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Comment by pupdogg | Hacker News Reader

I have family in Toronto and I concur that the primary cause of the rise in real estate prices is China. My cousin is an established IP attorney who earns a pretty good salary and this is directly from him...he was looking to move last year into a $1MM house (approx. 4k sqft) in suburbs of Toronto. He had the deal all worked up and ready to close until the real estate agent called him in the 11th hour and said the house was sold. He had been looking for some time and thought he finally found what he liked only to not get it. This really irritated him so he decided to find out what really happened. Well, it turns out that a Chinese foreign student made a $1.25MM all cash offer with contingency to close right away. This is the current state of real estate in Toronto. Imagine someone willing to pay more than the assessed value of the property because they’re not taking NO for an answer. Which seller would not want to make extra profit?

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North of Toronto, Vaughan specifically, quite a few homes on our street selling for slightly under $2m. Over the last two years, three homes were sold to Chinese nationals who never even set foot in them. Viewings were all via video.

The transactions were all brokered /over/ asking price in cash and are sitting empty ever since. They remove the snow, they do basic maintenance, and everything is again documented via video and shipped off to confirm a job done.

Many families came for the listing but all were outbid with much more favourable terms, quick closing, no inspection, no approval required for funds, etc.

The money is definitely being parked in many pockets of the city via Real Estate. Is it exclusively Chinese? No, but they are by far the larger demographics that parks the money in the home and keeps it empty. I've seen others invest in Canada as a means to get citizenship faster but they usually rent out the homes to generate some money back.

Whats there to complain about? Agents are making their commission, the city is getting their taxes, the province is cashing it on their taxes. Everyone is happy.

I’m going to share my own personal anecdote because I think “it’s China’s fault” is both wrong and leads to the anti-Asian sentiment that is going around North America right now.

I viewed many properties during the pandemic, and when we saw other potential buyers (e.g. had the appointment before or after us), they were all white couples in their 30s or 40s.

After a couple tries, we bid on a home and won (I am white citizen). We have since moved in, and I’ve observed that the other homes that sold on our street all now have white families living in them.

This is obviously inconclusive, but I believe “it’s all foreign money” is mostly a convenient scapegoat and doesn’t really capture what’s going on.

(Also I find it strange that in your story, the homeowner would break a contractual agreement to sell and go with someone else. I’m not a lawyer, but that seems like obvious grounds for a lawsuit. Note that in 2017 in Ontario a buyer broke an agreement to buy and was ordered to pay hundreds of thousands of dollars in the ensuing lawsuit.)

https://www.thestar.com/news/gta/2018/04/11/couple-ordered-t...

Population of Canada: 38,000,000

Population of China : 1,427,647,786

Shanghai alone has 27,000,000 people. There are 12,500,000 households in Canada.

It would take less than 1% of the Chinese population purchasing a home in Canada to double demand.

https://en.wikipedia.org/wiki/Population_of_Canada

https://en.wikipedia.org/wiki/Demographics_of_China

https://en.wikipedia.org/wiki/List_of_cities_in_China_by_pop...

https://www150.statcan.gc.ca/n1/daily-quotidien/170913/t001a...

> I’m going to share my own personal anecdote because I think “it’s China’s fault” is both wrong and leads to the anti-Asian sentiment that is going around North America right now.

The root cause of the anti-Asian sentiment (and most anti-other tribe sentiment) is the loss of relative socioeconomic status.

For example, in previous decades, almost everyone in China was socioeconomically lower than everyone in Canada. You can insert any undeveloped country and developed country here, but you frequently saw Americans/Canadians/Europeans vacationing in developing countries, buying vacation homes, real estate to diversify, businesses, etc.

Now the populations in those developing countries has caught up, and they’ve caught up by taking some of the economic value that used to be provided by populations in the developed countries. See income/wealth gap widening over the previous decades.

So now you have people in developed countries having to compete with people from previously developing countries, and more competition means life is not as easy. And people get tribal when looking for who to blame. But really, the only tribes that matter are those who are able to capture economic value and those who are not.

In the defense of the narrative, they've spoken about Chinese money stashing in real estate in Toronto LOONNNGGG before Covid was even thought of.

I understand it has been a popular narrative for a long time. Most studies have shown it’s a tiny percentage of home sales. There are also now significant taxes on foreign ownership, and statistics show this is having the effect of deterring buyers.

“CBC's analysis suggests foreign buyers account for about 1.8 per cent of total home purchases in the GTA (Toronto plus the regions of York, Peel, Durham and Halton) since the tax was imposed in April 2017.”

A common rebuttal to this is “well they use corporations to shield the true origin of the money”. Why not just park your money in the US where no such taxes exist and is overall less hostile to foreign ownership?

https://www.cbc.ca/news/canada/toronto/ontario-foreign-buyer...

> since the tax was imposed in April 2017

Base rate matters here. They are measuring `Sales subject to foreign buyers tax`, not the impact of foreign buyers.

This percentage of foreign buyers THAT ALSO pay their taxes. The foreign capital that flows into residential real estate mostly held in numbered corporations which are not captured in the above data.

> Why not just park your money in the US where no such taxes exist and is overall less hostile to foreign ownership?

After 9/11 the USA (relative to Canada) got very serious about prosecuting money launderers. Tax rates are less important than getting dirty money clean.

> government inaction is putting Canadian banks in an awkward position as they seek more growth south of the border. Americans are keenly aware that criminals exploit [Canada's] weaker laws.

https://www.theglobeandmail.com/business/commentary/article-...

Why is everyone so eager to blame this on China? Of course there are some Chinese buyers here in Canada but if you’ve actually been in the market or know any builders you know that explanation doesn’t add up.

I’m sorry if my comment offended you. The goal of my comment was not to put the blame on China but rather share a real life story of a close relative and correlate his experience with the current state of real estate in Canada (Toronto specifically).

To add value to this discussion, it would help others and myself if you could elaborate on why it “does not add up”. Just stating that without providing details is a disservice to those who you claim are trying to shape the narrative.

FYI: I did not downvote any comments on this topic. I'm looking to hear everyone's thoughts.

Both of our comments appear to have been downvoted a lot, so it seems we’ve struck a real nerve here challenging this narrative.

Folks should note that New Zealand literally banned foreign ownership and is similarly going through a property bubble.

https://www.theguardian.com/world/2021/mar/23/new-zealand-mo...

>Which real estate agent would be out of their mind not to take it?

The owner or person who has control over the real estate is accepting the offer, not the real estate agent.

Thanks! Changed to: “Which seller would not want to make extra profit?”

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