>Such a share of transactions is “sufficiently large to have an observable impact on real estate prices,” the report said. It estimated that dirty money pushed B.C. home prices 3.7% to 7.5% higher than they would be in the absence of laundering.
So yes it has an effect, but it is a tiny proportion of the price, something on the order of 5%.
You can read it here: https://news.gov.bc.ca/files/Combatting_Money_Laundering_Rep...
So yes, in that context, a 5% increase is indeed tiny. The popular conception is that "substantially all" of the rise in price has been due to foreign speculation.
https://d3exkutavo4sli.cloudfront.net/wp-content/uploads/201...
Essentially it’s worth it (to some people) to pay a “fee” to decontaminate the money.
There’s a reason why loss making businesses are traditionally associated with money laundering.
You don't mind a loss if that is the only way to launder money but if you can launder money without the loss, then why should you take the loss?
So a nominal loss is acceptable. The main thing is to get it laundered, and there is usually some price to pay to do so.
Tony Montana's downfall in scarface happened because he didn't understand this. Here's a scene where his banker explains to him difficulties in laundering as volume rises:
Secondly, I don't think I agree with your descriptions of the mechanics.
I will quote user @lsc below: "You realize that "money laundering" usually isn't about tax evasion, right? it's about figuring out how to take money gotten from an illegal venture and figuring out how to make that money come from a trackably legitimate source, which means paying taxes on it"
You want to spend the money, which is why you are bringing it into the "white" economy.
Nominal loss is acceptable to many people. If you are worth 10 billion, you might be okay with taking a 1% loss on a million dollar home to just to speed things up. This has nothing to do with it being black or white. You will be just as sensitive or insensitive to losses if you don't need to take them. That is, if you can be patient and get full price, you will do so.
The implied point I didn't spell out is that it can be difficult to launder money without taking a nominal loss. Obviously, if you can avoid it, you do. But if the loss is less than the loss you fear from not laundering, it still looks attractive.
I don't know the chinese case, but I'm assuming capital controls and other laws in both china and the receiving country in some way make it easier to buy and keep real estate compared to more productive assets. There are also advantages such as helping with visas, etc
If you consult the list of money laundering methods on Wikipedia you'll see some involve tax evasion: https://en.m.wikipedia.org/wiki/Money_laundering
Just like "money laundering caused x% of the increase in property prices", the above is a meme, the actual truth of which is unknown. Once repeated enough, such memes eventually turn into axioms (~popular "facts") that then contribute to erroneous thinking in all subsequent discussions.
Once you fully realize and appreciate how important this rarely noticed aspect of human/crowd perception is, reading the news (and discussion about it) becomes a very different experience, I highly recommend trying it.
https://www.rebgv.org/market-watch/MLS-HPI-home-price-compar...
> So yes it has an effect, but it IS a tiny proportion of the price, something on the order of 5%."
"...it is a tiny proportion of the price..."
Technically, the degree to which it affected prices is unknown. Our understanding of market pricing is far from sufficient to make any confident and specific (to one decimal place no less!) assertions about how much of price increases were "caused" by money laundering. Market behaviors (price & volume) can bleed over into the realm of human psychology, setting off a self-reinforcing feedback loop of greed. When this happens, setting of another x% of price increases, is it correct or incorrect to say that particular portion was caused by the demand from money laundering? Once again, the correct answer is: we do not know.
Any claims by anyone on this specific subset (the degree to which is certain things caused particular price increases) of the topic is inherently speculative, for more reasons than just the one outlined above (another obvious reason is, several of our input variables into the price increase model are themselves estimates).