
The Canadian Housing Boom Fueled by China’s Billionaires - dataminer
http://www.bloomberg.com/features/2016-vancouver-real-estate-market/
======
lpaone
What isn't talked about in this article is the effect this is having on the
other industries in the city aside from real estate.

I believe that Vancouver has potential to be THE tech hub in Canada.
Unfortunately, wages are very low compared to the cost of housing, and so the
cost of living is super high. Combine that with extremely low vacancy rates,
and it is very hard to attract talent from out of town. In fact, many young,
smart and talented people just head south to Seattle or the valley because the
wages are so much higher, and the economics of staying in Vancouver just don't
make sense.

The other industries that could be thriving and building up a real economy in
city are some of the biggest casualties in this whole mess. Unfortunately, all
of the politicians from municipal to provincial are in bed with the real
estate industry, so nothing truly effective and meaningful will be done.

~~~
Gustomaximus
This lacks recognition. So many factors could come into play. E.g.

The downstream effects of house prices has to hit entrepreneurship. Previously
a bunch of people would be in a good place to take a couple years off to start
a business mid-career. Now people have these huge mortgages where your ability
to start a business is hampered by your ability to get a financial buffer to
take this year or 2 off. And lets not forget most businesses are created form
people mid-career, not the TV typical university dropout.

And small community business, how will they exist in the future. If someone
wants to set up a local 'physical presence' vet/daycare type business that are
typically mixed into residential areas the threshold is now too high to exist
let-alone set up a new business. How can a daycare buy a million+ dollar house
and expect to make money paying that back on having 30 local kids being looked
after.

Also what is going to happen with social services like retirement and periods
of higher unemployment. I suspect society will be less stable as either the
government has to foot much higher rent costs (unlikely) or we will see
increased population movements during retirement, and now the government has
to look after older people that before a family who lived nearby could help
out with. And during low employment cycles society can no-longer absorb this
downturn if people have large income-to-debt loans. Historically people could
'tighten belts' for a year while things improve, harder when you're neck deep
in debt. So we will again see more movement of people, debt default etc. It
will serve to exacerbate recessions etc.

Also these higher prices skew the economy. When people are tied up in these
ever increasing loan/income ratios there will be less spending on dining,
holidays, hobbies etc. It will weaken the economy by concentrating the spend
in limited areas.

From this I really believe we should be talking seriously about ensuring
affordable housing for owner occupiers. Residential investment need to be
discouraged (note I'm not saying stopped) as a speculative asset class. I've
seen a few suggested methods to achieve this but I feel the simplest is to
place a yearly 'asset tax' on non-owner occupied residential property (I would
also include farms). Having a % tax would make it easy to adjust to find the
right balance given economic cycles change. Also this would encourage property
hoarders not in heavy debt to sell for lower taxed asset classes. This I feel
is important as most solutions focus on controlling the investment lending
side which is limiting in reach. And the 'add supply' will always be a limited
case solution.

Good luck. It seems most western governments have stopped caring about looking
past the most immediate budgets.

~~~
lpaone
Some great points here for sure.

I forgot to mention in my post that not only is the government in bed with the
real estate industry (new rumors that the biggest real estate marketer in the
city was notified weeks in advance about the new foreign buyer tax), but that
they also "unexpectedly" took in 50% more than forecast, to the toon of $500+
million, in extra property transfer tax last year. Good luck getting them to
slow down that gravy train.

~~~
Gustomaximus
The gravy train doesn't have to stop. With a non-owner tax they ride a new
gravy train. And the biggest complainers will be non-voting foreigners that
dont matter and the foreign governments like China will hardly care exiting
money is being punished, so bonus. It will be tough for those that bough at
the peak, but it seems those will be the minority to the almost 50% of the
population in my town that cant afford a home in their own city.

That said the 'loudest' voices will be the uber wealthy with large property
holdings so again...good luck...

------
jackcosgrove
The whole Pacific coast of North America is becoming a gated region, closed
off from those without at least quarter of a million dollars saved up.
Unfortunately I think the mild weather and beauty of that area mean prices
will never go down. Middle class people are seemingly bound to live in places
that are too hot, too cold, or too flat.

~~~
mikhailfranco
It is interesting to look at the map of California and wonder at that huge gap
between Carmel and Santa Barbara. No development, no population, its even hard
for tourists to find a place to stay, or even a campsite.

The tech industry pays all the state's bills, mostly captured by tenured
public sector workers, in true socialist fashion. If there's a tech crash, and
a few years pass without IPOs, the state will collapse into bankruptcy, and
the impoverished residents will start to eye that empty coastline as their
most valuable asset. When the tree-hugging hippies die off, 350km of the
world's most valuable real estate will come onto the market.

~~~
hx87
> that huge gap between Carmel and Santa Barbara

There's a reason that part of the state is sparsely developed. There's nothing
but the mountains and the sea, and constant rockslides make building any
transportation infrastructure hellishly expensive. Unlike Norway, there are no
fjords to provide easy sea access, and there is no oil. It's a beautiful place
to visit, but good luck building anything denser than small towns there.

------
pedalpete
Very surprised Bloomberg would put out such a fluff piece about the Vancouver
Real Estate market.

There are very serious issues in Vancouver, and some suspect Canada is in for
a ruder awakening than the US. [http://www.vice.com/en_ca/read/meet-the-wall-
street-short-se...](http://www.vice.com/en_ca/read/meet-the-wall-street-short-
seller-betting-against-canadian-real-estate)

1) Canadian Real Estate is being used as a money laundering facility
[http://www.huffingtonpost.ca/ike-awgu/canadian-real-
estate-f...](http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-
foreign-buyers_b_10329000.html) .

2) Canada also has a healthy (well, actually unhealthy) sub-prime lending
market [http://www.huffingtonpost.ca/2016/05/18/subprime-lending-
can...](http://www.huffingtonpost.ca/2016/05/18/subprime-lending-canada-
transunion_n_10011578.html)

3) Then there is the issue of occupancy. The reason the 15% tax was brought in
is because money was coming in to purchase houses which then sat empty. Many
have become derelict. When I lived in Vancouver, Yaletown was full of
apartment towers, but where were all the people (I believe occupancy in that
area has improved). [http://www.theglobeandmail.com/real-
estate/vancouver/poking-...](http://www.theglobeandmail.com/real-
estate/vancouver/poking-holes-in-vancouvers-housing-vacancy-
study/article29181730/)

4) Lastly, the shadow flipping, again, mentioned in the article, but didn't
get the attention it deserved [http://bc.ctvnews.ca/house-flipping-concerns-
as-368-vancouve...](http://bc.ctvnews.ca/house-flipping-concerns-
as-368-vancouver-homes-sold-at-least-twice-since-2014-1.2769801)

Don't worry if you don't want to read the articles, it will be a movie in a
few years along the lines of The Big Short.

~~~
linkregister
Fluff piece? Did we read the same article? It covered at length the issue of
the young couple essentially trapped in Surrey, unable to get enough space to
have a child.

The author really went out of the way to emphasize the wealth of the
investors, describing the buyer wanting a nonexistent car. The only remotely
fluffy portion was describing the ecosystem of luxury services associated with
the lavish spending. I think the article did a good job of conveying the huge
negative effect to the Vancouver economy and way of life.

~~~
tener
The requirements this young couple have is mind boggling. The have 111 sq
meters and think they _cannot_ have a kid in this space? A lot of my friends
live in ~40 sq meters and are happy to have their own place at all. With a
kid, even two. Surely they would like to move to a bigger places, but this
isn't a showstopper. They would __love __to have 111 sq meters place.

Rising prices of properties is a real issue, but this particular couple is way
above the standards I am used to.

What is the socially accepted minimal living standard for a couple with kids
in the US / Canada?

~~~
xemdetia
> What is the socially accepted minimal living standard for a couple with kids
> in the US / Canada?

A lot of this comes from the expectation of what you had growing up versus
what is available in your current situation, and how much you actually want
kids. Do you want to bring up kids from 0 to 18+ in that same 111 sq meter
space? The answer can be no for a few people, and people aren't seeing that
they can move to something bigger even if it becomes necessary.

It's also not a good idea to compare floor space 1:1 across regions, floor
layouts and building structure can have big impacts. 40 sq m used well can
have the same level of comfort as 111 sq m used poorly, but because of various
property restrictions (since it's not detached) they might not be able to
modify the 111 sq m space in a meaningful way.

The main thing here in this case is that the couple represented have the
choice of whether or not to have kids and they see the environment as not good
for it. This is the sort of thing that happens when educated people sit down
and consider whether or not having kids is the right plan for the moment.

------
jimjimjim
It's happening to countries all around the pacific rim (well, without being
too rude, all the stable countries).

Chinese money is land-banking in Vancouver, US north west, Australia, and
Auckland in nz.

and countries don't dear stop it because it will tank the real-estate bubble
too quickly (it'll go before the tech bubble anyway). But if it does it will
actually be good for the economies because capital tied up in unused land is
worthless to the economy.

~~~
vorg
ex-IT workers who left these places say "My job went to India and my home went
to China."

~~~
antisthenes
True globalization!

------
msie
I'm disgusted/saddened by the biased reporting that's taken place over this
issue. This article points out how Bloomberg and other media are attracted to
the "foreign buyers" narrative:

[http://www.straight.com/news/735161/revisiting-real-
estate-r...](http://www.straight.com/news/735161/revisiting-real-estate-race-
and-how-foreign-buyers-narrative-came-dominate-vancouver)

Study finds foreign buyers impact Vancouver real estate but likely can't
account for sky-high prices:

[http://www.straight.com/news/720471/study-finds-foreign-
buye...](http://www.straight.com/news/720471/study-finds-foreign-buyers-
impact-vancouver-real-estate-likely-cant-account-sky-high)

~~~
easytiger
Same in London. In everything except extremely high end property. But it is a
common narrative for political purposes because people "feel" it to be right.

------
RandyRanderson
As a vancouverite, and a person that's lived in Toronto for over a decade, I
can say that while vancouver has about half the population (of T.O.) it has
maybe 1/4 or 1/8 of the tech jobs. Also Canada is not like, say, the US, where
there are many different industrial centers (ie Entertainment in LA or Finance
in NY). In Canada, most corp headquarters are in Toronto and a small fraction
are in Calgary and that's it. Vancouver has little significant industry that
isn't tied to real estate.

Even if a crash does happen, the largest crashes to date have only been maybe
30% in '82 (prices recovered in 7 years) and 15% in '08 (prices recovered in 1
year).

What could change the course of the current deluge of chinese capital?

1 Canadian Regulatory change - the federal liberals and the provincial
liberals have significant political contributions from real estate agents
(look it up). They won't impl any _meaningful_ changes. This new 15% tax will
affect few and change little; it is just election season and our Premier,
Christi has to look active. 2 Interest rates - The US basically sets our rates
and the US is likely going to reduce the rates driving more capital to look
for better returns. 3 Chinese cash - are you going to stop buying chinese
shit? No, in fact most can only afford chinese made products these days. 4
Chinese Regulatory change - This could happen but most of the cash used to buy
homes in BC is likely illegally moved out of china anyhow so...

TL;DR- In the 1-2 year timeframe tho, my advice - mortgage your house and buy
as much BC real estate as you can afford. Good luck on finding 25%+ yoy low
risk returns anywhere else.

~~~
justinhj
A couple of issues here. Firstly US does not dictate Canadian rates, sadly.
The fed raised interest rates recently and likely will raise then further if
the conditions are right. In Canada many people, especially young people, have
dangerously high mortgages for their income. They bought into property because
of fear of missing out, often aided and encouraged by their parents who made
out like bandits and assume the market can only go up.

Secondly Chinese cash coming to Vancouver is almost by definition illegal
because of the $50k cash limit Chinese can take out of the country.

~~~
jperras
> Firstly US does not dictate Canadian rates, sadly.

Of course not, but 5 year-fixed rate mortgages are set according to the bond
market, not BoC overnight rates.

If interest rates set by the US Fed are high, then lenders are going to
securitize Canadian mortgages with US bonds, due to the higher yields found
there.

~~~
RandyRanderson
Agreed. While the US and CA rates sometimes differ, it's not by much and they
usually loosely track each other.

This is the effect when you have 2 economies that are so closely tied.

------
hoodoof
A disaster for people who believe Canadian citizens and permanent residents
should be able to afford to buy a home in their own city.

Great for those who own real estate and sell it.

~~~
et-al
It seems like the Canadian government is responding:

> Foreign investors will have to pay an additional 15 percent in property-
> transfer tax as of Aug. 2 and city of Vancouver was given the authority to
> impose a new tax on empty homes.

The additional tax on foreign investors is a good idea, but I wonder how it
will be enforced, especially when ownership is often hidden behind trusts.

~~~
enraged_camel
>>and city of Vancouver was given the authority to impose a new tax on empty
homes.

I wonder how they will actually enforce this. I mean, one can furnish a home,
have utilities remain active and leave a few lights on and make it look like
someone is actually living there. Add some random noise generation (pretty
easy to set up with home automation or other, similar methods) and you can
fool basically anyone who isn't actively watching your door 24/7.

~~~
tempestn
IIRC they're planning to use a number of sources. Things like utilities - so
at a minimum you'd have to pay for and use a reasonable amount of electricity,
water, etc. in the home. Even garbage/recycling collection would be a give-
away. Insurance companies will also be a source of info, as insurance rates
differ based on occupancy, so the companies have an incentive to determine the
same. Finally anonymous reporting (ie from neighbours). Sounds like it should
be pretty effective to me. The last bit least so, but utilities + insurance
should go a long way. It's going to be a lot easier to just find a decent
tenant (easy to do when housing is in such short supply; charge slightly below
market rent if you want your pick from many applicants) than to do all the
work to fake occupancy.

------
happyslobro
I think that the real problem is that so many people are trying to concentrate
into the densest areas. That creates huge pressures, which are reflected in
the price of space.

Take a look at the cities with populations below 100K. You will find lots of
people who live great lives, despite not being rich. For those of us who grew
up in these little island towns, living in a place like Vancouver is downright
depressing, regardless of the price.

~~~
jackcosgrove
I used to think you had to live in an "it" city to make it. Then I realized
that I could make my life whatever I wanted to be more easily in a less
expensive place. The chains were in my head.

~~~
dottedmag
Yes, until you have a family. Then suddenly you need a good school nearby (and
good luck bringing children to school in car if they have serious case of
motion sickness).

~~~
happyslobro
I walked to school back when I was in elementary school. In grade 2, my mother
confirmed that I remembered the stranger rules, and stopped walking with me.
It was about a 2km walk.

Why is it ok for this to not be the norm? Why do people just accept that their
kids are growing up in a city where they can't be allowed to explore their
environment?

~~~
bacheson1293
I've lived on both sides of the fence. I cover much more ground living in the
city then I ever did living in the country or suburbs. I drive 1-2 times a
month now compared to 2-3 time a day living outside the city. In my experience
the city inspires a lot more exploration. My daughter is all over Toronto on a
daily basis.

------
icantdrive55
I can't speak for Canada, but in the USA; all a foreigner needs to buy a home
is cash, and a phone call.

I'll get hammered for saying this, but I feel it's wrong on so many levels.

~~~
vivekd
I agree with you that there should be restrictions on foreign investors
looking to housing as investment. . . at the same time, I am worried that they
are being used as scapegoats to avoid addressing much larger structural
economic and legislative problems behind the inflationary price increase.

In fact I think these foreign investors are more being attracted by the
already inflating prices than actually the culprit in the inflation.

~~~
a_bonobo
>Being used as scapegoats

That's what it looks like for me with the Australian housing market where the
Chinese are being blamed for increasing prices. China is the biggest foreign
investor in the Australian housing market followed by the US with $12 billion
out of $34 billion foreign investment in 2013-14 [1], but it can't be the only
explanation.

As a non-permanent resident you can only buy from the plan, no 'used' houses
at all: 'If the FIRB feels that the residential real estate in question is
only being purchased by a foreign citizen or company just for the purpose of
renting it out, or because the purchaser wants to speculate on the property’s
future value, permission to purchase will be refused.' [2]

The reasons for the extreme prices are more complex and subsequent Australian
governments refuse to change this: banks have been giving out record-low
mortgages leading to massive debt and rising houseprices [3], and there's
negative gearing, which allows people to overinvest because they can claim
later and causes people to hold onto their property, thereby inflating prices
[4]. Changing this broken system is detrimental to the parties parties as it
would directly cut into income for the rich and the old, and so many blue-
collar jobs in Australia depend on building houses. It will only change after
the whole bubble implodes.

[1]
[http://www.globalpropertyguide.com/Pacific/Australia/Price-H...](http://www.globalpropertyguide.com/Pacific/Australia/Price-
History)

[2] [http://www.australia-
migration.com/page/Foreign_Investors_Bu...](http://www.australia-
migration.com/page/Foreign_Investors_Buying_property_as_a_foreigner_or_Temporary_Resident_in_Australia/178)

[3] [http://www.abc.net.au/news/2016-02-29/verrender-housing-
bubb...](http://www.abc.net.au/news/2016-02-29/verrender-housing-bubble-is-
building/7206678)

[4]
[https://en.wikipedia.org/wiki/Negative_gearing#Australia](https://en.wikipedia.org/wiki/Negative_gearing#Australia)

~~~
Khaine
Except, the FIRB does not collect adequate data to truely monitor the
acquisition of housing by non-Residents, and these regulations are easily to
get around and are often flaunted.

~~~
a_bonobo
Do you have any proof for either statement?

All I could find is the 2014 report on the FIRB which said they would never
initiate court proceedings; [http://www.abc.net.au/news/2014-11-27/foreign-
buyer-rule-enf...](http://www.abc.net.au/news/2014-11-27/foreign-buyer-rule-
enforcement-needs-to-be-strengthened/5921518)

I have no clue how much has changed there since then, and I don't assume
anything will change. This still doesn't mean that any of my original points
are wrong, the entire system is bad and IMHO Chinese foreign investment is
just a scapegoat (if you look at the report, at that time Chinese investment
was already the highest but back then very close ($5.9 billion) to US ($4.4
billion) and Canadian ($4.9 billion) investment: Why did no-one complain about
either?)

~~~
Khaine
Seriously?

The government held an inquiry into it, and this is the first key thing in the
report:

"First, there is no accurate or timely data that tracks foreign investment in
residential real estate. No-one really knows how much foreign investment there
is in residential real estate, nor where that investment comes from."

See
[http://www.aph.gov.au/Parliamentary_Business/Committees/Hous...](http://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Foreign_investment_in_real_estate/Tabled_Reports)
[http://www.rba.gov.au/publications/submissions/housing-
and-h...](http://www.rba.gov.au/publications/submissions/housing-and-housing-
finance/pdf/inquiry-foreign-investment-in-residential-real-estate.pdf)
[http://www.canberratimes.com.au/federal-
politics/political-n...](http://www.canberratimes.com.au/federal-
politics/political-news/abs-has-patchy-figures-on-foreign-investment-in-
homes-20140625-3atp4.html) [http://theconversation.com/little-hard-data-in-
the-hard-area...](http://theconversation.com/little-hard-data-in-the-hard-
area-of-foreign-investment-28893)

Secondly 4 Corners did an investigation into it
[http://www.abc.net.au/4corners/stories/2015/10/12/4327525.ht...](http://www.abc.net.au/4corners/stories/2015/10/12/4327525.htm)
and [https://www.crikey.com.au/2015/10/14/why-are-chinese-
buyers-...](https://www.crikey.com.au/2015/10/14/why-are-chinese-buyers-
snapping-up-so-much-australian-property/)

------
narrator
All the trillions of dollars that got sent out the trade deficit since the 80s
are finally making their way back to the developed economies. We can only
export our inflation for so long.

~~~
Canada
Yeah. Nobody will talk about this. Trillions of dollars went to China in
exchange for things purchased legally and voluntarily. Now, people throw
around terms like "money laundering" as if the Chinese are a bad ass cartel
that's been selling us cocaine all this time.

------
skylan_q
The Chinese buyers are paying on average $900k for a house, which is what the
average Canadian is buying. The percentage of Chinese buyers is anywhere from
4% to 8% in the market.

What upsets me here more than anything else is that no one mentioned the CMHC.
I suppose people would be more willing to believe that aliens are using mind
control on people to drive a real estate frenzy rather than believe that there
are institutions creating moral hazard within Canada.

~~~
hifumi
What is the "CMHC"?

~~~
skylan_q
Canadian Mortgage and Housing Corporation.

They insure the banks against mortgage default. People pay a small premium on
their monthly mortgage payments so that if they default, the bank is insured
for the cash difference of the outstanding amount on the mortgage.

As a result, banks in Canada face no risks from mortgage default so there's no
reason to deny a mortgage. Over 90% of mortgages made in the past decade are
CMHC-insured.

~~~
mrtron
I get what you are saying, but so far things are going very well.

By 2010 CMHC had an annual financial surplus of more than $2 billion.[6] CMHC
is the largest Crown Corporation in terms of assets with some $26 billion in
holdings as of 2008-2009.

If you think this insurance can cause Canadian banks to be more risky in their
lending - I don't think that is currently the case.

~~~
49para
So $26B in holdings to insure $1.372T in outstanding mortgages, that seem
pretty low but since the taxpayers will cover the rest, I guess it's fine to
continue handing out subprime mortgages.

~~~
mrtron
I havent looked in detail lately - but I believe they issue bonds and the bond
holders would be covering the impact of a market crash.

You would prefer if there was not such an insurance system required for home
owners putting less than 20% down?

~~~
skylan_q
_You would prefer if there was not such an insurance system required for home
owners putting less than 20% down?_

I know I would. It would be like the 90's again where banks had to only loan
out to people who they thought wouldn't default.

------
engizeer
Holy - I live 5 blocks from the C$64M home mentioned in the article and pay a
rent of 1200$ every month.

~~~
branchless
Rents are constrained by wages. Prices are constrained by money printing.
Money printing is not constrained.

------
steve_taylor
It's happening in Australia too, but the few people willing to talk about it
are crucified by the PC brigade.

~~~
linkregister
The SMH and West Australian publish articles about Chinese real estate
purchases every week. This is an oft-discussed issue.

------
thinkingkong
The interesting parts about foreign buyers is that the best story always seems
to highlight the super rich, but its not like mansions are the only things
going up in price.

I'm sure that a price increase in land results in a "rising tide" effect for
all homes, but because someone is willing to spend 64M on a mansion, does it
mean condo's should be worth more too?

The city is pretty, but there aren't exactly a massive pile of high paying
jobs, nor do we have much of an economy beyond resource extraction, satellite
offices, etc.

~~~
dgrant
I agree, this bothers me as well; the mansions seem to get way more press than
they deserve.

What gets under-reported is:

-the non-foreigner/non-Chinese/locals that are hanging on to 2-3 properties -the person who can now afford that $1 million condo because they just sold their smaller condo for $500,000 and netted $250,000. -the fact that interest rates are at the lowest ever and some years ago amortization periods were pushed up to 40 years and down payments of 0-5% were allowed.

~~~
1anh2kqowg
Investors who rent out their properties might change the price:rent ratio, but
they don't contribute to the housing shortage.

~~~
linkregister
They contribute to the issue of renters being unable to buy. Each of those
standalone houses are not available for purchase that otherwise would have
been, unless the investor bought the land, applied for residential zoning, and
built the property.

~~~
1anh2kqowg
>They contribute to the issue of renters being unable to buy.

But on the other hand, they give renters a good deal. Buying at a high
price:rent ratio means a low cap rate, which makes for a bad investment. So
the landlord is essentially giving ownership returns to the renter, while
keeping price risk themselves.

To the extent that rents are also high, this shows that the problem is not, in
fact, investors but instead a limited supply of housing.

------
FreedomToCreate
A running joke in Canada is that BC stands for "Bring Cash". This is what
happens in a completely unregulated market. Good in the short term, disastrous
in the long.

~~~
ido
Isn't BC vast and mostly empty though? Last I looked purchase prices in
Vancouver island (aside from Victoria maybe) were about the same as or lower
than rural areas in Germany.

~~~
serge2k
So people should just go live in the woods?

~~~
ido
Not what I meant, was just saying it seem to apply mostly to Vancouver (maybe
Victoria, to a much lesser extent) and not BC as a whole.

But that's not how jokes work I guess!

~~~
jonknee
But that's where almost all the people live. BC is a huge place and it's
almost all uninhabited.

~~~
ido
Yes, that's what I said above about BC being "vast and mostly empty" (and also
inexpensive).

And so FreedomToCreate's joke should still be about Vancouver, not BC.

------
ktRolster
8 percent of the total housing market is being bought by billionaires, that's
my understanding of the article.

------
mark_l_watson
Isn't the cause of rapidly rising real estate prices also caused by
devaluations of currencies, so people with a lot of money are looking for
relatively safe places to park it? In the USA real inflation is much higher
than our government admits.

~~~
arenaninja
Do you have any supporting evidence to your claim that real inflation is much
higher?

I'm not trying to prove you wrong, I'm genuinely curious. My impression has
been that inflation _has_ been relatively low, with the exception of housing.
Though housing has gone up _much_ faster in large metros than the rest of the
country

~~~
mark_l_watson
I have read that our government stresses consumer items like TVs in
calculating the inflation index because tech product prices decrease rapidly.
Food, housing and medical costs are increasing rapidly and get discounted in
the CPI.

If the true rate of inflation were admitted, then cost of living increases for
social security, etc. would be more expensive, right?

~~~
hx87
If that were true, wouldn't it make more sense to sink money into funds
targeting the food, real estate, and medical sectors instead of directly in
real estate? After all, there is no reason that (residential) real estate
prices track food and medical prices, and owning real estate outright is a
horribly lumpy, illiquid, and undiversified investment.

------
dottedmag
> The 31-year-old paralegal and her husband, an apprentice plumber, live in a
> two-bedroom, 1,200-square-foot (111-square-meter) apartment

They can't _afford_ kids? I have lived in 83-square-meter apartment with my
wife and two kids and a I had a friggin' separate home office room to work
from home. It wasn't ideal (we have moved when the youngest turned 5, so we
wanted to give them separate bedrooms), but it worked pretty well. Granted, it
was in Norway, not US, but one can't help thinking that people just don't know
how to use the space they have.

~~~
wyclif
Isn't the market telling that couple that they should move? I'm not being
sarcastic at all.

If you can't afford to live in a city because you're priced out, and you want
a different lifestyle as well (signalled by the stated desire for children),
why wouldn't you move?

------
jonesalice34
Canada is the fifth most popular country with Chinese property investors who
is interested in purchasing condos for their children near universities. As a
result, single-detached homes move further into luxury budget territory
leaving first-time buyers with funds enough for a condo. Source
[https://tranio.com/canada,new_zealand,australia,united-
kingd...](https://tranio.com/canada,new_zealand,australia,united-
kingdom,usa/analytics/top_five_countries_for_chinese_property_investments_5131/)

------
pascalxus
This situation can be turned around into a positive. The higher real estate
boom could be used for a massive building boom to reduce unemployment and
boost wages in the construction industry. I doubt every last bit of land has
been used up, I don't think their density is anywhere near that of Hong Kong.

On a broader scale, I don't understand why (other than politics and legal)
this massive multi nationwide demand for housing hasn't created opportunities
in the construction industry: building out with existing technologies as well
as incentives to produce more efficient methods and tech. Whatever happened to
big problems leading to big opportunities? I mean we're talking about a multi-
trillion dollar industry begging to be disrupted. I can't name a single
unicorn company that's involved in this right now.

~~~
ficklepickle
They make it look like they live in the homes to pay no capital gains tax.
These homes generally aren't used as homes but investments. It takes a lot of
work and luck to even rent a small apartment.

Source: I was just reno-victed I had a front row seat. My new apartment had
been available for 30 minutes when I put the deposit down. It was pure luck
that I found somewhere to live . It's not sustainable.

------
stana
As mentioned in this article, in most cases, father and the business do not
move, only part of the family. Apart for spending in property and luxury
items, looks like wealthy migration are passive participants in the economy -
not starting businesses employing people, or paying much tax.

~~~
GreaterFool
I wonder, what are wealthy people more likely to do: (1) but a hand made
leather bag from a local hipster workshop (which I would do) or (2) buy a 10x
more expensive Louis Vuitton bag which was probably made in a giant factory in
China? And generalize to other goods/services.

(1) at least supports local economy while (2) supports limited number of
middle men.

I'm not saying (2) is bad, but if it's only wealthy people spending their
money only on imported goods then it is not good.

~~~
bb101
Depends how recently the wealthy person came into money.

Nouveau: head to the nearest Louis Vuitton or Goyard boutique and choose the
bag with the most logos.

Old money: handmade artisan bag with no labels.

------
decayy
This is happening in Australia too.

There are new apartment buildings going up by Chinese property developers
aimed squarely at the growing Chinese population.

As a matter of fact, construction management university students are told to
study Chinese language and culture to help them get jobs after uni

~~~
pedalpete
I'm from Canada (Whistler, north of Vancouver) and now live in Sydney,
Australia.

Australia is nowhere near as bad as Canada. I'm amazed this article glanced
over the issues Vancouver is really struggling with.

I believe the housing market in Sydney will come into trouble, but Canada is
in for a very rude awakening.

I'll post another comment re:these serious issues canada faces.

------
erdevs
Isn't pretty much the same thing happening in San Francisco, too? Alongside
all the other drivers of increased home prices there. I think SF has shot up
the ranks to become one of the most expensive cities in the world now, right?

~~~
roflchoppa
The hole bay area is like that. Ive heard of like whole housing projects
getting bought out by foreign investors out in Santa Clara, stable place to
keep money I suppose.

------
dagaci
This type of money (rich and super rich) has always been invested in the nice,
stable democratic world, places where they can safely park their money,
friends, families and educate their children. Places they are go to in case of
an uprising or regime change..

The difference now is that this class of person is not just coming from the
oil-baron gravy train and political kleptocracy. But is also coming from the
booming business-class that is China

So many of those new rich who make it big certainly want their families and
especially their children to the chance to live and be educated in a free and
democratic society.

------
gmisra
A lot of commenters concerned about Bloomberg's potential editorial bias in
running this piece, but it is interesting that it comes just a few days after
they published "End of an Era as China’s Love Affair With U.S. Real Estate
Fades"

[1] [https://www.bloomberg.com/news/articles/2016-07-26/end-of-
an...](https://www.bloomberg.com/news/articles/2016-07-26/end-of-an-era-as-
china-s-love-affair-with-u-s-real-estate-fades)

------
Hondor
Are there examples of very lightly regulated housing markets in developed
countries? Does that really lead to bad things like people say? I know it can
cause slums in poor countries. But would California or Vancouver somehow fail
if they allowed unlimited high density construction and development in what's
currently undeveloped land? Are there examples of that happening before?

~~~
MarchHare
My understanding is the Vancouver has light regulation in some aspects, hence
the term Vancouverism:
[https://en.wikipedia.org/wiki/Vancouverism](https://en.wikipedia.org/wiki/Vancouverism)

------
serge2k
> Surrey, a neighborhood about an hour’s drive

Or a city of 500,000. It is part of the GVRD.

------
Aoyagi
Yeah, this is working so well for the real estate market in New Zealand...

------
serge2k
> The affordability measure is based on average household income of C$64,000
> and a 25-year mortgage with a 25 percent downpayment.

So if most houses are a million you only need 4 years salary for the
downpayment.

Ouch.

------
throwaway201607
There are some simple fixes to people's issues. 1) Charge more for everything
2) If you cannot get a good deal, then leave. 3) Stop playing games where you
sacrifice yourself trying to compete against people who sacrifice very little
but have much. These billionaires are flippant about these things because it
cost them nothing (personally) to get the wealth. When you make $64M a year, a
$4M condo is nothing. But when a paralegal and a plumber scrimp and save to
try and compete, it will cost them everything. Better to just move to another
city and not play the game. Or charge the billionaire $400 an hour for
plumbing.

~~~
linkregister
Great, tell my relatives to say goodbye to their elderly parents they support.
Also tell them to leave their clients behind. Oh! And hurt their school-age
children socially by moving them to a different region.

Not all people have the same mobility that you do. This is a situation that
many people need to stand and address, not vote with their feet.

~~~
throwaway201607
The fact of the matter is that you/they cannot afford to keep things going,
and the only way the market will correct is when people refuse to sacrifice
more.

Your family loves you and based on that I can securely tell you that if you
have to leave they will continue to love you. And if they truly are dependent
on your support, they will follow.

Assuming you're not literally 100% broke (like $0 in the bank, $0 credit) you
have the ability to travel somewhere close to make a less expensive life.
Maybe Kamloops or more central like prince George?

