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Comment by redthrowaway | Hacker News Reader

It's fascinating how effective the foreign ownership tax has been. It's only 15%, but it essentially halted the Vancouver property bubble in its tracks, and is now deflating it.

I'll admit to being one of those who thought Vancouver's real estate prices were due to an unwillingness to build. I was wrong. It was always just Chinese money fleeing uncertainty and trying to find a safe place to land.

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Every place's situation is different.

In vancouver with $60k/yr average incomes and a decent enough willingness to build, it's housing-as-bank foreign money. You see it even more with rent & housing price ratios being out of wack.

In the bay area with strong anti-building NIMBYs, prop 13 , a tech boom and some foreign housing-as-bank money leads to it's high prices. You see it in how housing prices and rent is pretty even in many cases. The places in the bay area that don't have fairly even rent/buy ratios are the ones who probably have money being imported.

A friend of mine pointed out how there seems to be about a $2 million limit in housing liquidity in palo alto now since there was a law passed that required that sources of cash have to be disclosed for housing that is over $2 million. You can often see housing liquidity bands too in the '1 tech worker salary' & '2 tech worker salary' limits, mortgage lender down payment behavior and what not.

This isn't a warranted conclusion. The market was showing signs of slowing down before the tax was implemented. Post ergo propter hoc.

The more likely cause of the rise and then decline in Vancouver prices is the incredible levels of debt home buyers are taking on, due to low interest rates.

This is a testable hypothesis. Toronto is currently where Vancouver was pretax: rising prices, but decline in inventory and overall sales volume. If Toronto declines in 6-12 months without a tax, then the tax likely wasn't the major cause of the Vancouver decline.

There has never been an unwillingness to build and that narrative remains baffling to me. The city has been steadily building condo towers for decades and continues to do so. Look at a photo of Vancouver from 1990 and now and the difference is startling.

I stopped by two City of Vancouver public consultations today and both were about rezoning areas to expand housing. One was about upzoning Chinatown to include more housing and the other concerned the design of the new North East False Creek neighbourhood that will exist after the viaducts come down. Tons of housing will be created when that land currently used for an incomplete highway is freed up.

Can't be too quick to attribute the "halt" as there have also been changes in currency control policies in China that came into effect in the new year. There likely are a few different contributing factors.

The article addresses this. Actions taken by china affect all cities but only Vancouver in recovering from bubble pricing. Other Canadian cities continue to suffer rising prices. Therefore we may conclude that the cause is specific to Vancouver.

> Chinese money fleeing uncertainty

More like fleeing Chinese taxes and laundering money.

Both. The Chinese economy is not dong as well as the gov says it is, places to park money to avoid deprecation and inflation are quite limited domestically.

There is also some laundering going on, as well as some fat cats setting up their life outside of china so they can escape to somewhere when Xi's anti corruption campaign catches up with them.

Are there no "legitimately" rich people in China? I've been given the impression that the laws and economy are structured such that one cannot become wealthy without taking what "should" have gone to the government/people, but I find this all very confusing. Obviously there are very visible rich Chinese folks. Or is it more comparable to rich Americans with Panama accounts, which there is nothing necessarily wrong with, but we all know that a good chunk of them are probably dodging taxes?

There definitely are! But they aren't the ones who have to really worry about getting their assets (and eventually asses) out of China.

There are plenty of people who have built their empires via guanxi, bribery, and lots of untaxed grey money. Those are the ones that are a bit more worried about the government turning against them (because there is plenty of ammunition).

A willingness to build would lower the price of real estate. It depends on how great that contributing cause is.

There's never been an unwillingness to build in Vancouver. There've been constant condo developments for 20 years, and the only thing stopping more from starting is lack of labour. Friends in construction have been saying for a decade that there's more work and overtime than they can possibly glut themselves with. They're literally building as fast as they can.

It's the geopolitical reverse of global search for yield.

Necroposting here, but that's an extremely interesting comparison. Would you be able to elaborate?

But has anything been solved? Can locals afford and are able to buy houses - especially first time buyers?

First step with any trauma is to stop the bleeding. Therapy and recovery come later and take a long time.

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