Canada, economy, hype, prices, USA

Chinese buyers move to the USA

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81 Comments

If you’re wondering why we haven’t heard as much about wealthy chinese buyers lately as prices drift down in Vancouver, maybe it’s because they’re moving to the USA.

“California has always been popular with Asian buyers,” he told beyondbrics. “But whereas before it was mainly buyers from Taiwan, Hong Kong and Japan, now we are seeing more mainland buyers visiting.”

Reasons for purchases vary, say those who have dealt with overseas Chinese buyers. Some are buying because they want to emigrate or they have children who will go to school in the US. More and more Chinese millionaires are looking to settle in the US or at least secure residency rights.

 And why would they be buying in the US as opposed to Canada?
Others buy because the numbers add up: the renminbi is relatively strong against the US dollar and property prices are cheap compared to Australia or Canada.
But it’s not supposed to work like that!  Wealthy people aren’t supposed to look for good deals..
Are they?
Read the full article on ft.com
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[…] turns will Burnaby Joe both the means and fortitude to hang on while equity drops monthly?” – oneangryslav2 at VCI 11 Jul 2012 11:32am Share: This entry was posted in 08. Overextended Buyers, 14. Social Effects of the Boom, 15. […]

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[…] Methinks there are many stories just like this out there, in the suburbs especially.” – Anonymous at VCI 11 Jul 2012 7:10pm Share: This entry was posted in 11. Regrets about Investing in RE, 16. Missed The Boat? and […]

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fixie guy

69 Crikey Says: “Let’s not overstate the impact of condo and home buying by wealthy investors outside Canada…”

Agreed, where the owner lives pales in importance to where the money is earned. In terms of Canadian price sustainability, new wealthy immigrants almost certainly have a much greater, and much less sustainable, impact than tracked foreign speculation. Without a local economy of sufficient scale to justify them, inevitably prices come down.

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patriotz

@Makaya:
“Now let’s assume the guy managed to rent out this place for $5k per month for 4 years, this unit would have fetched $240K. He probably had to pay some taxes on that investment”

Please, how many times do I have to point out that expenses are deductible against revenues for a rental property. Assuming he had a mortgage, he was losing money and was able to deduct that against his other income.

Apart from that, thanks for the numbers.

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gokou3

@Vote Down The Facts: No one has a burden to prove anything to you, especially if you aren’t appreciative of other people’s work after the fact.

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Rightsizer

@ZRH2YVR: Paris is a World-Class city.

So it’s exactly like vancouver then? Do they have one of those good crepe places like on granville? 😉

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ZRH2YVR

Some insight (I may repost on tomorrow’s blog also as the day is about to turn over soon). The new rules have definitely had some impact on moving the marginal buyer’s purchases forward. This is really sad as they stand to lose the most but you can see people are just driven to make any transaction and the possibility that they will lose this ability has forced their hand. The stats are now starting to include the sales since the annoucement date and a statistically significant change in the composition of sales has emerged. Here’s what we’re seeing. 1.) SFH sales continue to be slow and will almost certainly be lower in July than June and possibly up to 20% below last year. 2.) Condo sales have spiked such that July is on track for higher than last month by… Read more »

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pennysaver

crossposted to vreaa as well.

http://business.financialpost.com/2012/07/11/canadian-housing-prices-are-not-sustainable-david-rosenberg/

more msm articles on unsustainable canadian house prices.

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Jigs Up

@Crikey: “Let’s not overstate the impact of condo and home buying by wealthy investors outside Canada”

Geese that could never happen. Where is all that HAM of late? Bloating inventories and price reductions on the Westside and in Richmond is all I hear about. The Helicopters have been grounded.

Nice to see the article point to the realtor stunt back in March that had the media print exactly what they wanted. The problem is the media missed the other 2000 sales that day across Canada bought by over leveraged locals. Of course those sales have no effect on the market but the one house bought by a Chinese student does because he paid over the purposely low set asking price. The media just happened to be there when the offer was presented. People are gullible.

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jesse

CBC: Iranian-Canadians fume as TD closes accounts Several Iranian-Canadians are crying foul after the TD Bank abruptly closed their accounts with little explanation other than to say it had to comply with federal economic sanctions against Iran… Ghasemi said her father received some money from Iran for a down payment for a home in Canada. But that transfer took place before the new round of sanctions were introduced, said Ghassemi, who doesn’t see any legitimate reason for the letter. “We’re not involved in any sort of transaction or any sort of activity that may benefit the government of Iran. And we’re not people in Iran. We’re permanent residents and citizens of Canada,” she said. Capital flows are a cause of concern for the government, and Iran is a consistent source of wealthy immigrants. Sanctions are most likely politically motivated, but… Read more »

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VMD

@Makaya:
Vancouver East is the new Richmond…

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Makaya

@Rightsizer: Skytrain is the new Merco…

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Crikey

@Joe_Blown_Away_By_High_Housing_Costs:
Interesting… clipped from the article:
“3. Maybe the foreign buyers will go away

Let’s not overstate the impact of condo and home buying by wealthy investors outside Canada, because definitive statistics are lacking. But there’s no doubt that in cities such as Vancouver and Toronto, money from offshore has helped bid up prices. A classic example is the drab three-bedroom bungalow in Toronto’s Willowdale neighbourhood that in March went for $1.2-million – $421,800 over the asking price. CBC reported that the buyer was a university student whose parents live in China. We welcome foreign investment here in Canada, but in the case of the housing market that money has fed a pre-existing over-exuberance. “

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Rightsizer

@jesse: down is the new up.

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jesse

@Best place on meth: Red is the new black

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Best place on meth

@Jigs Up:

“It seems 8s are so passe in today’s market. I think 9s are the new 8s.”

And 6 figures is the new 7 figures.

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jesse

@Makaya: I assume they must have been putting funds aside into a capital fund when the buildings wear out. And if the mortgages are paid off they can refinance. If they managed their finances well there should be no concern whatsoever.

But Wright said Metro does not have a long-term capital budget to replace those buildings outright when the need arises, he added funding for redevelopment should come from the provincial and the federal governments.

I see. This whole “affordability” mantra is so comical it’s tragic.

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Vote Down The Facts

@Makaya: “Since you’re a bit lazy”

If YOU claim it’s a $500k loss then the burden is on you to back that up. Thanks for doing so, that puts you a step above Garth.

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Makaya

Metro Vancouver’s 50 affordable housing complexes will need replacement, but with whose money?

The Metro Vancouver Housing Corporation operates more than 50 apartment buildings and many of those will need to be torn down and replaced within 10 to 15 years, said New Westminster Mayor Wayne Wright, chairman of Metro’s housing committee.

Wright said there is no immediate need to replace the buildings, but “it is looming, it will come …. It’s going to come back and bite us.”

The 3,600 Metro-run units provide housing to 10,000 residents throughout the region. Some tenants pay market rents, subsidizing the remaining 30 per cent of residents — 3,000 people — who constitute low-income tenants.

They shouldn’t be too worried, they already have lots of available space at the Olympic Village Village on False Creek…

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Jigs Up

@Anonymous: “Was listed for $1,288,888 and then $1,198,000. Now $999,000.”

It seems 8s are so passe in today’s market. I think 9s are the new 8s.

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oneangryslav2

@Anonymous: What a sucker! Don’t they know that Richmond is HAM central and nobody who buys there needs to take out a CMHC-backed mortgage?!?

This is another example that price is not the same as value. The value of these houses has not changed a white over the last few weeks. What has changed is the potential buyer’s access to credit.

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Jigs Up

@Harry Wang: “once their mortgages are dropped by TD will they have to qualify under the new mortage rules at a new institution?”

Unless TD is interpreting the sanctions wrong they will not qualify with any Canadian institution. Either they come up with the funds or get foreclosed.

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Makaya

@Vote Down The Facts: Here is the message I posted last night: Between capital loss, transaction costs, condo fees, property taxes, debt servicing and opportunity costs, $500k looks about right to me… Since you’re a bit lazy, here is a quick and dirty calculation I did for you: Capital loss: ($3.125m - $3m) 125,000 Strata fees: (1825*12*4) 87,600 Property taxes: ~15K/year 60,000 Interest payments (3%-25y) 290,000 Opp. costs on DP (GIC @2%/year) 50,000 Transaction costs (3% of ppty) 93,750 Total 706,350 Since he’s a flipper, he probably have put the minimum downpayment he could, but let’s get conservative and assume he put 20% down. See, with my assumptions, I get $700K loss with doesn’t include insurance cost and GST (Shangri-La was a new built). I didn’t take into account inflation. Now let’s assume the guy managed to rent out this… Read more »

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Jigs Up

@Vote Down The Facts: “What downpayment did they make, at what rate, we’re they an owner occupier or an investor? What was the rental income?”

It was a spec flip. No rental income, no occupancy. Do the math.

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