Polozi Scheme posted this link to a post at Ross McKay real estate consultants with the theory that the Vancouver real estate is a ‘currency exchange ponzi scheme’.
A investor seeking to remove Chinese Yuan from China and have it converted into a foreign currency purchases a home in Vancouver. The investor once having the currency exchange authorized and completed for the purchase to take place then offers the same opportunity to another investor who is willing to offset any costs the original investor incurred through paying a high enough price for the same home that then allows the previous investor to “break-even”. This pattern is continued over and over again causing the selling price to raise higher and higher at no risk to the investor, while at the same time offering higher and higher amounts of currency to be exchanged on the rising home price being paid.
At no time is the price paid reflective of fundamental value of the real estate being traded but is being established for ulterior purposes that are not related to normal house price growth.
At some point in time the scheme ends as the last investor is converting so much currency that the benefits exceed even the need to “break even” and the home can be sold at a net loss. When that moment is reached the appearance of sustained house price growth ends and the scheme ends moving the scheme somewhere else.
Read the full posting here.
When the US real estate bubble burst it uncovered a problem:
It turns out that some realtors, mortgage brokers and lawyers were pushing through real estate deals that weren’t entirely ethical. Some groups would use straw buyers purchase property at a price far above what it was worth and then take out a loan for the excessive amount.
Some of that is still being uncovered, here’s a recent instance:
Yeboah admitted participating in the scheme by creating fake W-2 forms, pay stubs, and other records for straw buyers so that her fellow conspirators could collect millions of dollars in kickbacks from fraudulently-obtained mortgage loans. In entering her guilty plea, Yeboah admitted reviewing payment records that showed over $14.5 million in kickbacks were collected from the fraudulent purchase of $100 million in properties.
Now it looks like the problem has spread to Toronto:
Earlier this year, the Star reported a pattern of house flips and price jumps as much as 60 per cent in less than a day involving Hatcher. Most of the deals didn’t include deposits. Purchasers got money back. Mortgages exceeded the value of homes. The same buyers and private lenders popped up in many sales.