After I wrote this week’s post about Chinese homebuyers in Vancouver, I was surprised to learn about the racism debate that flared up in the city / on Twitter. I guess this really is a touchy subject. (See: #donthave1million)
My reaction to the research was: Great to see someone (Andy Yan) putting in the time to try and better understand a market phenomenon. It’s painful how opaque real estate markets can be. Let’s get even more data so that we can make even better policy decisions. I didn’t read it as: let’s deliberately single out a race.
Because the reality is that we all knew this was happening.
Bloomberg recently published an interesting and related article that talks about China’s money exodus and how the Chinese logistically get their money out of the country. There are restrictions in place.
But first, here are two snippets from Bloomberg that describe the order of magnitude we’re talking about:
This flood of cash is being felt around the world, driving up real estate prices in Sydney, New York, Hong Kong and Vancouver. The Chinese spent almost $30 billion on U.S. homes in the year ending last March, making them the biggest foreign buyers of real estate. Their average purchase price: about $832,000.
In total, UBS Group estimated that $324 billion moved out last year. While this year’s numbers aren’t yet in, during the three weeks in August after China devalued its currency, Goldman Sachs calculated that another $200 billion may have left.
Now here’s how it is being done:
It works like this: Chinese come to Hong Kong and open a bank account. Then they go to a money-change shop, which provides a mainland bank account number for the customer to make a domestic transfer from his or her account inside China. As soon as that transaction is confirmed, typically in just two hours, the Hong Kong money changer then transfers the equivalent in Hong Kong or U.S. dollars or any other foreign currency into the client’s Hong Kong account. Technically, no money crosses the border – both transactions are completed by domestic transfers.
And here’s a snippet that stood out for me because it shows how easy this has become:
While the first exchange has to be set up face-to-face, customers can place future orders via instant-messaging services such as WhatsApp or WeChat, and money changers set no limit on how much money they can move.
Given the scale and complexity of this issue – housing affordability – I have to believe that cities and policy makers would be far better off with more, rather than less, information. I hope we can work towards that.
It’s raining this morning in Toronto. The sun really hasn’t come up and out yet. And I’m spending the morning drinking coffee and reading a City Journal article from this past summer called “Hongcouver.”
The article talks about how the Chinese – first from Hong Kong and then from mainland China (PRC) – have dramatically reshaped the economic and cultural landscape of Vancouver.
I, unfortunately (it’s a great city), don’t spend a lot of time in Vancouver and so I don’t have an accurate sense of the local sentiment towards all of this change. But there’s no question the city has changed.
Here’s a snippet from the above City Journal article:
As for the notion that Chinese money tended to be ill-gotten, Yu pointed out that the property boom was propelled by the structural disparity between prosperous Hong Kong, a dynamic economy, and the comparative backwater of Vancouver, still “living on the fumes of empire.” For the price of a Hong Kong flat, a Chinese immigrant—even, say, an accountant—could buy a splendid home on Vancouver’s West Side. “The Hong Kong Chinese who came could buy their way into any neighborhood. [They] knew that money was a tool,” Yu told me. “They weren’t going to accept a second-class citizenship in Vancouver. They could say, ‘I don’t care about your British Imperial manners, I am going to buy your house.’ ” The irony was that the Hong Kong arrivals—“more sophisticated than the people they were displacing,” with “better schooling, better English accents,” Yu said—were themselves the products of a system of law and finance instituted by the British with the establishment of their Hong Kong colony in the 1840s, after Britain thrashed China in the First Opium War.