Vancouver loves hot asian money.

There’s an article in the Globe and Mail that asks that classic question “Is Vancouver in a real estate bubble?“. Well.. actually it doesn’t really ask that, it’s just titled that. What it really explores is Realtor anecdotes about wealthy foreign buyers.

If “buyers from China” answers the “who” question about Vancouver’s unique real-estate market, the follow-up question—“Where is this leading?”—is harder to answer. The torrid affair between eastern Asia and Vancouver real estate, now in its third decade, is actually a love triangle from which each party derives very different things. When wealthy Chinese immigrants buy property in Vancouver—and they utterly dominate the top end of the market—they’re actually buying a form of insurance. What the federal and provincial governments get out of these newly minted Canadians turns out to be a modern form of the infamous head tax that was imposed on Chinese migrants in the 19th century. And what Vancouver gets is an economy that boasts a lot of froth, and not much substance. From all three angles, it feels like a relationship that is built not so much on Commitment as on enjoying the good times while they last.

Ah yes, the wealthy foreign buyer and their almighty impact on the market. I guess we’ll just have to trust the Realtor anecdotes, since that’s all journalists seem to rely on when writing these articles.

.. Gosh, wouldn’t it be nice if there was some actual data on foreign buyers? Wouldn’t it be really great if someone sat down and put those numbers into perspective?

Oh! Look! Somebody has.

The article outlines a typical scenario in which, “one of the parents, usually the wife, moves to Canada with the children while the husband stays in Asia, coming for visits when he can.” So the number of total investor immigrants represents 2500 households at best! When this number is compared against the total annual sales volume for the Greater Vancouver area, we find that it accounts for at best 7% of total sales! That puts things in a whole different light, doesn’t it? As it turns out, rich Asian investors undoubtedly account for less than 10% of the total sales volume, and I would suggest that it is likely significantly less than that given the propensity of many Asian cultures to live in extended family (multigenerational) households.

Now given that the entire article is premised on the argument that there are lots of rich Chinese investors coming to Vancouver to buy extremely expensive houses, the above data calls this foundational assertion into question. In fact it leaves it in a smoldering pile.

Go read the full post over at the Financial Insights blog.

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patriotz
Member

@Revenue Canada:

Me: "That is incorrect. If you have a dependent spouse and/or children resident in Canada, you are deemed to be a Canadian resident for income tax purposes no matter where you live."

At the first hint that offshore (asian) non residents skirt the payment of taxes, you go into an unsubstantiated PC mode.

What's with this "PC" crap? I didn't claim that deemed residents aren't evading taxes on foreign income, I said that deemed residents are taxable on foreign income. All sorts of people evade taxes on all sorts of income, whether foreign or domestic.

There are any number of things which make a person a deemed resident for tax purposes regardless of actual residence, and they are on the CRA website.

Devore
Member
Devore

@Dave:

Short of the Smith Maneuver, you can’t write off interest on your house. But, you can write off a leased car. Lot’s of businesses lease their cars and trucks.

You can write off interest on your house if you use it for business purposes, like your car.

But I thought we were talking rich asians buying $2M houses and leasing expensive cars for their wives, not businessmen.

painted turtle
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painted turtle
jesse
Member

@paradox: You do know Buffett sold property in Florida in 2005 because he thought it was overvalued, right?

kansai92
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kansai92

I love hot asians.

I also love money.

Me likes this topic.

paradox
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paradox

@jesse

"Why would someone who has $2MM to buy property and a mint salary offshore insist on sending their child to an underfunded and overcrowded ESL class?"

here is the answer to your question :-))

Why do you think Warren Buffet drives a used car and lives in his clumsy house he bought 50 year ago?

paradox
Guest
paradox

@ anonymous

you dont get it, rich people in China pay 0% taxes. Maybe some bribes , but thats it.

Even normal chinese dont pay taxes as you will find that mos ex-comunist countries didnt have any income tax. It takes one generations for those people to come around the idea of paying income tax. That is why there are so many state emterprises in china. Dont kid yourself.

jesse
Member

@Denier: "When you don’t pay into a system"

Well according to the article, paying $2MM for a Dunbar old timer is de facto "paying into a system."

Why would someone who has $2MM to buy property and a mint salary offshore insist on sending their child to an underfunded and overcrowded ESL class? China has some decent private schools so I've heard; in fact a lot of Chinese parents think even the IB program is inferior to curricula in higher end Chinese schools.

I also know a lot of born Canadians abusing the system. The sheer magnitude of the abuse blows the mind. 🙄

Newcomer
Guest
Newcomer

@Revenue Canada:

Why don't you just visit the CRA site, it all there in plain English. The CRA sees no problem with people being resident in more than one place at a time. There are ways to minimize you tax burden, but if you have a house here and depedents here and status here, you are resident here.

Denier
Guest
Denier

Yeah making tons of money offshore then nickel-and-diming on chronically underfunded and oversubscribed ESL classes and using a health care system with long wait times.

@@@@@@@

Lol. When you don't pay into a system, you have no qualms about abusing the services provided by that system. Its really quite simple for those that are not naive

Anonymous
Guest
Anonymous

@Paradox: I see your point of the dad being a "deemed resident". If he is taxed in Canada he would get credit for taxes paid in China & therefore only pay the difference in tax rates to Canada. Example: China tax rate 30% (guessing??), Canadian rate 44% so he pays an extra 14% to Canada.

Now if the Canadian government says we want you to pay all your income tax (44%) to Canada there is an issue. He can't be resident in both countries and be taxed in both countries 30% + 44% = 74%. Good luck telling the Chinese government that even though he lives and works in China he refuses to pay tax in China because he is a Canadian resident and pays taxes in Canada.

Besides I think the woman probably says she is a single mom.

Simpatico
Member
Simpatico

@jesse: I agree. Lots of reasons that Asian families, just like other families, sell their homes. I worked for one of the most sought-after private schools on the westside and have gotten to know a lot of these families. Here's a snapshot of the kinds of reasons they sell (which reminds us not to stereotype people too easily): Sold house because Taiwanese father called wife and kids back to Taiwan so wife could return to work in family business during economic downturn in Taiwan. Family needed cash from sale; Family divorce–father in China divorced wife (had a second family) and he sold home. Wife moved with kids from this marriage into a rental with instruction from husband to "get a job" — no more support for her, only for the kids. (She was young and naive and failed to get… Read more »

Sigfried and Freud
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Sigfried and Freud

@Revenue Canada: Wow, rich people evade taxes. Who knew? Next topic…

jesse
Member

@Revenue Canada: "Dad can continue to make huge sums of money that are taxed nominally (if at all) while Mom and kids can claim social service assistance"

Yeah making tons of money offshore then nickel-and-diming on chronically underfunded and oversubscribed ESL classes and using a health care system with long wait times.

Is it so hard to believe everyone, recent immigrants and Canadians with hundreds of years of establishment alike, is speculating on real estate? I'm trying to figure out which comments I hate more, the ones complaining prices are high because of immigants, or the ones bragging prices are high because of immigants.

jesse
Member

@paradox: "This is grossly unfair to the canadian hardworking taxpayer"

Do you have any numbers showing how prevalent so-called "astronaut families" really are? Maybe on the westside it's more common but in the rest of the Lower Mainland I think it's relatively rare.

Sigfried and Freud
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Sigfried and Freud

Consider this:

4325 W 9 was listed at $1,498,000 on November 5, 2010 and got sold at $2,000,000 on Monday after a fierce multiple-offer bid.

Lot size: 5,290 sq. ft.

Buildable: 3,174 – 3,703 sq. ft.

I doubt this was any rich Asian investors. These are wealthy locals that can play this game (in West Point Grey).

paradox
Guest
paradox

Guys, if your wife or dependent is a permanent resident here and resides for more than 183 days / year in canada and has established ties to this country (kids go to school here) then CRA will consider that their principal residence is in canada and they will be taxed on their worldwide income. This is the law. Do those rich asian declare their worldwide income here? I dont know but taking a 50% cut on your yearly income just to have your family live here seems a high price to pay, especially if your income is high, more than 200k/year. My educated guess will be that most of those guys take a gamble, wife and kids live here, claim child tax benefit, free healthcare, ESL etc, and husband takes care of mistresses back home and business. If he gets… Read more »

Best place on meth
Member
Best place on meth

@xyz:

What are these people thinking?

They're thinking interest rates are going up.

And they're right!

Renting
Guest
Renting

@logic: I could go buy one for cash tomorrow, but don’t see the appeal.

When you earn and then save cash you don't want piss it away. you realize the value of a dollar.

When people can get something by just signing their name without having saved a dime they tend to give it less thought. Easy credit makes people do stupid things.

Dave
Member

@Renting:

Revenue Canada doesn't care if you drive a truck of a Merc. But, there is a cap on the write-off, which I think is $40k. Hard to be balla at $40k.

Revenue Canada
Guest
Revenue Canada

Canadian residents are taxed on their worldwide income. If the father lives in China he is NOT a Canadian resident and will NOT be taxed in Canada. The wife and kids (who live in Canada) are Canadian residents. Their income is zero & so they will pay no tax here ************8 That is incorrect. If you have a dependent spouse and/or children resident in Canada, you are deemed to be a Canadian resident for income tax purposes no matter where you live. *********** Care to back up that assertion? Or are you just prepared to say, "no it isn't" ? At the first hint that offshore (asian) non residents skirt the payment of taxes, you go into an unsubstantiated PC mode. Clearly you are unfamiliar with the reasons why dad continues to work in Hong Kong and mainland China, while… Read more »

Dave
Member

@Devore:

Short of the Smith Maneuver, you can't write off interest on your house. But, you can write off a leased car. Lot's of businesses lease their cars and trucks.

Burpy
Guest
Burpy

@Vanrod: Why don't they rent for 1/2 the monthly cost?

Prices are no longer going up. There will be no more flippiing for gains.

Vanrod
Guest
Vanrod

@xyz: They want a place to live?

xyz
Guest
xyz

Sold Listings 120

What are these people thinking?