The City That Had Too Much Money
bloomberg.com
bloomberg.com
But what Canada does maybe the best in the world is 'boring, stable governance' - which is what so many people want.
If the environmentalists would have it ... and I was King ... I would carve out an area on Vancouver Island and make it basically like Singapore - an open city state, that Canada manages, but basically for expats from anywhere.
Anybody can come, keep their homeland citizenships, and live in a super above bar and stable regime. There'd be a few extra rules here and there, and they wouldn't be citizens - but they'd get what they want.
This way you avoid the massively disruptive socioeconomic issues, and you can actually possibly create industry and a new kind of financial sector, and maybe a few added taxes to boot. Win Win Win all around. All complexities aside, BC residents would protest it to death merely on environmental grounds.
I'd simply make it so that residences (and real estate ownership), and maybe some other things like their financial positions (even like regular current accounts) are within the 'New Singapore' but otherwise they can go where they want and do as they please in Canada without any kind of border or whatever. And try to make a deal with US so that residents also have 'Canadian-like' access to the US, meaning visa free travel etc..
People who wanted to live in Van or Vic could apply for citizenship.
Seems like an odd basis for a highly experimental idea.
The reasons they want to go to Canada is, as you say, because it is stable. China, and other parts of the world, is the experiment you are talking about.
No - most wealthy people moving to Vancouver could care less about Canada really. They want a stable place to live and park their money - and a nice backup passport if things go crazy back home.
They are not economic migrants, i.e. doctors and engineers looking for jobs - they are business owners parking their families and children and money in Vancouver.
Economic migrants go to Toronto for jobs and opportunity.
It would be nice if they could figure out how to export this with fewer side effects. I don't quite know whether a city-state Vancouver is the right measure though. What does this solve compared to the status quo? Living in Vancouver is already unaffordable, but other places are not. Would such a setup lower the barriers for Chinese businessmen to buy a flat there very much?
That's not a concern :)
The issue is to provide 'stable governance' for those who need it, while protecting regular folks from massive inflation due to external factors.
Vancouver's 'regular' (ie non construction) economy is being hurt by this - why? Because nobody can afford to live there on regular salaries. Very few entities would consider opening up an office where the 'prevailing wage' cannot attract people.
Consider the 'cost' for buying property and who gains from it? The arbitrary owner. What if that 'cost' could be transferred by way of taxes, instead of property speculation?
So a 'New Singapore' with land owned by the state and leased out for long periods, and a series of taxes to make sure the surpluses are mostly derived by the state and not property speculation. Surely it'd be expensive to live there, some kind of market function. But a small area could accomodate quite a few people. 90% of these major expenses are real-estate, and I don't mean development, I mean speculation.
So this way - Canada can 'export' stable governance and protect local economies. If ex-pats want to move to Van they can get citizenship etc.. but that would slow down as it should be easier - and probably more convenient - to just move to the a new, well managed city state.
A huge financial services sector would immediately pop up and there'd be tons of jobs there for those who wanted to work in that sector. Major private wealth management funds, with assets under Canadian domain, not PRC. Safe investments, safe place for domicile etc.. Great export :)
Those apartments have secure title, under stable property rights, because they are under the same system as every ordinary Canadian voter's house. That's what protects them: there would be a revolt if you messed with all the ordinary voters.
Would you be as keen to buy an apartment that instead fell under some special laws which are designed to squeeze you, the foreign investor, to the benefit of the voters? I think you'd be pretty worried that next time there's a pension crisis, or an oil crisis, they'll be very tempted to squeeze you a bit harder, and then a bit harder...
I wish there were ways to exploit this export market with less side-effects. There are smaller ones, like Nestle's roaring trade in trustworthy powdered milk. But in general it seems hard.
Real estate everywhere is booming in nice cities.
However, I may have been hasty in that assessment because this single number — the first estimate I have seen — is mind numbingly large:
“of their country’s capital controls. Since mid-2014, capital flight from China may have totaled as much as $800 billion, according to estimates from the Institute of International Finance.”
Racism/fear of change aren't factors. Locals would fear "these people" moving in and jacking up real estate prices if they were German, Swedish, or Danish. The problems are quite practical: as with older property owners in Silicon Valley, locals love seeing their own house values skyrocket, but no one thinks about the fact that once they sell they won't be able to remain.
Wouldn't it be hard to stay anyway once real estate price go up for the sheer fact that rich people are coming and so prices for everything will go up anyway ? Is my simplistic reasoning flawed ?
The issue in cities and areas like Vancouver and Seattle and San Francisco--ones that aren't just hubs for high-paying technology jobs but also ones where overseas capital has made inrushes--is that wages haven't been able to keep up with the outside capital. So property of all types (it's just that most people only directly care about residential property, but commercial property also goes up and that increases the cost of other things in the local economy) rises in price while wages don't, so a major disconnect starts to happen.
This is a two-paragraph summary of a nearly three-hour conversation we had, so there's a lot of nuance I've left out. Zoning, development, density, and all of the rest around property use also affect prices and, according to her, probably more than inbound foreign money, but the added money has an influence.
2. All real estate used for income production - i.e. AirBnB for significant percentage of the year
3. An owner can declare a single piece of property their primary residence, all others are taxed as commercial property.
4. etc....
Vancouver needs to define "residents" and tax property that is not being held by non-residents.
Absolutely every little thing is so expensive. I can’t even really afford to go to the bar for a few pints.
So, yes, I agree with you completely. Even if real estate prices aren’t an issue, the influx of price insensitive residents can make an area infeasible to live in.
You'd have to be living under a rock to miss the signs of the times. Willfully ignorant, perhaps.
Maybe they can actually get some cash by growing weed there, now that it's legal and all. ;)
What definition are you using for the word "racism"?
> The majority of real estate is not owned by foreigners.
There have been no published statistics on the amount of foreign owned real estate. Feel free to post evidence otherwise, and I will respond by pointing out it is not statistics on foreign ownership (or, you could just read the report yourself and discover the same thing).
The US inflow of capital is much higher in both absolute and relative terms.
> Over a lunch of steaming soup at Chef Hung Taiwanese Beef Noodle, a bustling second-floor restaurant, the mall’s developer, Thomas Fung, explains how he arrived at the idea. Fung, 67, is slim, with spiky black hair and delicate features. The son of a prominent Hong Kong financier, he arrived in Vancouver in the 1980s and did everything from running bakeries to film production. He soon grasped that the city was about to change dramatically. “I believed that in the coming 10 years, because of the 1997 issue in Hong Kong, there would be a lot of new immigrants coming over here,” Fung says. He knew they’d want the comforts of home, which led him to conceive of a shopping center that would stock the same goods as the megamalls of Hong Kong’s Causeway Bay.
This capital influx problem has been decades in the making. I'm curious: what social problems are brewing today that we won't see the effects of until 10, 20 years down the line? How do you identify these trends? In Fung's case, it seems he identified the trend correctly by living directly in the midst of it. Is it possible for an observer to find these trends as well?
Article doesn't do a good job of covering "little thirds", mistresses who are settled there with an apartment and allowance, or of unaccompanied "college students" who spend way more time vlogging than studying. Anecdotally a shitload of people following those descriptions have been shipped in, an influx that has slowed drastically with real estate taxes meant to punish this behavior.
The city of Richmond just south of Vancouver is mentioned but its import is arguably understated by the article. It's a fascinating place, and Richomond's "night market" (sort of a combination fair midway/flea market) is an electric experience soon to be imported to Silicon Valley, where it will be a huge hit.
Westerners generally speaking have absolutely no clue about the importance of a stable currency, which implies a stable political system, a nation that respects rule of law, and a notion of property rights. This leaves only a few countries, namely the US, the UK, and a couple of Western European nations. Wealthy Chinese absolutely do, and they are scared out of their minds that the tyrannical regime there will separate them from their assets. These people remember the Cultural Revolution. So the West is the first resort for relatively safe storage of their often questionably-gotten cash. (More adventurous/volatile places to invest, like Africa, are riskier but often have a higher upside.)
Because I apparently hate good karma I will observe that we used to love going to Vancouver, especially the weeklong jazz festival, but we don't any longer. Like Seattle, the fun places to walk have largely been overrun by street people who use hard drugs and leave needles around. None appear to be Asian.
Probably not for much longer, given the rather interesting https://en.wikipedia.org/wiki/Unexplained_wealth_order
They also reserve the right to investigate crimes and compel cooperation with investigation.
From the primary source linked by that Wikipedia article:
A UWO requires a person who is reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the nature and extent of their interest in particular property, and to explain how the property was obtained, where there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property.
So if you're a known associate of, say, a mobster, and your income tax documents say you made £100k last year, but you suddenly had £2m cash to spend on a choice piece of real estate with no record of you taking out a mortgage or other loans, yeah, they're going to want you to explain where that money came from, and the law gives them the option to compel you to do so. This is how the rule of law is actually supposed to work!
Literally.
While I support the conclusions drawn in the article, there is one important factor that wasn't emphasized - weather. People from all over Canada come here for the (relatively) mild temperatures and snow-free winters.Thus you have a market where demand already exceeds supply before even factoring in foreign ownership.
Vancouver has always had nicer weather. If weather is the causative factor, why is there no correlation between Vancouver weather and housing prices over the last 30 years?
Those aren't the same things.
The weather has always been nice in Vancouver and Vancouver has always had net positive migration. If there was a change in the weather we could test the theory but alas there hasn't really been one.
But mainly, I mostly just get irked when people dismiss RE price action in Vancouver because the weather is nice, it is a pretty common technique for those looking for racism.
Westerns have forgotten or do not understand how stable and safe the West is compared to most of the world. Chinese have never forgotten that they live under an authoritarian regime.
Unlike most other North American urban centres, Vancouver resisted amalgamation with all of it's connecting cities.
The result is a geographically constrained area (Vancouver proper) surrounded by cities that are effectively it's suburbs (greater Vancouver).
Homes and rents are somewhat more affordable when you look at these suburbs, although they have increasingly gotten worse.
The residential data from tiny Vancouver has increasingly become absurd, as people focus on this small handful of luxury neighborhoods in the centre of a large metropolitan area.
This is how you gently and quietly wage war against a society. Sell drugs to the youth and then buy up all their property with the proceeds.
Indeed. Century of Humiliation: https://en.m.wikipedia.org/wiki/Century_of_humiliation
Also don't forget Edgar Allen Poe in the US. Anyway, after the good white people of the world (/s, ie probably my ancestors in the us) decided that black people were still a real threat, we got the 1920s anti-pot laws (http://origins.osu.edu/article/illegalization-marijuana-brie...) and it continued even until Nixon tried his successful early "make harsh drug laws to hurt minorities" strategy https://www.cnn.com/2016/03/23/politics/john-ehrlichman-rich....
https://www.nytimes.com/1985/08/25/us/rhode-island-a-crossro...
Can someone explain what this means? It seems like Vancouver is most definitely the de facto business capital of Western Canada but I base this solely on my observations as a tourist from Seattle and friendship with Chinese real estate broker.
Never thought of Calgary as the de facto business capital of Western Canada (it could also be Edmonton) but could be because I'm mainly in Vancouver.
They found out pretty quickly there aren’t as many jobs in Vancouver as one would expect. As others have mentioned, lots of regional office, but not many headquarters.
You’d have a much easier time finding a job in Calgary or Toronto than Vancouver.
It’s a big, well known city, but has fewer professional jobs than you’d expect.
You could say this about Canada in it's entirety.
I believe Calgary has the highest number of corporate HQs in Canada.
Calgary may have a higher number per capita - or - they may 'technically' have more HQs because of the vast number of shell companies that exist for complex resource extraction events. Kind of like Delaware in the US.
[1]https://www.calgaryeconomicdevelopment.com/dmsdocument/133
My feeling is Vancouver is more like Monaco then New York City. Already rich people move to Vancouver.
BC doesn't have much of a real industrial basis in anything.
Vancouver has a problem of determining responsibility for poorly maintained buildings, fire code violations, etc.
Its not the Chinese you should fear, its the fifth columnists from your Southern neighbour. The Chinese immigrants don't vote and they don't really hate Canada.
Canada knows the solution to this "problem": higher property taxes for everyone. No, not just got absent owners. Use this money to fund infrastructure spending. Help increase supply of housing. The Chinese don't have unlimited monies. They can't print the US dollar...
Of course, home owners don't want to pay higher taxes. They don't want property process to fall. A bunch of hypocrites if you ask me.
It sounds like property taxes are unsustainably low the more I hear arguments against the Chinese money.
Disclaimer: I'm not of Chinese descent and I'm definitely poor so none of this benefits me. I'm just trying to understand what people are saying because it all sounds like a bunch of dog whistling where people say something but mean something else. I just want us to be open and honest with our bigotry if it is bigotry or greed if it is greed.
Please don't buy into this nonsense. Your sibling comment brought in some actual numbers: https://news.ycombinator.com/item?id=18269257
BC has relatively low property taxes for the area. But you can't raise them now or all the current homeowners would revolt as their taxes goes to unsustainable levels. Nearby seattle's king county has a tax rate of %1, texas has rates around %2, while saanich is %0.4. The UK doesn't even really have property taxes, just council taxes which charge flat rates for things like garbage collection AFAIK. http://www.saanich.ca/assets/Community/Documents/Property~Ta...
The property taxes are too low to be sustainable. Progress always causes some problem for some people but we must go forward with it. Raise property taxes for everyone.
> Also the supply of houses is lower, making apartments even more dear. Next many of the houses aren't lived in, so local area businesses don't have enough customers and close (grocery, clothing, restaurants).
What kind of hot garbage is this? Isn't the whole point of a market economy that we don't have to centrally manage grocery stores (and indeed that it asserts we cannot do this efficiently in the long run)?
Of course, planning has its place. Higher taxes in itself does not solve any problem. We still need to plan city expansion and not just build new suburbs because "ZOMG the Chinese will pay for it". That's not what I am saying but I am saying that existing home owners have been benefiting in a manner that I consider unsustainable and we should thank the Chinese elite for exposing our double standards.
We live in a democracy and as such we have an obligation to think beyond our immediate short term benefit when we vote. Vote for sustainable tax structures. I am not saying property taxes should be 50% of appraisal value. In fact, I think we should aggressively cut salaries and wages in the public sector (especially at the top). But lets not delude ourselves by pretending we can think "smart". The extra money raised from increased property taxes (which should damper home prices somewhat already) must be spent in a very disciplined and planned way to increase capacity (which will further decrease home prices). I think we can do it but we can only do it if we want to do it. There will be a little pain but there's simply no way around it I can think of that leaves our moral fiber not too frayed.
I'm not pushing an agenda for the government to intervene, I'm just reporting on the basic economics - demand went up, supply went down (more people moving there, and also houses bought but not on the market) led to higher prices.
Also, on my second point about neighborhoods losing their commercial infrastructure because of empty houses, isn't that obvious too? I honestly feel like you were replying to another post and accidentally used mine.
[1] https://www.cbc.ca/news/canada/british-columbia/are-vancouve...
This means the locals eventually leave, businesses close and the community suffers.
A huge issue in Vancouver is the lack of rental units. When a significant amount of property is owned - but not lived in this creates significant community debt.
Same thing happened to my community - we became a vacation community for a neighboring province, which in turn has left homes empty on my street for 9 months of the year.
Local business cannot survive when a large bulk of the residents only live and buy 3 months out of the year.
I saw my home price triple - sounds great, but so did all the homes that I would want to purchase (after selling mine for a huge profit) - so to me, zero benefit.
My friends who did have them means to buy 10 years ago...now they will never be able to purchase.
Nor can they find a home to rent as there is a huge rental void.
http://www.saanich.ca/assets/Community/Documents/Property~Ta...
You also cannot just say 'recently foreign buyers pay a higher tax continuously' due to various obvious discrimination and unfairness issues as these people convert into citizens. So you get stuff like the unoccupied residence tax (which should triple IMO to make it exceed texas's property tax rates) and the foreign purchase tax.
I think fears of racism is what partly delayed a lot action that has happened recently. This has been an issue 10-15 years in the making at the least.
My goal would be to eventually raise property taxes to make them negative investments unless rented out on an active basis, and divert those new taxes into something like the singaporean HBD flats.
Instead looking at the long term the 21st century is Asian not American. Canada is handed an opportunity.
So it didn't seem to imply major issues of racism.
It seems to me its more of a logical stance. People can buy real estate and move to Vancouver, but it should be done in a way where the foreigner's arrival creates opportunities and a better life for the locals. All relationship has to be win/win.
Laundering money, leaving homes empty, not investing in the economy appart from real estate, these don't sound very beneficial. It seems its not even a big tax benefit due to loopholes.
Also, the measures put in place target all foreigner equally, Germans and British included.
You'll have to do more than argue the racist stance here, at least to convince me. Are there still racists in Vancouver? Yes (thoug in my own experience, a lot less then in most other western cities). Are they relevant to the topic at hand, I believe not at all.
I already proposed a very simple solution: raise real estate taxes to sustainable levels. Use the money to cover infrastructure costs. I don't see why it is so difficult.
Real estate taxes are low as a percentage but high in terms of dollars, for those residents who live and work in the city. Incomes have not risen accordingly. For the independently wealthy, sure another few percent on a recent purchase is no problem. But for families that are already struggling to pay the huge tax (in dollar terms, not percentage, due to the rising value of their home) it would force them to sell and leave the city.
It also would get passed on to renters.
This is different than the bay area issue, where property taxes are locked down and the city is generating massive wealth due to the tech industry, floating real estate prices. Vancouver is not generating the wealth to support that kind of tax base that it needs.
Higher taxes would force owners to either sell or rent which increases housing supply, right? Also I want to use the tax money to further increase housing supply.
If a resident is forced to sell or rent, well, they'd be either selling to a wealthier, possibly absentee owner who can afford the massive price and higher taxes, or they'd be renting a basement suite (since they're residents). Most basement suites legal to rent are already on the market, I think.
There's a good chance that this would make the problem worse, by creating vacancies that nobody can afford to occupy. If it manages to crash the market, perhaps those people would be able to move back eventually or see their taxes drop in dollar terms, but it's not clearly a good thing.
Effectively your solution is what they're doing. Foreign home purchases is now taxed at a higher rate, and empty homes also get taxed.
Personally, I don't think that's the greatest solution, unless the taxes are turned back into income for locals, or major tax cuts for them, to a point where it balances out the artificial cost of living increase due to the foreign real estate market.
That's not that I want. I want higher taxes on everyone, not just an absentee owners.
The tax money should be used to increase supply of housing and help suppress home prices.
Now I don't have data, but I feel this would be true. It is for me. And if so, that also would clearly demonstrate to me this isn't a racial issue.
Personally, this seems much more like a financial issue. The Vancouver locals are seeing their cost of living go up, and their income go down. That's the problem, as simple as that.
I know several children of astronaut families, with their fathers making fortunes abroad at companies like Foxconn and others. If they moved here and brought their knowledge and skills, they could create fantastic jobs and industries. Maybe someday they'll retire here.
Their kids falling in love with Vancouver and convincing them to make it a home rather than just an investment are my greatest hope for the city's future.