Two significant Vancouver court cases regarding Chinese money in Vancouver Real Estate

In case you missed them, there were two interesting articles written today by Ian Young, Vancouver correspondent for the South China Morning Post.

The first, in his "The Hongcouver" column (they say only Nixon could go to China... and only an Asian could get away with that title in today's PC world), headlines "A Vancouver firm offers clients 'new identities'. It's customers have included Chinese criminals"

It's news sure to add to Vancouver's reputation as a centre for laundering illegal money through our bubblicious Real Estate market.

Apparently a Vancouver firm, Amicus International Consulting, will provide clients “new legal identities” via new citizenships, passports and "plausible cover stories?"

One of Amicus' customers, which Young profiles, is Kuang Wan Fang. Writes Young:

Kuang’s husband, Xu Chaofan, and Yu’s husband, Xu Guojun, were involved in a massive scam to defraud their employer, the Bank of China, that lasted from 1991 until their arrest in the US in 2004. Together with a third BOC manager, they made off with at least US$485 million. They fled to the US via Vancouver, acquired US citizenship and laundered their cash through Canadian and Hong Kong banks, Macau and Las Vegas casinos, and the Vancouver and Toronto property markets. 

According to the US indictment that would lead to all being convicted, the fraudsters used the stolen cash to buy at least three Richmond mansions, on Udy Road and Mang Road, that are now valued at about C$9.5 million. 

According to Amicus, it helped get Kuang and Yu transferred into Spanish custody on September 23 and September 11, 2011, respectively; the US Federal Bureau of Prisons confirms that they did indeed leave US custody on those dates, although their destination is not listed. 

Kuang’s movements between 2011 and 2015 are unclear. In the meantime, the BC Supreme Court ruled on April 16, 2015, that Kuang should repay BOC the entire stolen sum, now valued at C$670 million, which the RCMP said had been hidden and dispersed among 14 relatives, many living in the Vancouver area, according to The Province newspaper’s account of the case.

$670 million? One assumes more than a couple of $5 million + homes on Vancouver's west side were acquired with that tidy sum.

Giggidy.

Young follows that up with a second article, "In landmark ruling, Vancouver homebuyer is ordered to repay millions to China’s Citic Bank" in which we are told about Chinese mainlander Yan Shibiao.

It seems China’s Citic Bank has won a landmark judgment in a Canadian court against Yan Shibiao and has ordered him to repay the bank RMB50 million (US$7.3 million), plus interest, that the bank says was spent in part on real estate in Vancouver.

The fact that a mainland Chinese bank has won a judgement in a Canadian court is causing a massive stir on local Chinese online internet chat boards.

China has been working with Canada for years to finalise a deal on the return of ill-gotten assets seized from those suspected of economic crimes. The agreement was originally announced in July 2013 and has not yet been ratified.

But this case marks a turning point. It's rare for Chinese banks to use Canadian courts to pursue those who have left the country and it sends a chilling message to Chinese nationals in Canada on visitor's visa's (which was Yan's situation).

Vancouver lawyer Christine Duhaime, an anti-money-laundering expert who represents Citic and originally petitioned the BC court on the bank’s behalf last year, said the case “shows China and their banks that [Canadian asset] recovery is possible in the civil context”.

“There are so many more cases with similar facts of foreign nationals from China who owe vast amounts of debt in unpaid loans that are parked in other countries, that I suspect the floodgates will open to pursuing recovery of those debts. Much of that money is in Canada,” said Duhaime in an interview.

We wonder what west side realtor Tom Gradecak's thoughts might be on these developments?

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Monday Post #1: On the topic of Printing Presses

The pure definition of inflation is "an increase in the money supply".

Excessive expansion of the money supply leads to loss of confidence. That's why Yu Yongding, a former member of the Monetary Policy committee of the Chinese Central Bank, said yesterday that the situation:

• "is ultimately unsustainable. The longer it continues, the more violent and destructive the final adjustment will be.... The danger for China is that it does not learn the right lesson - namely, that now is the time to end its dependency on the US dollar."

Greenspan has made it clear what the United States intends to do.

How long before China accepts what it must do?

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Realtor decries real estate protectionism... with a little 'buy now or be priced out forever' thrown in.

In the Vancouver Sun newspaper today there is an Op Ed piece written by Cam Good, president of a local real estate sales and marketing company.

Faithful readers will recall that Good received a certain amount of notoriety a few ago when he hosted a helicopter tour of the Vancouver suburb of White Rock for a select group of Vancouver based Chinese-speaking Realtors. Our friends at VREAA documented this back on February 11th, 2011.

Today Helicoter Cam returns to the media spotlight to comment on backlash to the reports of Hot Asian Money (HAM) flowing into the Village on the Edge of the Rainforest:

• “In the last two months, we’ve sold over 700 condos in Toronto. Sixty per cent went to Mainland Chinese buyers. In meccas like Richmond, 98 per cent of the hundreds of homes we’ve sold are to buyers who are Chinese... Buyers from Mainland China are a driving force in our real estate market. The staggering truth is we’ve seen just the tip of the iceberg… A recent story in the Wall Street Journal reported that Chinese are 'stampeding to Vancouver and Toronto, two of Canada’s hottest markets.' For that, we should be grateful. Chinese have made owning real estate in Canada more rewarding than any of us expected and they have made our society distinctly richer by bringing their values and culture to Canada and sharing them with us.… But instead of gratitude, I see growing fear and resentment that foreign buyers are inflating prices and pricing 'us' and 'our children' out of the market... Let’s look at what this global trend is doing to benefit us: It’s driving demand and creating a real estate industry that is the envy of the entire world. Our land, homes and businesses have become more valuable and Chinese investment is a big reason we weathered the global economic storm as well as we did”

Good wraps up his Op Ed lecture in true R/E sales fashion with a lecture to all those who may feel left out of the real estate boom...

• “If you suffer from real estate impotence, don’t blame Chinese people. Besides, getting all worked up about it will only make it worse. Have a glass of wine. Relax. Stop feeling sorry for yourself and pick up the phone to call a realtor or a mortgage broker, either of whom will be more than happy to show you how easy it can be to get your real estate groove on. Real estate is the best investment you’ll ever make, but don’t take my word for it. Ask any of the 70% of Canadians who are already owners. Or a Chinese person.”

The message, as always, is the same.  Real estate always go up to jump on the bandwagon, assume an $800,000 mortgage debt, and 'buy now or be priced out forever'.

As Cam says, call him because he is more than willing to show you 'how easy it is' to plunge yourself into debt and follow the herd with a financial decision which could well ruin you for life when you buy at the top of the market.

Although I suspect Cam will not like that way I spun that last part.

My bad.

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Tulip Mania in Richmond

Last night I was talking to a colleague about Tulip Mania.

Tulip Mania was a period in the Dutch Golden Age when the tulip flower was introduced.

A mania gripped the Dutch and contract prices for bulbs of the tulip reached extraordinarily high levels and then suddenly collapsed. The era has become known as one of the first 'economic bubbles'. At the peak of tulip mania, in February 1637, tulips known as ""the Viceroy" (which is pictured above) would fetch between 3000 and 4200 florins depending on size.

A skilled craftsman at the time earned about 300 florins a year. Thus some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman.

The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).

Which brings us to Richmond.

Once most famously known as the home of former Premier (and gardener) Bill Vander Zalm and his Fantasy Gardens attraction/mall, the Vancouver suburb is now one of the Lower Mainland hotspots for what has infamously come to be known as Hot Asian Money.

So crazy is the housing market in Richmond right now, that one house near Gilbert and Francis Road at 6531 Dunsany Place recently sold for $300,000 above asking price.

From the listing description:

• Lovely 4 bedrooms plus den, 2 1/2 bathroom family home situated in the sought after desirable "Woodwards area". Perfectly located on a quiet cul de sac - steps away from Blundell Elementary, London Secondary, and conveniently located to Blundell Elementary, London Secondary, and conveniently located to Blundell Shopping Centre. A comfortable, warm home surrounded by a community of new families. Well maintained with newer roof, exterior paint, renovated bathroom with soaker tub. Garage is wired with 220 and perfect for those wishing a workshop area.

The house was listed for $798,000 on Nov. 29. After receiving an astonishing 49 offers the house sold on December 6th for $1,111,111.

No word on whether or not the Realtor threw in a complimentary bag of tulip bulbs on behalf of the seller.

But that example isn't unique. Check out this beauty:

This little 1,100 square foot mansion is located at 7480 Petts Road in the Broadmoor area of Richmond.

It was listed at $1,080,000 and sold for $1.22 million!

A contributor to Garth Turner's blog recently commented:

• "Buying at these prices you’d have to be the greatest fool indeed. Sorry Vancouver, but you’re just not worth it. Trying to create wealth by lowering interest rates is a short term ponzi scheme at best. This equates to printing money. Wouldn’t it be nice if governments could print their way to prosperity? You can’t fool all the people all the time. I don’t wish this on my fellow Canadians but I can smell the reckoning day.”

Looking back through time it’s easy to laugh at the foolish Dutch, paying such prices for simple tulip bulbs, but an economic bubble was nothing new even then.

We are no different. Real Estate has become our tulip bulb.

Human beings have always been prone to want things that are difficult to get, especially if everyone else seems to be doing it. Nutty behavior becomes commonplace when enough people are following along.

It’s only afterwards that we stand back and shake our heads and wonder what came over us.

And there is going to be one hell of a lot of head shaking going on before long.

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I don't think 'HAM' got the memo

As previously noted, on June 12th we heard about how 'Hot Asian Money' (HAM) was maintaining property value on the west side of the City of Vancouver. Headlining the message was our buddy Cameron Muir from the BC Real Estate Association:



So here's Cameron - in the MIDDLE of the month of June - telling us 'HAM' is going to maintain property values on the west side of the city of Vancouver.

Well... lo and behold the latest Real Estate Board of Greater Vancouver (REBGV) statistics for the month of June 2010 are now out and things in June don't quite reflect Muir's appraisal of the situation..

Seems the 'Ham" didn't get the memo from Cameron.

The REBGV in June reported total sales of 2,972 which is the 2nd lowest sales total for June in the last 8 years. Only June, 2008 (when the world financial markets were imploding into the greatest credit crisis and subsequent recession since the Great Depression) had lower sales.

In addition to significant drop in sales, there has been a substantial rise in unsold inventory (17,564); it'ss double what it was 6 months ago (Jan/10).

These conditions combined to drive the overall REBGV benchmark price for all housing in all areas down by just over $10,000 from May to June.

But $10,000 is the average of all areas in Greater Vancouver combined.

On the west side of Vancouver, where all the supposed 'HAM' money was supporting real estate values, the benchmark price for detached homes dropped a significant $91,000 from May to June.

And up in toney West Vancouver, home of all the luxury properties the 'HAM' is supposed to be snapping up, the one month drop in apartment prices has been a significant 11.5% off the previous month's benchmark price.

As the blog Vancouver Condo Info notes with the clever graphic above, you could have gotten a free luxury car by waiting a month to buy.

We will see if the downward trend continues.

Brian Ripley, CEO, Oakes Ripley & Associates, certainly thinks it will. He was on BNN yesterday and not only does he think the downward trend will continue but he believes Vancouver is in for a signficant collapse.

You can see the Ripley interview here.

Meanwhile, stateside, noted American blogger Mike Shedlock (Mish's Global Economic Trend Analysis) has also taken note of these recent statistics and wrote:

"This pattern is quite similar to how things cascaded in the US once the top was in.

Housing Collapse Cascade Pattern

• Volume drops precipitously
• Prices soften a bit
• Inventory levels rise slowly
• High-end home prices remain relatively steady for a brief while longer
• The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low
• Bubble denial kicks in with media articles everywhere touting the "fundamentals"
• Stubborn sellers hold out for last year's prices as volume continues to shrink
• Inventory levels reach new highs
• Builders start offering huge incentives to clear inventory
• Some sellers finally realize (too late) what is happening
• Price declines hit the high-end
• Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc
• Gimmicks do not work
• Price declines escalate sharply at all price levels
• The Central Bank issues statements that housing is fundamentally sound
• Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt
  

Some of those may happen simultaneously or in a different order, but the whole mess starts with a huge plunge in volume.

I am now confident the peak in Canadian housing insanity is finally in.

- Mish"

So am I. Let's see what happens.

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A Tale...

Interesting question raised by SethM on a real estate chatboard: what's wrong with this picture?

On the shores of False Creek, located directly across from the downtown core of the City of Vancouver is the luxury real estate development of Millennium Water aka the Olympic Village. Sales of units are stalled at 36 with none having sold after the first 2 days (it's been on the market now for 5 weeks). Worse, 11 pre-sale purchasures are trying to let out of their legal obligation to proceed with their purchase.



Meanwhile, about 15km south is a proposed real estate development known as River Green. Located in the Vancouver suburb of Richmond, the development is across the Fraser River from the Vancouver Airport (with the accompanying views of the airport and the airport noise). The development is touted as the biggest ever single development in the City of Richmond and is the start of what the City hopes will be a reorientation of its downtown out to the Fraser River waterfront.

The first phase of that development, 458 luxury-oriented units in six buildings with completion expected some time in 2012, set condo sales records as 'HAM' money flowed in.



So what gives?

The consensus is that the River Green development pre-sales are driven by Chinese buyers whose intention is to sell when it's complete. In this development a 2 bedroom typically sold for $900,000 + HST. The Olympic Village is already complete... so no speculative potential there.

Thus we have a current, completed set of luxury condos on the highly desirable False Creek perimeter located directly across from downtown and Yaletown... and those condos go wanting for buyers.

But condos which won't be ready for 2 years in a highly speculative venture across from a busy international airport are snapped up instantly by speculators!

Naw... this doesn't scream 'housing bubble' at all.

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Where's the HAM?

Coordinated media campaigns are always something to behold.

As previously noted, on June 12th we heard about how 'Hot Asian Money' (HAM) was maintaining property value on the west side of the City of Vancouver. Headlining the message was our buddy Cameron Muir from the BC Real Estate Association:



On June 21st the R/E propaganda machine gushed about records being set for sales from 'HAM':



So 'HAM' has created a buying frenzy, snapping up all the luxury properties in fierce bidding wars.

But like the old lady from the vintage Wendy's commercials I'm compelled to ask, "Where's the HAM?"

You've heard of one of the most luxurious and high profile properties in Vancouver, that collection of condos known as the Olympic Village extravaganza on False Creek, are now available for purchase.

On May 17th the newspapers trumpeted that in two days 36 units had been sold, "almost double the number anticipated."

But as VREAA noticed, five weeks have now passed and there are still only 36 units that have sold - and 11 of the pre-sale buyers are now trying to get out of their commitments to purchase.

Where's the HAM?

Last week I profiled the estate at 3639 Osler Street which had languished on the market for almost half a year before the sellers took a 34% haircut on their asking price.

No 'HAM' flavoured bidding war there.

And make no mistake... 'HAM' hasn't lead to a dearth of inventory. Click on this link and you will be taken to a website that lists all the houses for sale on the west side of the City of Vancouver. (Faithful readers from outside BC will enjoy this window into the absolute delusional world of Vancouver's housing bubble)

There are 805 detached houses listed.

Ranked for you in order of price, you will see the list headlines with an abode asking a cool $22 million.

There are 10 properties per page in this inventory layout. If you were to scroll through them looking for something under a mil... you won't find anything until page 72!

That's right, 711 detached houses currently up for sale on the west side of the city of Vancouver that have asking prices of more than $1 million dollars

(and yes... there are even more 'million-dollar-plus, homes for sale on the east side of Vancouver. Add to that even more million dollar condos and apartments).

711 detached homes.

There had better be one stupendously massive amount of 'HAM' pouring into Vancouver if it is going to support prices in this type of market.

Meanwhile the blog Vancouver Condo Info has also noted the rising real estate inventory. They provide a link to a Vancouver Asian newspaper who have been reporting this fact, presumably to the 'HAM'.

Along with the theme of rising inventory, VCI also took note yesterday of the very high number of price reductions occurring daily in the Vancouver Real Estate market.

Apparently daily price changes are ranging from 162 to 200 reductions. Even with the number of real estate listings in the Greater Vancouver area now nearing 19,000, VCI notes that we’re consistently seeing about 1% of total inventory drop their price every single day.

That means about 5% of all listings in Vancouver are reducing their asking price each week.

Somehow I'm just not buying into all the 'HAM' hype, sorry Cameron.

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Show me the money...

We keep hearing tales that Asian hot money is keeping real estate values high in Vancouver, but is it?

I'm sure the people that own this Dunbar house aren't buying into all that hype.

Courtesy of our friends over at VREAA, we bring you this 4 bedroom, 2 bathroom home at 4006 W. 38th Avenue.

From the listing description:

Beautiful, sunny and rare SW corner, 53 x 167 property (8851 sq ft) in the Southlands/Dunbar neighbourhood. Only 1 block from Pacific Spirit Park and a short stroll to Southlands/St Georges/Crofton schools. House is very pleasant - ideal for living-in or renting until ready to build, or... build your dream home now! The exceptional depth to this property allows room for a spacious house (w/ attached garage?), a pool? and still plenty of sunny yard, and/or a large garage (laneway house?). Endless possibilities, call to make this yours!

Endless possibilities? Perhaps. But there sure haven't been endless offers.

Gone are the bidding wars that saw properties snapped up in a couple of days. Apparently this property has been on the market for about 10 weeks.

On April 11th the asking price was $2,140,000,

On June 3rd the asking price was dropped to $1,980,000,

And on June 23rd it was dropped to $1,850,000.

So in 10 weeks we have seen the asking price drop about 15%.

Now let's be realistic... this isn't a 'luxury' property and maybe it isn't of interest to the so called 'Asian hot money'. But several months ago people were snapping up properties right, left and centre.

Not now. And prices are being slashed.

Is the Asian money angle R/E hype to keep sellers from slashing their asking prices and to protect the 'integrity of the market' or is it really flowing in and maintaining the bubblicious values?

More on this tomorrow.

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