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Comment by huhtenberg | Hacker News Reader

Vancouver is an extra special case because of all the Chinese/HK money parked there. A planeful of middle-aged Asian gentlemen in suits would land in the morning, take a private bus tour around open properties, pay the asking, board the plane and leave. Developers were literally building high-rises to give foreign "investors" something valuable to buy. This all but priced every normal family the fuck out of the market. It was completely insanely bananas. Not "a little money laundering" by any measure.

Lovely city though, beautiful nature, excellent restaurants.

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Developers were literally building high-rises to give foreign "investors" something valuable to buy.

...and yet with all of this development, the rental vacancy rate still hovers around 0...

...and it’s not like we have a huge number of empty homes because we have 2 layers of empty home taxes at this point and we’ve precisely quantified how many there are (~6000 private residences out of a total of ~900000 in the metro area) and there aren’t that many...

...and the population keeps exploding at 2%/year...

...and most of the residential land in the metro area is still restrictively zoned for only single family homes.

I don’t think that we need money-laundering to explain the crazy real estate market here. We just need plain-old NIMBYism, break-neck population growth, and historically-low interest rates.

People like having one factor to blame. It means they can avoid all the cognitive overhead of engaging with a complex reality. It means never having to evaluate if policies you support and goals you desire might be at odds.

When everything is the fault of those foreigners, a truly remarkable amount of cognitive work just doesn't have to happen.

Similarly, the same often goes for classification of people as racist without the burden of evidence or thinking.

I haven't heard this side of the story before. How do they count empty houses? Is it done in a way that makes it difficult to game the system?

It's based on an affirmative declaration - every property gets a letter sent to its owner or listed representative annually, containing the declaration. You return the declaration (or submit it on the British Columbia website) before the deadline affirmatively declaring that the property isn't empty.

If you (or no one else) don't make the declaration, the property is taxed. If the province and/or city can't find you, a lien is put on the property (which can eventually be used to force a sale).

If you falsify the declaration, this is legally equivalent to a false affidavit, and you can be prosecuted. The tax is fairly small, to encourage compliance.

In effect, you're saying that Vancouver has become the laundromat of converting illegitimate capital produced under a shadow banking system into real valuable assets.

This is bad for everyone else in our global economic system. It would be akin to someone in a game of monopoly accepting counterfeit money. The rest of the players have to play the game with actual monopoly rules while one player is allowed to make up whatever they want. Guess who's going to win that game?

Of course its a shadow banking system for a reason, because keeping everything hidden gives them a cheaters advantage. Revealing what happens there would be admitting to cheat and fraud.

China is seriously going full force with deception, passive aggression, claiming innocence, claiming moral high ground, while doing everything that is in the book of machiavellian/art-of-war tactics, and the rest of the world is doing nothing about it. (hardly surprising given their cultural mythologies and inclinations which differ vastly from for example a "liberty, justice, and freedom-for-all" mantra that is the foundation and aspiration of a different nation)

It's not only china that does this, and it's not only Vancouver that is the destination for this, it's just Vancouver is a popular destination for pacific rim countries for this AND has no superstar industry to speak of like London & NYC to help balance this.

In SF, NYC & London you can also partly blame their superstar industries and economic growth on the RE market, but NYC/London also has their empty Condo buildings too, and their equivalent of 'wealthy chinese' is 'wealthy russian'.

Ex: https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apa...

https://theweek.com/articles/736313/how-foreign-investors-la...

Yes, there are a lot of bad actors are in the system, which is why punitive measures need to be enforced. We can't pretend that they aren't being sneaky about their finances. China in particular has been notorious in their two-facedness presenting their economies as safe havens while covering up their underhandedness. If they aren't put on the spot and faced directly for what they are under their mask, they'll continue to shapeshift and avert transparency into a system that disproportionately benefits them. Economists have long predicted their economy is in a bubble, but because of the way they prop it up, they are able to inflate far longer than they would in a more transparent world, thus drawing investors into their falsely good looking economy while acquiring foreign assets that have real value with that extra purchasing power.

What’s bad about foreign capital influx? Someone has to plan these buildings, someone has to build them. It creates jobs in various sectors.

We should be glad that the Chinese view our countries as safe and want to invest into them.

The real problem is that our local governments are unable to adjust the supply to the demand. THAT drives up prices and nothing else.

/edit: You could even make a law that foreigners can only invest into new construction which would make it impossible to invest without value creation for the local economy.

The jobs associated with planning and building are clearly a positive in an absolute sense. The counter-point is this positive aspect is very much outweighed by the negative aspects. The housing supply for people who actually need somewhere to live is being limited which drives up the housing prices and rental rates.

Re-reading your comment, it feels like you've missed the point that these units are largely not being made available to the housing market.

Foreign capital influx isn't bad unless the capital that is being traded is bad, which in this case it very likely is.

On the direct trade it's a win for both sides, the side with bad money turns it good, and the the side with the asset converts it into capital (just like every other trade, which is always a win for both sides), but not at a broader level where illegitimate funds enter the system and become legitimate, whereby the one producing the illegitimate funds are the true victors, stealing away with real value while the rest of the market is destabilized for introducing illegitimate turned legitimate extra capital.

To clarify, by not doing due diligence and allowing funds created in a nontransparent shadow banking system to enter the real market, you are giving the power of printing money to a foreign entity.

Seems like an interesting strategy - because the only people that can buy those properties, are other rich people.

It's like with high culture and art; Lots of art is simply being passed around multi-millionaires and billionaires. Since there's such a limited pool of buyers, the price is essentially whatever the next buyer is willing to pay for it.

Same goes for buildings - If I decide to pay $5MM for a $1MM house, just to park my money in it, I better find some buyer whose willing to pay in the same price-range, or else it's gonna be a substantial loss. Driving up prices, and keeping them artificially high, is not sustainable - unless the area happens to see some major influx of people, and the demand starts to grow organically. Bonus points if it's a very difficult area to develop in, which limits new buildings / real-estate development.

But as for the reasons, who knows - could be:

- Tax evasion in their native country - Ill-gotten gains they want to hide, or money laundering - Alternative investments

Folks rent these condos at a high price, and folks working in that area buy condos at these market prices.

It is not like high priced art.

Why is that all considered "money laundering" rather than investing? There was a forcing function on getting money out of HK prior to China taking over, but that seems more diversifying than "laundering".

Similarly, many Canadians own rental properties (often bought without viewing them) in Florida and Phoenix. Planes full of these folks used to head to those regions for a few weeks or a month in winter months.

Wealthy Chinese fleeing oppression aren’t money launderers.

They are if they don't follow rules.

Your political issues do not free you from following tax law.

Evading Chinese capital outflow restrictions occurs on the Chinese side. Vast majority of real estate in Vancouver adhere to Canadian law, the industry is very well developed, agents and lawyers cross their T's and dot their I's.

The issue is there are just too many wealthy Chinese people. Essentially any Chinese citizen who owns property in tier1 Chinese cities, many snatched up 20 years ago for nothing, can afford to buy 1M+ homes in Vancouver or Toronto if sold. None of it involves black money, just being lucky at the right place at the right time and having a desire to live in Canada. The TL;DR: is there's like more legitimate Chinese millionaires by wealth than there are Canadians.

What Canadian tax laws are they violating?

Would you say the same thing if I embezzled a bunch of money in the US and moved to China?

That’s illegal in both countries. Are these money launderers being extradited back to China for transferring their own funds to Canada, like an embezzler would?

No, because that’s not illegal in free countries.

If they continue to live, work, and do business in China, then it doesn't count as fleeing.

Diversifying your net worth internationally to create an insurance policy against worse oppression by your regime is a first step towards fleeing.

Not... really, at least not in the sense that "fleeing oppression" typically conveys. That's fleeing oppression about as much as any other multi-millionaire with holdings in a Swiss bank account is doing.

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