Real Estate

Vancouver housing bubble?

  • Last Updated:
  • Feb 20th, 2019 12:07 am
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Deal Fanatic
Jan 27, 2006
9858 posts
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Vancouver, BC
Another interesting article on Bloomberg - Four Chinese Tycoons Just Transferred $17 Billion to Trusts.

According to the article, the smart Chinese sourced money is looking for places to hide due to new taxation -
Four Chinese tycoons transferred more than $17 billion of their wealth into family trusts late last year, underscoring how the rich are scrambling to protect their fortunes from the nation’s newly toughened tax regime.
The moves come as China’s super rich brace for the possibility of the government going after the wealthy to push through tax cuts for the masses this year. Personal wealth ballooned to an estimated $24 trillion in 2018, making the rich ripe for further scrutiny from tax collectors, and prompting many families to seek refuge via shields such as trusts.
"Offshore trusts may not avoid taxes entirely, but they may to some extent win more tax deferral space for billionaires," said Oscar Liu, chief executive officer at Noah International Holdings (Hong Kong) Ltd., an asset-management service provider.

Still, China’s new tax law doesn’t spell out clearly whether offshore trust assets are taxable, Liu said. Any levies will also depend on various conditions, such as whether trust beneficiaries are tax residents in China, he said.
I suspect we can expect another flood of funds coming out of the PRC as the Chinese government decides on whether to go after these trust or not.
Deal Addict
Apr 10, 2011
1087 posts
538 upvotes
Vancouver
Westcoastdad wrote:
Jan 17th, 2019 10:24 am
Is Vancouver’s Real Estate Market Crashing?
Prices are plummeting, taxes are up and the foreign money has run dry. Are the crazy times finished in the city’s real estate market?

http://vanmag.com/city/is-vancouvers-re ... 1twOP9x1lo

Great article.

'Continually adjusting downward' rather than 'crashing' is probably the more accurate phrase.

The developers still preach great opportunities are still here since many are interested in still coming.

Developers also predict a continued slowdown for another year and then a big rise again.

Really? Developers are great at predicting future economic and political events?

However prices and yearly ownership costs (interest rates, taxes, etc.) have risen significantly since investors said Vancouver Real Estate was the best place to park money 5 years ago. (Tesla was also a great stock 5 years ago.)

Many Vancouverites are also leaving or now considering leaving. I know many with multiple properties who are cashing out this spring, because the decline wasn't temporary (waiting the usual 18+ months).
craftsman wrote:
Jan 16th, 2019 1:20 pm
It might even cause more of these 'illegal' funds to move from China to Canada as a way to protect those funds from the Chinese government.
From the real estate agents and mortgage brokers that I know, I'm not sure that they actually parked their millions in Canadian banks. They parked it off-shore and wire as-needed. That'll be even more common now given the current China-Canada-US situation.

They'd put 30% down and mortgage the rest. I wonder what will happen well after a property drops by 30% and shows no sign of bouncing back.

BC/Canada is also turning up the heat on where those millions came from. The government has deep pockets for lawyers and accountants and things are very different from 2 years ago. Even if the money was legal, the additional exposure and tracking will leave a bitter taste now.
Deal Fanatic
Jan 27, 2006
9858 posts
3709 upvotes
Vancouver, BC
RxMills wrote:
Jan 18th, 2019 1:02 pm
Great article.

'Continually adjusting' rather than 'crashing' is probably the more accurate phrase.

The developers still preach great opportunities are still here since many are interested in still coming.

Developers also predict a continued slowdown for another year and then a big rise again.

Really? Developers are great at predicting future economic trends?

However prices and yearly ownership costs (interest rates, taxes, etc.) have risen significantly since investors said Vancouver Real Estate was the best place to park money 5 years ago. (Tesla was also a great stock 5 years ago.)

Many Vancouverites are also leaving or now considering leaving. I know many with multiple properties who are cashing out this spring, because the decline wasn't temporary (waiting the usual 18-24 months).
Generally, a real estate 'crash' is continually adjusting but to downward pressure. Unless of course, you have external factors like what happened in the US during their mortgage crisis. Typically, 'crashes' happen over multiple years and I suspect that what we are seeing is a multi-year downward trend closer to historical norms. The only question is how close we will get to those historical norms.
RxMills wrote:
Jan 18th, 2019 1:02 pm
From the real estate agents and mortgage brokers that I know, I'm not sure that they actually parked their millions in Canadian banks. They parked it off-shore and wire as-needed. That'll be even more common now given the current China-Canada-US situation.

BC/Canada is also turning up the heat on where those millions came from. The government has deep pockets for lawyers and accountants and things are very different from 2 years ago. Even if the money was legal, the additional exposure and tracking will leave a bitter taste now.
Offshore doesn't necessarily mean from China. I suspect that offshore really means one of the many tax havens that exist in the world that doesn't work with the Chinese government. Much of these funds have been sitting in 'non-Chinese' accessible locales for probably years.

As for the level of heat in Canada, you have to compare that to China... The Chinese government has shown that they can be ruthless when it comes to heat on who they consider their citizens as they don't respect passports as much as they use the Russian argument of citizens been of ethnic origin nor is the idea that the rule of law really exists other than to further political gains. In other words, the level of Canadian heat just doesn't compare with Chinese government heat.
Deal Addict
Apr 10, 2011
1087 posts
538 upvotes
Vancouver
Vancouver Sun
January 18, 2019

https://vancouversun.com/news/local-new ... es-reports

"international report that pegs money laundering in B.C. at more than $1 billion annually"

- BC now knows the federal government had been aware of it but didn't tell BC

- initially thought by BC to be $200M annually, now $1B annual money laundering in BC, much annually through Vancouver Real Estate


[it's a good thing we have a part time drama teacher running the country]
Last edited by RxMills on Jan 18th, 2019 3:50 pm, edited 1 time in total.
Deal Addict
Apr 10, 2011
1087 posts
538 upvotes
Vancouver
"Top-Performing Hedge Fund Is Shorting Canada Banks on Housing"
January 18, 2019
Bloomberg

https://www.bnnbloomberg.ca/a-top-perfo ... -1.1200486

A small U.S. hedge fund that was a top performer last year is shorting Canadian banks.

Crescat Capital sees the Canadian economy heading for recession as the housing market buckles.

That might be bad enough for the banks but they face an added strain: outside the financial sector, more than 80 per cent of Canadian companies aren’t generating enough cash to support their businesses, the highest in the world, according to Crescat.
Deal Addict
Dec 27, 2006
1828 posts
821 upvotes
RxMills wrote:
Jan 18th, 2019 3:09 pm
Vancouver Sun
January 18, 2019

https://vancouversun.com/news/local-new ... es-reports

"international report that pegs money laundering in B.C. at more than $1 billion annually"

- BC now knows the federal government had been aware of it but didn't tell BC

- initially thought by BC to be $200M annually, now $1B annual money laundering in BC, much annually through Vancouver Real Estate


[it's a good thing we have a part time drama teacher running the country]
We need more supply!
Deal Expert
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Nov 15, 2004
16270 posts
2362 upvotes
Toronto
RxMills wrote:
Jan 18th, 2019 3:09 pm
[it's a good thing we have a part time drama teacher running the country]
Because Vancouver real estate was cheap as dirt and no money laundering at all was going on before Trudeau took office, right?

The money laundering and associated real estate price boom started just before Harper took office, but it really went wild under his watch. Everyone at every level of government maintained a strict policy of 'look the other way' until the US and other countries took notice and came down on Canada's lax controls. It wasn't until this that anyone actually started trying to do the jobs they were supposed to do:
Piro21 wrote:
Sep 6th, 2018 7:25 pm
The government is being forced by external parties to actually enforce the law now, so of course things will dry up now that money launderers are finally being targeted. Of course this means that the people doing the enforcement will be voted out by the pro-crime populace, but we'll see how that works when the international community ups the pressure on Canada.

http://forums.redflagdeals.com/canada-c ... j-2213408/
https://www.wsj.com/articles/canada-com ... 1533729600
Could HAVE, not could OF. What does 'could of' even mean?
Deal Fanatic
Jan 27, 2006
9858 posts
3709 upvotes
Vancouver, BC
RxMills wrote:
Jan 18th, 2019 3:41 pm
"Top-Performing Hedge Fund Is Shorting Canada Banks on Housing"
January 18, 2019
Bloomberg

https://www.bnnbloomberg.ca/a-top-perfo ... -1.1200486

A small U.S. hedge fund that was a top performer last year is shorting Canadian banks.

Crescat Capital sees the Canadian economy heading for recession as the housing market buckles.

That might be bad enough for the banks but they face an added strain: outside the financial sector, more than 80 per cent of Canadian companies aren’t generating enough cash to support their businesses, the highest in the world, according to Crescat.
US investors have been shorting Canadian banks for almost a decade now as they wait for a US style housing crash to happen.... nothing new here.
Deal Addict
Oct 7, 2007
4341 posts
1368 upvotes
RxMills wrote:
Jan 18th, 2019 3:09 pm
Vancouver Sun
January 18, 2019

https://vancouversun.com/news/local-new ... es-reports

"international report that pegs money laundering in B.C. at more than $1 billion annually"

- BC now knows the federal government had been aware of it but didn't tell BC

- initially thought by BC to be $200M annually, now $1B annual money laundering in BC, much annually through Vancouver Real Estate


[it's a good thing we have a part time drama teacher running the country]
The new question becomes whether we will have a part time drama teacher running the country for another 4 years. In other words, can things get any worse for us both internationally and domestically.
Deal Addict
Apr 10, 2011
1087 posts
538 upvotes
Vancouver
Vancouver Real Estate
CBC News
January 19, 2019

'Rat's nest of rot': Up to $2B in dirty money laundered in B.C. casinos, real estate in 1 year

https://www.cbc.ca/news/canada/british- ... -1.4985203

David Eby's new figure dwarfs initial estimates on scope of money laundering.

Surveillance video shows bundles of $20 bills dumped at a B.C. casino in an example of apparent money laundering.

B.C. Attorney General David Eby said at the height of the problem, $2 billion of dirty money was laundered through B.C. casinos and real estate.

The money was likely the proceeds of crime — drug money — that had to be laundered through legitimate sources to obscure its origins.

Eby's Friday claim of up to $2 billion in dirty money marks a stark increase from an estimate given by former RCMP Deputy Commissioner Peter German last the summer.

Eby says some of the new numbers come from an RCMP intelligence report that has not been fully shared with the province.

The B.C. Liberal government displayed "significant willful blindness" on the file, Eby accused.
Member
Nov 25, 2009
236 posts
51 upvotes
Vancouver
RxMills wrote:
Jan 18th, 2019 3:41 pm
"Top-Performing Hedge Fund Is Shorting Canada Banks on Housing"
January 18, 2019
Bloomberg

https://www.bnnbloomberg.ca/a-top-perfo ... -1.1200486

A small U.S. hedge fund that was a top performer last year is shorting Canadian banks.

Crescat Capital sees the Canadian economy heading for recession as the housing market buckles.

That might be bad enough for the banks but they face an added strain: outside the financial sector, more than 80 per cent of Canadian companies aren’t generating enough cash to support their businesses, the highest in the world, according to Crescat.
I just looked at their Q2 investor's letter. They shorted US stocks right before the crash, they shorted the Chinese yuan, and they bought a lot of precious metals commodities last year. Seems legit
Deal Addict
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May 11, 2014
2663 posts
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Iqaluit, NT
lawonga wrote:
Jan 20th, 2019 6:40 pm
I just looked at their Q2 investor's letter. They shorted US stocks right before the crash, they shorted the Chinese yuan, and they bought a lot of precious metals commodities last year. Seems legit
Top performing because they happened to time trades very well last year doesn't necessarily mean their bet is correct. Doesn't help when news articles use that as a means to get a reader's attention.
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Deal Fanatic
Feb 9, 2009
7177 posts
4158 upvotes
lawonga wrote:
Jan 20th, 2019 6:40 pm
I just looked at their Q2 investor's letter. They shorted US stocks right before the crash, they shorted the Chinese yuan, and they bought a lot of precious metals commodities last year. Seems legit
You can be right often, but one decisions sends you back. shorting canadian banks is a crap shoot.. you would need to see an epic recession for this to happen... so if they see that it's possible, otherwise just another hedge fund ready to lose and move on...
Deal Fanatic
Jan 27, 2006
9858 posts
3709 upvotes
Vancouver, BC
RxMills wrote:
Jan 20th, 2019 4:47 pm
Vancouver Real Estate
CBC News
January 19, 2019

'Rat's nest of rot': Up to $2B in dirty money laundered in B.C. casinos, real estate in 1 year

https://www.cbc.ca/news/canada/british- ... -1.4985203

David Eby's new figure dwarfs initial estimates on scope of money laundering.

Surveillance video shows bundles of $20 bills dumped at a B.C. casino in an example of apparent money laundering.

B.C. Attorney General David Eby said at the height of the problem, $2 billion of dirty money was laundered through B.C. casinos and real estate.

The money was likely the proceeds of crime — drug money — that had to be laundered through legitimate sources to obscure its origins.

Eby's Friday claim of up to $2 billion in dirty money marks a stark increase from an estimate given by former RCMP Deputy Commissioner Peter German last the summer.

Eby says some of the new numbers come from an RCMP intelligence report that has not been fully shared with the province.

The B.C. Liberal government displayed "significant willful blindness" on the file, Eby accused.
I expect more claims to come out of the government as the Nanaimo by-election date draws closer especially now that the polls have the BC Liberals and the NDP basically tied (if you factor in the margin of error) in the latest polls especially if you consider that the riding is considered a 'safe' NDP seat for the past 16 years (even when the NDP wasn't popular they won that seat).

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