Friday, October 5, 2012

Real Estate Industry tries to reassure market that Chinese investors still active in the Lower Mainland.



The Fairmont Waterfront Hotel has, for the past two days, been the site of the Western Canada Hotel and Resort Investment Conference.

This little confab bills iteelf as '36 hours of power-packed action providing answers and insights into what's relevant in today's market, identifying uniquely Canadian challenges and ascertaining how we can position ourselves for the future.'

Since this is Vancouver, the topic of HAM (or Hot Asian Money) is of keen interest.

With all the doom and gloom stories about Vancouver’s housing bubble bursting, some industry experts came to the conference to talk about Chinese entrepreneurs and to reassure everyone that HAM continues to invest in Vancouver properties - and not just in high-end holdings.

Graham Kwan, CEO of Character Capital Inc. (a strategic investment firm) told the Huffington Post that:
Most Chinese investors don’t buy lavish $18 million mansions, preferring 'more discreet' homes and transactions in B.C.’s Lower Mainland
The thrust of the Kwan's presentation was that HAM is continuing to invest here and is doing so for the long term. Not only are they investing, many Chinese investors are making Vancouver their primary home. Concerns that HAM will liquidate their Vancouver holdings are unfounded because these Lower Mainland homes are not just 'investments'.
“There’s the show side of real estate, the trophy homes. But look at Burnaby, look at Richmond, look at West Vancouver and an increasing number of Chinese families buying into those markets.”
Kwan points to the expansion of Chinese supermarkets as a sign of where investors’ families are actually living.

Ian Gillespie, head of Vancouver developer Westbank Projects Corp., said that one-third of the luxury Fairmont Pacific Rim condo-hotel tower was sold last year to people in China – as residences and not investments.
"They're not coming in to speculate, throwing money at things. They're not trying to flip. They probably flip less than anybody."
Roque Hsieh, a partner in KPMG’s real estate tax practice in Vancouver, told the conference that his foreign Chinese clients look at social and political stability as factors in their investment decisions.
"In the face of the cooling B.C. market, my clients are not liquidating anything and are very bullish in the long term.”
So why all these efforts to re-assure regular Canadian investors that the all important HAM (which underpins the Vancouver market) is not going away?

As faithful readers know not only are local real estate sales statistics grinding to a halt, but local media have been hammering away at the fact that Chinese buyers have all but disappeared from our market.

The absence of Asian buyers has meant all that is left are local buyers and with the tightening of mortgage regulations, that local buying is drying up too.

This one/two punch has Vancouver real estate on it's knees.

Hence the efforts to re-assure that HAM has not left.

This becomes especially important as locals watch as the economic situation in China becomes more desperate by the day. Many are wondering if the ability of Chinese to invest excess capital here is rapidly vanishing - with good reason.

As noted today on the blog World Housing Bubble, about 80% of speculators from the prefecture-level city Wenzhou (in southeastern Zhejiang) have been trapped by their property investments that have recently depreciated 30 to 50% from levels in 2010.

The Hong Kong newspaper, The Standard, reported these Wenzhou-based property speculators are likely to go broke in the not so distant future due to the plunging value of their assets purchased during the peak of the country's last real estate boom.

China Nation Radio said:
"They will be insolvent either selling the houses or holding them."
According to The Standard newspaper, Wenzhou wheeler- dealers are known as the most hardcore of the property speculators - often overextending themselves by investing at home and overseas (in markets like Vancouver).

Their speculative activities domestically have been blamed for soaring real estate prices in China, where they have been nicknamed "locusts." 

The Standard notes that China's latest home boom - or bubble - commenced at the end of 2008, when the country launched a series of stimulus measures to weather the global economic crisis. Hot money poured into the burgeoning real estate industry as a result of an investment of 900 billion yuan (HK$1.11 trillion) out of the 4 trillion yuan stimulus package into the sector, amid easy borrowing in a loose credit environment.

Many Wenzhou entrepreneurs who dabbled in the city's property market now find themselves in a dilemma. Ye Tan, a renowned financial commentator China notes:
"Due to rising borrowing costs and the continuous decline in home prices, Wenzhou's speculators can hardly avoid insolvency."
The Standard reports that in Chongqing, one Wenzhou investor dumped 90 apartments onto the secondary market, saying he needed to liquidate.

The great fear is that as more and more Chinese entrepreneurs find themselves in similar positions, the need to liquidate will extend to foreign holdings in cities like Vancouver.

If Chinese entrepreneurs with foreign holdings in Vancouver were to liquidate en mass, it would trigger a cascading free fall the likes of which our market has never witnessed.

And the last thing the real estate industry needs is locals bailing on the market to get ahead of that panic.

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9 comments:

  1. I remember when everyone was upset the Japanese were buying everything.

    ReplyDelete
  2. Think of all the houses bought for kids to go to school here, as 2nd homes, or investment properties. Regardless of whether their owners are real estate speculators or not, the (under reported)Chinese downturn will soon create a wave of highly motivated sellers.

    Get ready for the tidal wave to go out now, after 30 years of coming in.

    This is going to sting.

    ReplyDelete
  3. No they are not. Stop the bullshit!

    ReplyDelete
  4. When the likes of Cam Good are saying the Chinese aren't buying here anymore, you know it's true.

    I agree with Jet Pack, stop the bullshit claims that HAM is still strong in our market.

    Who buys into this crap?

    ReplyDelete
  5. The reason why the Chinese are buying here in Canada (or US or Europe or anywhere but China) is to park money safely. Mainland Chinese are people just like you and I and avoid risk. Their risk in their homeland is not fluctating price but the fact that they do not own the land they buy there - the Chinese government can expropriate the land with minimal reasons. Hence Chinese need to park money elsewhere. What better place than a Chinese friendly city (and government) such as Vancouver.

    ReplyDelete
  6. We are seeing the desperation and lies of this sleazy "industry" really rise to the top now. Twisting of statistics, outright lies about the market, denials, anger, desperation, deceit, you name it. I have no sympathy for anyone associated with RE. They brought it on themselves with their greed.

    ReplyDelete
  7. ha ha ha ha ha ha ha ha ah hah hahahahahah ahahahhahah hhahahahahh ha ha ha ha ha

    you losers in Vancouver make nothing, build nothing and deliver nothing.

    you sold your soul and your entire city to godless heathen communist foreigners because you are too lazy to do anything else.

    enjoy your apocolypse. i will enjoy watching your smug city rot.

    ReplyDelete
    Replies
    1. As much as I'd like to disagree with this sentiment, I unfortunately have to agree with it. Vancouver has no real industry, not many head offices, and basically relies on the candy of tourism and Real Estate to stay alive. We offer nothing of substance other than that.

      Delete
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    ReplyDelete