Perspective from a Chinese Investor of Vancouver Real Estate

Yesterday I met with my Chinese clients who are here visiting from overseas. They usually visit for a couple weeks every September. I sold them a Vancouver condo about a year ago.

I know the stereotype around foreign investors so I want to set this post up to let you know they are two absolutely amazing people. Despite our language barrier we have become excellent friends, mostly via WeChat which helps us translate. They also bought me these really nice little engrained silver Chinese bowls, which I’m not sure what to do with or how to use them. If anyone knows please share!

China bowls
What do I do with these?

Anyways It was great to catch up with them over lunch. We had lots to talk about, particularly their thoughts on the new foreign buyers tax, global real estate, and Chinese culture in general.

What are their thoughts on the new foreign buyers tax?

They tell me the 15% tax makes little difference to Chinese investors. They see it as a small fee to pay and one that won’t affect purchase decisions. However, it is not the 15% tax that worries them, it is the policy that scares them. They feel the tax has created uncertainty with what may come next.

Most Chinese move their money out of China because they want to get it to a safe haven. Canada used to be a safe place. Now many Chinese worry Canada will implement more knee- jerk policies. They feel the current 15% tax policy should be nationwide or not at all. The fact that Justin Trudeau can go to China and encourage more Chinese investment and then Christy Clark can turn around and impose a 15% tax with no notice creates a lot of uncertainty when planning future investments.

Many other countries are encouraging Chinese investments, such as the United States and Europe. With more immigrant investor opportunities in other countries, the pasture appears much greener elsewhere. In fact, they say Chinese are being warned about Canada and are being encouraged to invest elsewhere.

The QIIP (Quebec Immigrant Investors Program)

They say many Chinese investors who are now citizens here are actually selling their homes. Because many of them came through the QIIP and had purchased homes in Vancouver before applying, those homes were not declared in the application process. In light of the recent 15% tax they fear CRA will crack down and come after them for not declaring the home purchase(s) during the application process.

Part of the QIIP program, when applying, mandates that you can’t already own Canadian real estate elsewhere. If you declare you will get denied. Quebec wants you to invest in Quebec and stay in Quebec. So any real estate purchased elsewhere in Canada before applying for the QIIP is generally not declared. You can see how this is an issue amongst locals. For more on that I interviewed Ian Young on the Quebec Immigrant Investor Program Adding to Housing Crisis.

Competing for Chinese Money

Basically every country in the world is competing for China’s money. With BC having implemented the foreign buyers tax it has discouraged Chinese investors. Other countries such as the United States and Germany are promoting their Immigrant Investor programs similar to the QIIP. The capital outflow from China will certainly continue to grow, although it sounds like it will end up in other countries.

In fact, many other countries work collectively with Chinese real estate companies to help facilitate and encourage overseas investment. Basically everywhere except Canada I’m told. As confirmed by a colleague who recently visited China hoping to strengthen ties with Chinese real estate brokerages.

Basically every country in the world is competing for China’s money. With BC now implementing the foreign buyers tax it has discouraged the Chinese. Other countries such as the United States and Germany are selling passports similar to the QIIP. The capital outflow from China will certainly continue to grow, although it sounds like it will end up in countries other than Canada.

They fully agreed that offshore money was a driver in real estate prices and also acknowledged tax avoidance is a problem in Canada. They liked the idea of a property surcharge tax which would tax people based on whether or not they paid taxes here, instead of targeting nationality.

They went on to tell me they won’t be investing in Vancouver anytime soon due to the uncertainty.

It’s interesting to note that if/when offshore money ends up in other countries and Canada loses out on that, how long does the Canadian government hold out before opening the flood gates again? Also makes you wonder with over 1 billion people in China looking to invest in real estate elsewhere, how much will real estate prices rise in other countries over the coming years? And how much do Vancouver prices fall?