The Hong Kong government over the past few years have actively been implemting strategies to cool the HK housing market. If the BC government does anything to "significantly" reduce the opportunity for foreign investment or if the Chinese government finds a way to tighten capital flight substantially, Vancouver's high end market may have challenges.
Right now the 10% correction can't be seen as a collapse. Having lived in Hong Kong and survived the massive drops in 1997/98 and again in 2003, I would call this a much needed dip. Prices are still up over 60% from when I sold my last unit in 2009. My colleagues in China, specifically Beijing and Shanghai paint a very different story with respect to what is happening on the Mainland. They really believe that real estate prices will continue to go up - and they are stratospheric by any metric. Yes, prices will correct in these markets, but it will take something like another SARS to really begin the unravelling in my opinion.
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Rickson9
Since January 2016, China has tightened controls on moving money overseas.
We may not feel the impact on Toronto and Vancouver market right now, the effect is imminent. My personal view is that we will see the impact by later 2016 and 2017 onward.
Over the years, one of the main methods of moving money out of China is using a stack of Chinese IDs (similar to the combination of SIN card and citizenship card) to wire money from a list of accounts in Chinese banks under different names to an oversea bank account. Because there's a $50,000USD limit per year for a person to transfer money in foreign currency to overseas. Now a red alert within the banking system is triggered, if more than $50,000USD is transferred to the SAME destination account, even from different source accounts. And the transaction will be blocked or delayed.
Although the appetite for Canadian real estate, especially Toronto and Vancouver is still high, the execution is much harder.
What's your take on this?
We may not feel the impact on Toronto and Vancouver market right now, the effect is imminent. My personal view is that we will see the impact by later 2016 and 2017 onward.
Over the years, one of the main methods of moving money out of China is using a stack of Chinese IDs (similar to the combination of SIN card and citizenship card) to wire money from a list of accounts in Chinese banks under different names to an oversea bank account. Because there's a $50,000USD limit per year for a person to transfer money in foreign currency to overseas. Now a red alert within the banking system is triggered, if more than $50,000USD is transferred to the SAME destination account, even from different source accounts. And the transaction will be blocked or delayed.
Although the appetite for Canadian real estate, especially Toronto and Vancouver is still high, the execution is much harder.
What's your take on this?
Here are the links:
Chinese tighten controls on moving money overseas http://www.afr.com/news/world/asia/china-tightens-controls-on-moving-money-overseas-20160120-gma7g3
Inquiries for Canadian homes on Juwai.com, a property search engine that lists real estate around the world for Chinese buyers, jumped 134 per cent in the first quarter from a year earlier, according to the Shanghai-based company.
http://www.theglobeandmail.com/real...tate-set-to-increase-in-2016/article29628005/.
Chinese tighten controls on moving money overseas http://www.afr.com/news/world/asia/china-tightens-controls-on-moving-money-overseas-20160120-gma7g3
Inquiries for Canadian homes on Juwai.com, a property search engine that lists real estate around the world for Chinese buyers, jumped 134 per cent in the first quarter from a year earlier, according to the Shanghai-based company.
http://www.theglobeandmail.com/real...tate-set-to-increase-in-2016/article29628005/.
One should never underestimate the ingenuity of the Chinese when it comes to finding creative solutions to challenging problems. It appears to me that whenever the Mainland government attempts to impose stricter measures for investing, this actually induces those with the capital to invest to search even harder for ways to protect their money. In my opinion this is one reason why we are seeing such a high degree of Chinese money being invested here in Vancouver and Toronto. It's not really investing, it is capital preservation. The problem I see happening for real estate here in these hot areas is not the if, but the when our government finally steps in and makes it too expensive or difficult for overseas investment to be parked in vacant properties.
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helenxu
Cannot agree more colinaforrest! There's a Chinese saying, whenever there's a rule from the top (government), there's a solution from the bottom (the mass population) to get around it. It may take some time for the mass to pave a new way to wire their money out of the country, the underlying demand is there.
You mentioned "capital preservation". You are right. They see Canadian real estate as a safety box to park their money. If our market drops for 10-20% percent, it's still much safer than the market back home. The volatility of the real estate in Beijing, Shanghai and Hong Kong is much greater.
Today's Chinese millionaires and billionaires were ordinary Joe with zero net worth in 1980s. People who have accumulated such wealth in merely 20-30 years have taken extreme risks in all these years. And they know that it cannot be repeated in their life time. Most of them have "capital preservation" on top of their list.
Foreign investments is good for our economy. It boosts GDP, creating jobs. At the mean time, people utilize our resources should pay enough taxes as well, just like rest of Canadians whose main sources of income are generated within Canada. That's our challenge.
You mentioned "capital preservation". You are right. They see Canadian real estate as a safety box to park their money. If our market drops for 10-20% percent, it's still much safer than the market back home. The volatility of the real estate in Beijing, Shanghai and Hong Kong is much greater.
Today's Chinese millionaires and billionaires were ordinary Joe with zero net worth in 1980s. People who have accumulated such wealth in merely 20-30 years have taken extreme risks in all these years. And they know that it cannot be repeated in their life time. Most of them have "capital preservation" on top of their list.
Foreign investments is good for our economy. It boosts GDP, creating jobs. At the mean time, people utilize our resources should pay enough taxes as well, just like rest of Canadians whose main sources of income are generated within Canada. That's our challenge.
Canadian, especially BC politicians are very naive, and/or extremely self-serving and/or do not serve their populace very well in this regard. Taxation of Canadian real estate, especially rare SFH is far too low for non-residents. Land transfer taxes and property taxes ought to be tripled at least ! One could easily argue that 25% is the right figure for land transfer taxes and maybe half that for condos in BC.
With a billion+ Chinese and Indians each, plus a host of other large, rich yet unstable regions of the world ( Russia, Iran, Saudi Arabia, S-America, N-Africa, ...) we need to learn from other overpriced regions like Singapore, London, Sydney etc and tax foreign real estate ownership far FAR higher as surely many of them will want to park their legal ( or illegal or unlawfully moved) money to safer real estate havens, including its top two Canadian destinations: Vancouver and Toronto.
Why go to war if you can buy real estate in the best lost ions on the cheap, in-taxes or certainly under-taxed ?
With a billion+ Chinese and Indians each, plus a host of other large, rich yet unstable regions of the world ( Russia, Iran, Saudi Arabia, S-America, N-Africa, ...) we need to learn from other overpriced regions like Singapore, London, Sydney etc and tax foreign real estate ownership far FAR higher as surely many of them will want to park their legal ( or illegal or unlawfully moved) money to safer real estate havens, including its top two Canadian destinations: Vancouver and Toronto.
Why go to war if you can buy real estate in the best lost ions on the cheap, in-taxes or certainly under-taxed ?
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