to sell immovable assets off to foreign buyers.

[Vin]

Originally Posted by djmk

didn't the kids of baby boomer starting buying homes around 2004? that would be a huge amount of demand

This chart clearly shows that apartments are very affordable as compared to single family homes. More SFH lots should be rezoned.

[Jebby]

Originally Posted by Vin

This chart clearly shows that apartments are very affordable as compared to single family homes. More SFH lots should be rezoned.

Actually it shows that on a square footage basis, they're about the same.

[Jebby]

Originally Posted by whatnext

Homebuyers take condos as a poor substitute for the house they can no longer afford. Condos are absorbed thanks to that and to investors.

Studies:
A single-family home is at the top of the shopping list for the majority of first-time home buyers in Canada, says a new research report conducted by the Environics Research Group on behalf of Genworth Canada...
http://www.calgarysun.com/2015/04/17...e-family-homes

Sure, condos are a poor substitute because of the lack of family sized units. Look at any major development and over 75% of the units are 2-bed or smaller, leading to a lack of supply for family sized units.

Add to that the almost complete inexistence of townhouses and rowhouses within the CoV which further leads to a lack of family sized units.

The only other option within the CoV is detached single family homes. So of course that's on the top of the list of first time home buyers. Either buy a single family home or try to bid for one of the very few units that are appropriate for a family in a new condo development.

This issue would be alleviated if the CoV changed its zoning bylaws to increase the FSR in RS-1 areas and allowed townhouses/rowhouses to be built in current SFH areas.

On a the typical RS-1 SFH lot in, say, Arbutus Ridge (60'x120' lot), you could easily fit in two 3 or 4 bedroom townhouses with a 2-bedroom apartment along the lane. If an FSR of 1.2 or 1.5 were allowed on these lots and they were rezoned to allow rowhouses, we'd have a lot more family sized units in the City which if supply were allowed to meet demand, would bring down prices.

Originally Posted by whatnext

It's a similar thing, in fact given your argument it is even more absurd to sell immovable assets off to foreign buyers.

Explain.

[Vin]

Originally Posted by Jebby

Actually it shows that on a square footage basis, they're about the same.

Sure, if you choose to sleep on the lawn or driveway.

[whatnext]

Originally Posted by Jebby

...Why? Just because the owner is foreign doesn't necessarily mean the house is necessarily off the market for locals. In fact, it gives the opportunity for a local to rent that house. Since most people can't (and shouldn't) take on a $1.5 to 2 million mortgage, renting is a much better option....

Or more than likely the property just sits empty:

...Numbers crunched from the past seven published censuses show the percentage of these homes in and around Vancouver hovered around 3 or 4 per cent until 2006, when that jumped to just over 6 per cent and remained at that level until the last published census in 2011, said Andy Yan, acting director of Simon Fraser University’s City Program.

“When [empty homes] really entered the popular lexicon in the mid-2000s, that’s exactly when you see a spike,” Mr. Yan said. “It was always there, but it wasn’t to the level in 2006 and 2011.”

A breakdown of the 2011 data showed that 50,810 homes in the region were vacant and another 7,415 units were being lived in temporarily by people from other parts of Canada or other countries...

http://www.bnn.ca/vancouver-home-vac...-2001-1.592409

[whatnext]

More fun and games:

A number of Chinese investors and B.C. real estate professionals are suing Richmond lawyer Hong Guo, alleging $2.1 million in losses, after Guo says more than $7.5 million was stolen from her trust account.

Guo is a prominent immigration and real estate lawyer in Richmond. The complainants, many of them investors from China, say Guo failed to pay taxes and complete real estate transactions with money held for them in the trust account.

Guo says she had trouble meeting her obligations because she was a victim of theft.

In court filing, Guo alleges her former bookkeeper and legal assistant developed a relationship beyond their office work and conspired with accomplices to unlawfully remove the money from her trust account. Some of the millions missing from Guo’s account were converted to cash in a B.C. casino before the bookkeeper and legal assistant fled to China, a civil suit filed by Guo in B.C. Supreme Court alleges....

http://vancouversun.com/news/local-n...e-transactions

[casper]

Originally Posted by whatnext

More fun and games:

A number of Chinese investors and B.C. real estate professionals are suing Richmond lawyer Hong Guo, alleging $2.1 million in losses, after Guo says more than $7.5 million was stolen from her trust account.

Guo is a prominent immigration and real estate lawyer in Richmond. The complainants, many of them investors from China, say Guo failed to pay taxes and complete real estate transactions with money held for them in the trust account.

Guo says she had trouble meeting her obligations because she was a victim of theft.

In court filing, Guo alleges her former bookkeeper and legal assistant developed a relationship beyond their office work and conspired with accomplices to unlawfully remove the money from her trust account. Some of the millions missing from Guo’s account were converted to cash in a B.C. casino before the bookkeeper and legal assistant fled to China, a civil suit filed by Guo in B.C. Supreme Court alleges....

http://vancouversun.com/news/local-n...e-transactions

I would expect the law society to take a very negative view of a lawyer that can not manage their trust account.

[Cypherus]

Originally Posted by casper

I would expect the law society to take a very negative view of a lawyer that can not manage their trust account.

Also her story seems incredible. She is basically implying that the bookkeeper and an unknown employee were very good at forging her signature on cheques or bank drafts, then withdrawing it through the casino, all behind her back. It does happens, but there are other similar cases in the news of persons acting as agents on behalf of principle mainland Chinese buyers to which they have very little recourse if the agent just takes their money and runs.

[casper]

Originally Posted by Cypherus

Also her story seems incredible. She is basically implying that the bookkeeper and an unknown employee were very good at forging her signature on cheques or bank drafts, then withdrawing it through the casino, all behind her back. It does happens, but there are other similar cases in the news of persons acting as agents on behalf of principle mainland Chinese buyers to which they have very little recourse if the agent just takes their money and runs.

Real estate lawyer trust accounts have cheques with pretty large values going in and out every day. Between the buyers, seller, issuer of the mortgages and taxes there quite a large number of high value transactions. The bookkeepers job is to manage all of that.

Disappointing that the Law Society stance is their fund is only responsible for the lawyers activities and not their employees. When you go to a law firm as a client you don't differentiate between what the lawyer takes responsibility for and what his staff take responsibility for. The lawyer should be responsible for his staff. The insurance should be expected to cover the entire cost.

[whatnext]

Originally Posted by Cypherus

Also her story seems incredible. She is basically implying that the bookkeeper and an unknown employee were very good at forging her signature on cheques or bank drafts, then withdrawing it through the casino, all behind her back. It does happens, but there are other similar cases in the news of persons acting as agents on behalf of principle mainland Chinese buyers to which they have very little recourse if the agent just takes their money and runs.

I dunno, I suspect that like doctors, there are many lawyers who aren't good business people. But it just goes to show: you can take the bookkeeper out of the corrupt kleptocracy, but...

BC Lottery Corp has some explaining to do. How could a gov't entity be set up to allow such blatant money laundering? I guess it's easy to see why Richmond's casino does so well.

[Cypherus]

Originally Posted by casper

Real estate lawyer trust accounts have cheques with pretty large values going in and out every day. Between the buyers, seller, issuer of the mortgages and taxes there quite a large number of high value transactions. The bookkeepers job is to manage all of that.

Disappointing that the Law Society stance is their fund is only responsible for the lawyers activities and not their employees. When you go to a law firm as a client you don't differentiate between what the lawyer takes responsibility for and what his staff take responsibility for. The lawyer should be responsible for his staff. The insurance should be expected to cover the entire cost.

A book-keeper's job is to never handle money. Cash should always be separate from accounting, otherwise the book-keeper can steal cash and record it in the books as a fictitious expense. It's basic internal control like password protecting a computer. As such, it will be interesting to see if insurance would cover it if the lawyer was careless in the conduct of their affairs.

[casper]

Originally Posted by Cypherus

A book-keeper's job is to never handle money. Cash should always be separate from accounting, otherwise the book-keeper can steal cash and record it in the books as a fictitious expense. It's basic internal control like password protecting a computer. As such, it will be interesting to see if insurance would cover it if the lawyer was careless in the conduct of their affairs.

We are talking about a small business (a small law office). I would be surprised if in this type of organisation the book-keeper is not the person who prints the cheques, does the electronic banking, does the wire-transfers and calculates the remittance to government.

There is probably no cash. I would not be surprised if everything is electronic transfers or cheques.

[the_prof]

Originally Posted by whatnext

Time and time again, study after study has shown what the "market" wants is single family houses. Not condos.

It is very easy to figure out what the market wants - rezone everything to CD-1 (or whatever the "all allowed" category is) and see what happens. I bet very few SFH will be built or remain near DT if that happens.

[whatnext]

From the Sun, How Canada's federal government failed to protect Metro Vancouverites:

Canada’s public guardians have failed to protect Metro Vancouver residents from forms of rule-bending and law-breaking that have been significant contributors to city housing becoming gravely unaffordable.

Two of the government departments that have let down city dwellers, basically by not doing their jobs, are Immigration Canada and the Canada Revenue Agency.

Although other government departments have also sat on their hands while Metro Vancouver prices have skyrocketed, I’ll focus here on the ways Canada’s immigration and taxation departments have not fulfilled their mandates. And doubts remain they’ll do so in the future...

....These observers have recognized, one way or another, that those responsible for immigration and taxation have been encouraging their staff to look the other way while subterfuge has contributed to housing prices becoming ridiculous...

....National Bank of Canada economists estimate almost $13 billion was spent by Chinese investors on Metro Vancouver real estate in 2015 alone. That represents roughly a third of all home sales by volume. It helped cause price surges.

The critics, in various ways, charge that Canada’s immigration and tax officials have failed to catch many abusers of their systems because of underfunding, understaffing and, sometimes, simply fear...

http://vancouversun.com/opinion/colu...-vancouverites

[trofirhen]

Do you think that the 15% property tax on house sales in BC has had little effect? Take a look at these, and think again. Yes, Virginia, there just might be a Santa Claus.
BTW, I know these are dated by a few months, but so what? Still pertinent, and rekindles a hope of getting our city back.

http://www.theglobeandmail.com/news/...ticle31150727/

http://www.zerohedge.com/news/2016-0...arket-implodes

http://www.bloomberg.com/news/articl...allout-spreads

http://www.zerohedge.com/news/2016-0...has-just-burst

[Pinion]

Originally Posted by trofirhen

Do you think that the 15% property tax on house sales in BC has had little effect? Take a look at these, and think again. Yes, Virginia, there just might be a Santa Claus.
BTW, I know these are dated by a few months, but so what? Still pertinent, and rekindles a hope of getting our city back.

http://www.theglobeandmail.com/news/...ticle31150727/

http://www.zerohedge.com/news/2016-0...arket-implodes

http://www.bloomberg.com/news/articl...allout-spreads

http://www.zerohedge.com/news/2016-0...has-just-burst

The housing market crashing doesn't mean getting the city back, it just means the end of one of the few surviving industries in the city.

This place will be a smoldering crater when all is said and done. The tax should have been introduced in the late 90s at latest.