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Comment by ashleyn | Hacker News Reader

I wonder if this will help make housing more affordable due to reduced foreign investment.

It'll probably help in California, where 38% of the Chinese money is going. But only 266k properties were purchased in 2018 by ALL foreign buyers https://www.gbreb.com/GBREBDocs/GBAR/News/Informer/2018/2018... (page 22 has purchase locations by country of origin) out of 5.33 million existing home sales and 667k new home sales in the same year https://www.nar.realtor/research-and-statistics/quick-real-e... . So if you figure California and Florida look like they're disproportionately attracting foreign investment, there isn't that much left over for the rest of the country to be impacted with.

A lot of Chinese money involves families paying for housing ostensibly bought by a legal resident or green card purchaser, usually a student who comes over and then ends up owning one or two properties and sheltering family assets.

These purchases aren't usually reflected in the stats. It is more unusual for non-residents to end up owning property with no guarantees they can use it. Same in Australia and Vancouver.

Exactly, I have a friend who's from China. His parents bought his house in SF as a "graduation present," though the deed is under his name so it's technically his. However, if he were to lose his H1B, then it's essentially a foreign owned asset at that point.

He describes it as a cultural exchange as parents in China want to help him be successful. He also says that in China, corrupt banks make money disappear all the time. So it makes sense to me.

Any sources on how much that actually happens?

Yeah my neighbor. She comes from China, goes to school at a local university has no relatives here except a brother also in school. First thing she did was buy a house. She also drives a BMW 3-Series. How? When I asked, her parents sends her money every month. Her parents put the down payment on the house. Everything is in her name. So it happens quite often

This can be perfectly legit, or not of course. How come such transfers don't attract irs or govt attention? I can't give my son more than the max annual gift of 15k without it being taxable. I've always wondered why international money transfers can seemingly ignore these rules. I expect the parents are somehow hiding that it's a gift to the kid.

> 15K is not taxable. > 15K ought to be reported and will count against your lifetime exclusion. If you are likely to leave less than 11.4 million dollars, then the >15K you give every year is never taxed.

Gift taxes are payable by the giver, not by the receiver.

Yes. But I'd bet that the parents just claim the kid owned that account. Tax rules in other countries like China may not require a gift tax, so you could just give it to your kid in china, and then move that account to the us, so it doesn't look like a gift. Indeed, this article says they are thinking of adding gift taxes in China. https://www.huffpost.com/entry/china-considering-to-collect-.... So I'm sure people would follow this practice and avoid us gift taxes and limits.

It happened once therefore it happens quite often is not a great argument

You mean twice. Which means its probably happening a lot more in other locales

According to new data from Statistics Canada, immigrants own 43 per cent of all residential properties in Toronto and 37 per cent in Vancouver, while making up 46 per cent of Toronto’s population and 41 per cent of Vancouver’s. An additional 4.8 and 3.4 percent of residential properties have foreign owners in Vancouver and Toronto respectively. And these statistics do not seem to include people coming in on student visas.

https://ca.finance.yahoo.com/news/immigrants-canadas-highest...

Even without students the numbers are pretty high comparatively. In contrast, "of all the metropolitan areas in the [United States], Miami had the highest rate of immigrant homeownership (26 percent), as well as the largest percentage of immigrants in its population (41 percent)."

https://www.nytimes.com/2018/11/15/realestate/immigrants-and...

So it sounds like people that study and work in those cities buy houses and live in them. Wouldn't it be good city planning to permit the construction of enough homes for everyone that studies and works in the area? Housing is only a zero sum game when there's not enough of them.

It would indeed be excellent city planning to do what you are suggesting. Other ideas include taxing vacant properties; restricting immigrants to ownership of a single property for N years; taxing immigration more heavily and investing in municipal infrastructure; or following Australia's lead and restricting non-residents to the purchase of newly-built housing.

And it's an great question why so many cities fail to take these steps. My guess is that inertia wins partly because it becomes politically inexpedient to blame immigrants for anything once cities have a certain percent of non-native residents, and partly because rising home prices make older homeowners happy while pushing the marginalized and disaffected younger voters into other ridings.

They might buy them but they don’t necessarily use them. A lot of the housing stock in Vancouver is vacant even if purchased, screwing up the neighborhood economy greatly.

Unfortunately city planners are appointed by officials who are elected by the CURRENT residents, not the potential future residents.

Preventing adequate construction is in the financial interest of current homeowners -- it inflates their property values due to artificial scarcity.

This won't change as long as city planners answer to those elected by existing residents.

It doesn't take much to distort the real estate market.

In June alone, California saw 389,690 home sales worth $238 billion. Markets that large are not moved easily.

https://www.car.org/marketdata/data/countysalesactivity

That depends if there is a ratchet in said market. Housing availability has a large leverage in sticky upward prices, especially with large amounts of low interest debt availability.

Housing prices are slow to fall as owners delay sales, but, as we saw in 2009, they do fall when the fundamentals change.

How often, in general, do you think parents buy houses (or the down payment at least) for their children in a hot market like SF? AFAIK, quite often, especially in expensive places like SF. It doesn't just happen to parents of international students as well, I know there are boomer parents buying houses for their children.

I doubt it. The impact of foreign investment is overblown. The majority of buyers are domestic.

I remember reading an article about the obsession with Chinese money in Vancouvers housing market was totally overstated since it was in the single percentage points.

People just can’t accept there’s a ton of people who want to live downtown than ever before (reverse ‘white flight’) and the housing market is incredibly constrained in supply for a ton of other reasons that can’t be blamed on foreign boogiemen.

Not to mention those small percentage of foreign investors are making regular Canadians wealthier than they ever would be normally which goes right back into the economy which creates jobs and industry for other Canadians. The solution then is increasing supply or not expecting to live in a big place whole living in expensive downtown areas, not whining about demand.

> I remember reading an article about the obsession with Chinese money in Vancouvers housing market was totally overstated since it was in the single percentage points.

Valuations are set at the margins, so single digits percentage of ownership could easily translate into a huge change in prices if the Chinese have different criteria for buying a house (which they obviously do since the goals - asset protection vs. a place to live - are different).

Vancouver housing prices are falling, largely due to the tax on empty homes and a large retreat in foreign buyers. Whether it was the Chinese or domestic buyers, people buying Vancouver real estate to park assets (as opposed to live in) had a large impact on prices.

A lot of it turns out to have been money laundering by people trying to either hide income for tax reasons (eg : US 1%) or less legitimate sources - all operating through countries which are good at hiding ownership histories (Eg : China)

It doesn't mean the money's coming from China - it could be coming from the USA or other countries with high incentive for tax evasion. Or it could be coming from money laundering from large scale organized crime. (RCMP did a fairly thorough trace and report on this not too long back)

Speaking as someone who moved away from Vancouver BC as it became unaffordable. And my income is higher than most Canadians.

The "Dirty Money" series breaks this down further, but a not bad link to stories is : https://www.cbc.ca/news/canada/british-columbia/laundered-mo...

No if you narrowed the regions you were looking at, the amount of non-resident buying of housing in Vancouver was indeed quite high.

For example if you're looking at new condos in Richmond, that was 23% being purchased by non-residents.

https://www.cbc.ca/news/canada/british-columbia/vancouver-no...

Additionally the government only started collecting data around foreign ownership well after the steepest part of the bubble curve was over so who knows what the actual sales numbers were when the prices just started rising.

Considering the "new normal" interest rates around the world and the direction things are going (down), I have doubts housing prices will decrease in any developed country for the upcoming 5 years.

Housing prices in Las Vegas and Southern California are declining. This is a first time for LV since the Great Recession. Declines like this have historically preceded every recession.

Do you anticipate housing prices will weather such a recession which many predict is looming on the horizon? That would be a first.

Armchair economist here and more familiar with the situation in Europe. The US has the highest interest rates among all developed economies (since December last year) so I assume that is starting to feel into the housing markets.

The FED seems ready to drop rates at the first signs of economic bad news and consensus is that it will this year. Party will go on until inflation skyrockets, no idea when though but I doubt it's too soon. (not before elections)

declining by what magnitude? In Cali it's more like they've been oscillating around an upward trend.

10% down in Texas metro cities. Considering buying a house, but may wait for complete recession to hit first

We're in preparation to move to SoCal so we've been watching prices for the last year. The trend has definitely been downward for housing in our price range.

It's flat where I live (south Orange county, California) for homes in the $500k-$1M mark. Newer development has stickier prices than older homes. However, there's a lot of local business development happening and, in the case of a single organization that I am aware of, many high-paying jobs are moving into the immediate area in the next 18-24 months. That single organization is stated to be investing over a billion in this new facility alone. It'll be very interesting to see what this does to the local market.

They already are in some places (Silicon Valley), you can see it on sites like Zillow.com.

A lot of rich common wealth Asians moved to Canada and created a similar situation x10. Then government created new laws to tax empty buildings.

Did it solve the housing issue? Not entirely, but it sure helped a bit.

Vancouver will suffer from “be careful what you wish for”. If house prices drop it will kill the economy because people will will be locked in their underwater homes for the rest of their lives. Deflation will destroy the entire economy.

> Deflation will destroy the entire economy.

How healthy and legit is an economy if this is the case? The same can be said of a Ponzi scheme, yes.

It seems that the change of the rules effects the current winners the most. And thus the unsustainable persists...until it doesn't.

The problem with deflation (and hyper-inflation) is that people are irrational, not that the economies are illegitimate. The danger is that people acting irrationally causes a vicious feedback loop. That feedback loop could potentially take down the best of economies

Deflation doesn't cause people to behave irrationally. The problem is that rational reactions to deflation such as hoarding cash, avoiding debt, and cutting spending become a drag on the economy.

hoarding cash, avoiding debt, and cutting spending

Most of the people around here immediately buy something as soon as "they can afford it" - with credit. I find it hard to believe that these same people would suddenly hoard cash.

Wikipedia says

The Great Depression was regarded by some as a deflationary spiral.[35] A deflationary spiral is the modern macroeconomic version of the general glut controversy of the 19th century. Another related idea is Irving Fisher's theory that excess debt can cause a continuing deflation. Whether deflationary spirals can actually occur is controversial, with their possibility being disputed by freshwater economists (including the Chicago school of economics) and Austrian School economists.

It sounds more like a theoretical concern than an immutable law of nature to me.

That's kind of my point. Those are not rational reactions during a deflationary period but that's what people will do anyway.

They are rational for individuals acting in their own self-interest, and that's what economic theory is based on.

The problem with economic theory is that it assumes people are rational. There is absolutely zero historic record to support that. Until economics embraces reality it's foolish for the rest of us to hold a false god so high.

> The problem with economic theory is that it assumes people are rational.

No, it doesn't. [0]

> There is absolutely zero historic record to support that.

Yes, there is. [1]

> Until economics embraces reality it's foolish for the rest of us to hold a false god so high.

Sorry to be kinda blunt here, but I'd like to appeal to you to try to maintain a higher standard of discourse on HN.

[0]: https://en.wikipedia.org/wiki/Behavioral_economics

[1]: https://en.wikipedia.org/wiki/New_Keynesian_economics

What % of economists are versed and apply Behavioral Economics?

Ironic. Your reply does more to support my point than your own.

One can only dream that prices correct that much. But while expensive for Canada, prices are not wholly unreasonable for such a desirable city. And the population here is expected to increase by a million (33%) by 2050. That just won't be handled on the supply side the way zoning is done. So long term I expect prices to continue on the upward trajectory. Speaking as a renter with no house in the race.

Except if you have a high end tech job in Vancouver that only pays 80k/year or less.

Unless you are already rich, it makes sense to get a T1 and head off south to Seattle where the houses are still pricey but the salaries are much higher.

I'm not sure exactly what that had to do with my comment, but I've long told anyone who will listen in tech that you can double your salary by moving to the US or working remote for a US company with no Canadian office. Why anyone in tech remains in Canada makes no sense to me.

Just that Vancouver property values are not sustainable on Vancouver salaries.

They're not, but Vancouver is a very international city and owning a single family home is hardly a fundamental right. People who choose to live in Vancouver on Vancouver salaries pretty much have no hope of owning a home. That most locals can't afford it doesn't make it unsustainable unfortunately as long as there are enough people willing to live there anyway.

Sure, but as as tech worker, I don't think I could make it living there, at least not with the lifestyle I'm used to in the Seattle area. Vancouver is also one of the cities to get hit big whenever Asia has a cold, it took their real estate market more than a decade to recover from Japan. In the late 90s they would advertise condos for $150k or so.

When China's bubble finally pops, it will be Japan 2.0+ for Vancouver.

Here's hoping! It would be nice not to have to win a lottery (startup or 7-11 style) in order to afford a home here.

Home prices have not fallen meaningfully since those measures were taken except at the very high end. At a certain point naysayers may have to admit they were wrong about the sky falling.

Increased density allowances continue to prop up lot values on single family homes, which allows homeowners to not be underwater but also increase housing supply when they are torn down and duplexes/condos are built in place.

Overall I feel like most people are happy with the outcome thus far.

I'm not sure the consequences of falling home prices will be as catastrophic for the economy as it sounds.

At the moment the high price of real estate is putting a lot of strain on almost every other sector of the economy: tourism (cheaper to visit other beautiful places like Banff), tech (it's expensive to attract talent with high cost of living), services (similar deal). It's also driven out a lot of younger families which can have delayed impacts on the economy.

On the other hand, it's been great for the construction industry, tax revenue, and infrastructure investment. The high price of land has also justified investments in density which will result in a lasting increase of land value even if the market cools.

There are also a lot of people who have sold their expensive homes and taken the money to cheaper areas, like Victoria and Nanaimo, distributing the windfall a bit.

A lot of us are hopeful it will happen as that’s when we will buy so ️

Some will win some will lose and I have little sympathy for those who entered the market in the last 5 years expecting it to keep increasing as it has.

Your statement comes across as rather heartless. What about those of us who entered in the last 5 years just because they were ready to settle down in an area they liked?

Sales and land values are plunging in Vancouver and even with the accordingly significantly decreased property transfer tax revenues the economy is great and the BC NDP government has posted a big surplus.

https://www.cbc.ca/news/canada/british-columbia/bc-finances-...

It'll destroy chiefly the minority rich though, the minority capitalists. And since they are in fewer numbers than the workers, I don't know if it'll impact the greater economy so much. Somewhere in this, Vancouver might become being a neat place to be I think.

Unlike the situation in Marx's time, many workers have their retirement savings in "capitalist" equity devices like home ownership and the stock market. 2008 was terrible for them in America. The divide between workers who can only access linear growth and capitalists who can access exponential growth no longer exists.

Where did they stash their wealth in Marx's time?

Cash, mostly.

As a Canadian living in Markham, I am also deeply concerned about the growing inequality (or at least its growing visibility) and the damage it can do to our social fabric.

That being said, modulo some extreme reconfiguration of Canadian society, workers need someone to pay them. I think we should be _very_ cautious about unduly alienating capitalists in an indiscriminant manner.

It would also mean less wealth in the us. I'm not sure how the two get balanced. But I guess things are more skewed toward to more affordable zoning as government regulation, when it exists, limits construction.

Less foreign inflows means the dollar gets devalued, and US exports become more competitive against everyone, including China.

It also means everything imported is more expensive no?

Couldn't it also make housing less affordable as less investment means less homes get built?

Building isn't the bottleneck in the system - it's land that is zoned for residential development.

Sure is nice to live in a non-zoned area. I built an addition to my garage and poured a large concrete pad next to my driveway without consulting any government authority, here in western Kansas.

I don't expect you to disclose further information, but it seems that many counties in Kansas, even agricultural ones, have zoning and permitting.

That's what happens when you get a lot of people living together in a city or county.

This is why the government and non-profits need to be involved in constantly building housing.

So long as population is growing we'll always need more homes, regardless of whether it's a good investment or not.

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