China's Millionaire Migration

[Flash Walken]

Originally Posted by MillerTime GFG

Maybe try putting yourself in their shoes rather than judge from a distance. I'm sure your stance would be different.

Every thread Rube, every thread...

If you can't afford the tax while trying to upgrade your housing situation in the current Vancouver market you have no business trying to upgrade your housing situation in the current vancouver market.

Basically, it's that simple. Don't over leverage yourself and you will be fine. Make poor financial decisions and you won't be.

[rubecube]

Originally Posted by MillerTime GFG

Maybe try putting yourself in their shoes rather than judge from a distance. I'm sure your stance would be different.

Every thread Rube, every thread...

Dude, this is what you originally wrote:

Originally Posted by MillerTime GFG

It may force people to stay in their current home if they can't find a new buyer.

Do you not realize how tone deaf and privileged that sounds when we're talking about a measure that has been passed (in theory) because people literally cannot afford or find housing in Vancouver? Actually having a home to go back to or stay in kind of pales in comparison, don't you think?

[MillerTime GFG]

Originally Posted by rubecube

Dude, this is what you originally wrote:



Do you not realize how tone deaf and privileged that sounds when we're talking about a measure that has been passed (in theory) because people literally cannot afford or find housing in Vancouver? Actually having a home to go back to or stay in kind of pales in comparison, don't you think?

Sigh...of course it pales in comparison. It would also pale in comparison to a 3rd world country, so why don't we draw comparisons from there too while we're at it?

What I'm saying is the retroactive tax has caused unnecessary hardship on some. It's a very poorly implemented plan. Plain and simple.

[MillerTime GFG]

Originally Posted by Flash Walken

If you can't afford the tax while trying to upgrade your housing situation in the current Vancouver market you have no business trying to upgrade your housing situation in the current vancouver market.

Basically, it's that simple. Don't over leverage yourself and you will be fine. Make poor financial decisions and you won't be.

I'm talking about the locals, where the tax doesn't apply.

[rubecube]

Originally Posted by MillerTime GFG

Sigh...of course it pales in comparison. It would also pale in comparison to a 3rd world country, so why don't we draw comparisons from there too while we're at it?

Because the tax wasn't implemented to help third-world countries so it's completely irrelevant. If the tax is causing more people to stay in their current homes, leaving more vacancies, or it's causing the market to settle and become more affordable then it's doing it's job. We'll have to wait and see if it's actually effective. I think you actually need to do more than that to make it effective

I thought this article had some good points:

http://www.theglobeandmail.com/repor...ticle31120967/

First, let’s consider “the good.” This kind of a policy is an important component of a long-term strategy to bring the local housing market back in line with the local labour market. The tax will do a few important things. For one, at 15 per cent, it will discourage foreign buying in Vancouver real estate, since foreign buyers are not completely price insensitive, contrary to popular belief. In short, it will make other destinations for foreign capital more attractive. To the extent these buyers are price insensitive, then British Columbia will get a good deal of tax revenue, and this can be put toward worthy public purposes.

Most important, the tax will affect buyer expectations, local and foreign. If buyers perceive the tax to be an effective mechanism to curtail foreign buying, and as a sign of further action to come, then expectations of price growth will moderate substantially. This will give local buyers pause, weakening the “fear of missing out” mentality that has helped drive prices sky-high. And it will also be a signal to those counting on price appreciation, including but not limited to speculators, that selling soon might be a good idea.

Combined, these reactions will likely slow price growth substantially and may even turn it around, if the experience of Hong Kong and Australia are any indication.

Second, though, there is “the bad.” This policy will only address a fraction of the foreign capital entering the Vancouver real estate market. Since it only affects new purchases, earlier purchases on the basis of foreign capital will be untouched, and money will continue to arrive to fund these mortgages.

As well, it will not be able to stem foreign buying that occurs through local proxies. Not all foreign buyers will want to buy through a proxy, but given the new tax, many might opt for it now.

Lastly, it does not address the purchases that will take place by newly arrived, non-working permanent residents with substantial wealth, including those admitted through the Quebec Investor Immigration Program (QIIP).

What these weaknesses indicate is that further policy action will be required to truly re-establish affordability in Vancouver. The most promising step in that direction is something similar to the policy proposed by my colleague Rhys Kesselman. It is a progressive property surtax that can be offset by Canadian income tax paid, with seniors effectively exempted. What this structure does is target the surtax to those who have paid for housing with foreign income or wealth, and who do not plan to work and pay income taxes in Canada. At the high end, the property tax rate reaches 3 per cent annually, which is nothing to sneeze at, especially if price growth slows or reverses.

In the meantime, further action can be taken by the federal government and law enforcement bodies to tackle “the ugly.” The federal government should cancel the farcical QIIP, which encourages a particularly perverse form of wealth-based migration, and which has been shown to be a net loss for Canada. In addition, law-enforcement bodies, including the Canada Revenue Agency and the Financial Transactions and Reports Analysis Centre, should begin to crack down on tax evasion and money laundering in a much more concerted way. The B.C. New Democrats’ proposal for a dedicated “task force” in this area should be looked at seriously.

[MillerTime GFG]

Originally Posted by rubecube

Because the tax wasn't implemented to help third-world countries so it's completely irrelevant. If the tax is causing more people to stay in their current homes, leaving more vacancies, or it's causing the market to settle and become more affordable then it's doing it's job. We'll have to wait and see if it's actually effective. I think you actually need to do more than that to make it effective

That was my intention, as your comparison was irrelevant to the argument as well. That is, if we're arguing about the same thing. My argument is not about housing affordability (as I obviously agree something needs to be done), my argument is this could have been implemented without having an impact on existing sales.

I'm not sure how you thought I was arguing against there being a bubble, as that was never my point.

[Lubicon]

Naturally it didn't take long for people to look for ways around the new tax.

http://www.cbc.ca/news/canada/britis...ltor-1.3697962

And naturally it is affecting people who were likely not the intended target of the tax.

http://www.cbc.ca/news/canada/britis...-tax-1.3698362

[rubecube]

Originally Posted by Lubicon

Naturally it didn't take long for people to look for ways around the new tax.

http://www.cbc.ca/news/canada/britis...ltor-1.3697962

And naturally it is affecting people who were likely not the intended target of the tax.

http://www.cbc.ca/news/canada/britis...-tax-1.3698362

Obviously enforcement is going to be a key issue on this. The BC government has already seized control of the Real Estate Board back because agents weren't self-regulating themselves as they had promised to do, shocking no one except the Christy Clark apparently. The second article goes back to what Millertime was saying and what Flash and I agreed with that making the tax retroactive was a hamfisted cash grab.

[Leeman4Gilmour]

According to this, Calgary is #4 on Canadian destinations for Chinese investors (it's 2013, but I can't find a more recent).

Does this new tax in BC, push investors east? I can't seem to Google up Alberta's policies for foreign investment to be able to speculate on that question as well as I'd like......

[Locke]

Alright, I'm going to throw out a question and I'm asking as I dont know:

"Why are all of the Chinese buying property and acquiring Citizenships in Canada and what is China doing about it?"

Initially it appeared to me to be a fairly standard money laundering scheme, but then subsequently acquiring Citizenships seems to trend toward the likelihood that they, someday, intend to be here.

This much money funneling out of China cant be a good thing for them, and it isnt exactly funneling into Canada. They're picking up assets and are taxing the system somewhat but their money isnt really being funneled into the local economy.

This is kind of a problem because having this much Capital basically tied up in Limbo isnt good for anyone.

So Canada dragged their heels for a while apparently because they thought this would be good for Canada at some point, and it may well yet be, but what is China doing about seeing dollars and people, presumably highly qualified people, preparing for a mass exodus?

[Fuzz]

Mass Exodus? Have you seen the population of China? This is like, a rounding error. Though they probably don't like to see the money leave.

[Locke]

Originally Posted by Fuzz

Mass Exodus? Have you seen the population of China? This is like, a rounding error. Though they probably don't like to see the money leave.

I understand that, but these are obviously wealthy people, if they're wealthy they're likely skilled and educated, not just losing your average bear.

[Kjesse]

Originally Posted by Locke

So Canada dragged their heels for a while apparently because they thought this would be good for Canada at some point, and it may well yet be, but what is China doing about seeing dollars and people, presumably highly qualified people, preparing for a mass exodus?

This is a really good point. I guess that the very wealthy Chinese are hedging their bets and prefer to risk a portion their money in overinflated Canadian properties than keeping the money elsewhere, including their own country. Also, their political system, while currently stable, has been subject to a few revolutions in the last century so they will know stories about what happens to your money when a revolution occurs.

[Winsor_Pilates]

Originally Posted by calculoso

As far as I'm aware and it is likely not quite this simple, but if there is a firm sale on your house (ie: conditions removed) and the buyer walks away from it, you still get the deposit. I also believe the deposit is usually at least 5% ($50k on $1MM), which should more than cover any debts until the next sale.

Not quite how it works.

1)You don't just get the deposit. When a buyer defaults, the seller still have to go through a legal process and essentially sue to get the deposit.
Considering it's a foreign buyer who is backing out, that will be very difficult to do.

2)Using the same numbers as an example and assuming they successfully sue for the 5% deposit:
That local home seller gets $50,000 from the defaulted deposit; but they now have the completing of their $1.5M purchase come up and haven't sold their current home.
They have no way of completing that sale and will have to default on their 5% deposits which is $75,000.
Net result is a $25,000 loss and lots of headache for that local home owner. All of that is assuming they can even successfully get the defaulted deposit released to them and not factoring in legal costs.

[AltaGuy]

Originally Posted by Locke

Alright, I'm going to throw out a question and I'm asking as I dont know:

"Why are all of the Chinese buying property and acquiring Citizenships in Canada and what is China doing about it?"

Initially it appeared to me to be a fairly standard money laundering scheme, but then subsequently acquiring Citizenships seems to trend toward the likelihood that they, someday, intend to be here.

This much money funneling out of China cant be a good thing for them, and it isnt exactly funneling into Canada. They're picking up assets and are taxing the system somewhat but their money isnt really being funneled into the local economy.

This is kind of a problem because having this much Capital basically tied up in Limbo isnt good for anyone.

So Canada dragged their heels for a while apparently because they thought this would be good for Canada at some point, and it may well yet be, but what is China doing about seeing dollars and people, presumably highly qualified people, preparing for a mass exodus?

I think the citizenship aspect is for two reasons: possible protection and help from the Canadian government should they need it; and the ability to start a new life in Canada with the aforementioned aid should it be required. Without citizenship, the insurance policy wealthy Chinese are buying isn't nearly as valuable.

All of this is because China remains without the rule of law: at any moment the rules can change, or you could piss off the wrong Party member, and all of whatever you have disappears.

International corporations are having the same difficulties: they want access to the Chinese market, but don't know how to keep whatever profits they make safe in an unstable legal environment.

[snootchiebootchies]

Originally Posted by Delgar

This is a really good point. I guess that the very wealthy Chinese are hedging their bets and prefer to risk a portion their money in overinflated Canadian properties than keeping the money elsewhere, including their own country. Also, their political system, while currently stable, has been subject to a few revolutions in the last century so they will know stories about what happens to your money when a revolution occurs.

Yes, the last part is the reason why Chinese folks get PRs and citizenships in other countries. I don't think any mass exodus is guaranteed. It's just that the Chinese do not trust the Chinese government and they want a destination to flee to if things go FUBAR. I know of family members and friends of family members who have secured PRs or citizenships in Canada, US, Australia, Great Britain, etc. If that's not successful, then they send their children to get study and/or work visas in those countries so they can begin the process of gaining citizenship and one day, be able to sponsor other family members over. I myself am a citizen only because my parents did not want to chance the outcomes of Hong Kong's sovereignty transfer back to China and immigrated to Canada when I was a child.

[snootchiebootchies]

Originally Posted by Leeman4Gilmour

According to this, Calgary is #4 on Canadian destinations for Chinese investors (it's 2013, but I can't find a more recent).

Does this new tax in BC, push investors east? I can't seem to Google up Alberta's policies for foreign investment to be able to speculate on that question as well as I'd like......

Yeah, I don't think Calgary is high up on the list anymore. Foreign nationals, like Maritimers/Ontarians/Saskatchewanians, immigrated to Calgary and bought homes because there was a prospect of a job or a job was already awaiting them. Without the jobs, there is very little reason for foreigners to buy homes here.

[squiggs96]

I think the 15% tax is a good idea in concept, but I don't like the execution of it. As many have stated not grandfathering in existing deals is a bad idea. There is a building in North Vancouver with 113 units that was set to have an August 15th closing date. Most of these deals were done in March of this year. With the new tax, there are a few people that would be on the hook for between $60,000-$240,000. Keep in mind you can't mortgage this portion, as it has to be paid from your bank account at the time of closing. For this closing, six of the buyers (out of the 113) will have to pay the excess PTT if the units close after August 15th. Luckily for all involved, the COC was already obtained, and the units can now close July 29th. Lots of time by the lawyers, sales team, and buyers was needed, but the deals will all close tomorrow.

I know many of you think that the people who are buying all the houses in the Lower Mainland are wealthy, and they'd just hand over another bag of cash. That's likely the case with the ultra expensive (greater than $5M) houses, but the people buying the $500,000-$1,500,000 homes are not the ones with the practically unlimited funds.

These condos aren't even the ones where they were purchased 3-5 years ago, and would have seen an increase in value of at least 15%. The contracts were only signed 5 months ago, and the value today is likely close to what it was in March. Deposits are 20%, so it would be a big sum to walk away from.

[blankall]

Originally Posted by Locke

Alright, I'm going to throw out a question and I'm asking as I dont know:

"Why are all of the Chinese buying property and acquiring Citizenships in Canada and what is China doing about it?"

Initially it appeared to me to be a fairly standard money laundering scheme, but then subsequently acquiring Citizenships seems to trend toward the likelihood that they, someday, intend to be here.

This much money funneling out of China cant be a good thing for them, and it isnt exactly funneling into Canada. They're picking up assets and are taxing the system somewhat but their money isnt really being funneled into the local economy.

This is kind of a problem because having this much Capital basically tied up in Limbo isnt good for anyone.

So Canada dragged their heels for a while apparently because they thought this would be good for Canada at some point, and it may well yet be, but what is China doing about seeing dollars and people, presumably highly qualified people, preparing for a mass exodus?

China has also finally starting cracking down on the illegal money.

In March China made it illegal to move more than about $50k out of the country at a time. China recently started a law suit to seize a property purchased with laundered money:

http://www.huffingtonpost.ca/2016/06..._10722392.html

Keep in mind, that corruption is a major problem in China. It's still a somewhat communist country, yet clearly people are becoming outrageously rich there. I doubt you get that rich without proper party connections. The kind of connections that would not only allow you to make the money but then smuggle it out of the country. So a "crackdown" on the part of the Chinese government may just be for show.

[blankall]

Originally Posted by squiggs96

I think the 15% tax is a good idea in concept, but I don't like the execution of it. As many have stated not grandfathering in existing deals is a bad idea. There is a building in North Vancouver with 113 units that was set to have an August 15th closing date. Most of these deals were done in March of this year. With the new tax, there are a few people that would be on the hook for between $60,000-$240,000. Keep in mind you can't mortgage this portion, as it has to be paid from your bank account at the time of closing. For this closing, six of the buyers (out of the 113) will have to pay the excess PTT if the units close after August 15th. Luckily for all involved, the COC was already obtained, and the units can now close July 29th. Lots of time by the lawyers, sales team, and buyers was needed, but the deals will all close tomorrow.

I know many of you think that the people who are buying all the houses in the Lower Mainland are wealthy, and they'd just hand over another bag of cash. That's likely the case with the ultra expensive (greater than $5M) houses, but the people buying the $500,000-$1,500,000 homes are not the ones with the practically unlimited funds.

These condos aren't even the ones where they were purchased 3-5 years ago, and would have seen an increase in value of at least 15%. The contracts were only signed 5 months ago, and the value today is likely close to what it was in March. Deposits are 20%, so it would be a big sum to walk away from.

Quite frankly, I don't think a non-resident should be allowed to buy a property in Canada ever. They certainly don't qualify for a mortgage. I have little sympathy for a non-resident buying a 500k vs. a 5 mil property in cash.

The only people I hope the government steps into help are the residents who got stuck in limbo after their buyers backed out and they needed the funds to secure their new place.