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Canada's immigrant investor scheme: How the rug has been pulled from under the rich

Axing of immigrant investor programme will likely bring changes to Vancouver, particularly when it comes to luxury home prices

PUBLISHED : Wednesday, 12 February, 2014, 9:19pm
UPDATED : Thursday, 13 February, 2014, 8:50am
 

Last year, a Porsche-driving real estate agent hosted an open house in Vancouver.

As Putonghua-speaking couples cooed over the plush home's fittings, the Hong Kong-born agent described how she had made her fortune in one of the world's most expensive property markets, where run-down bungalows can fetch C$2 million (HK$14 million).

Where did these well-heeled buyers come from, in a city where the median family income is less than C$70,000?

"Beijing, Shanghai, Hunan, Dalian. Everywhere," came the reply.

But the agent said that she had seen the writing on the wall for Canada's costliest city and was planning an exit from the industry.

The reason? Canada's decision in 2012 to freeze applications to the immigrant investor programme.

The party was just about over.

Canada's announcement in Tuesday's budget that it was scrapping the scheme suggests she may be right.

And the decision upsets the best-laid plans of tens of thousands of Chinese millionaires.

It also promises to have a vast impact on Vancouver, where 80 per cent of Chinese investor migrants seek to live, and where average home prices are now some of the most unaffordable in the world.

Successive generations of wealthy Hongkongers and mainlanders have turned the leafy suburbs of Vancouver into a bolthole with mansions with gated security and limousines in the driveway.

Under the current version of the investor visa scheme, applicants with C$1.6 million simply loaned the Canadian government C$800,000 for five years in exchange for residency visas for them and their dependents. Canadian passports usually followed.

The scheme also helped mould modern Hong Kong, facilitating the boom of dual citizenship among the city's elite.

The Hong Kong firmament of entertainment, politics and finance is liberally sprinkled with Canadians.

They include former immigrants and their Canadian-born children, who arrive in Hong Kong with a North American accent to make their fame and fortune in their parent's birthplace.

The scheme has been a boon for rich Chinese, but it has not been universally appreciated in Vancouver, which has borne the brunt of the impact in Canada.

Kerry Starchuk is a lifelong resident of Richmond, a Vancouver satellite which is famously the most Chinese city in the western hemisphere, according to census data.

Once famous for its blueberry fields and pumpkin patches, the region now features glittering malls, high-rises and streets full of luxury cars.

"We have had rich people all the time here in Richmond but you can really see it now," said Starchuk.

"When you go out, you see the cars. Have you seen how many Ferraris there are in Richmond, how many Lamborghinis are driving by?"

Starchuk has seen the value of her modest home in Richmond balloon to C$1.3 million, but as she has no intention of selling, she is far from happy.

She is faced with higher tax and the transformation of her city as neighbours cash out to make way for rich Chinese.

"I don't see a lot of family reunification where I live. I see investment. I see absentee owners with just the family members here," Starchuk said.

"We've reached a crisis point. We have to address the issues we have now before putting more wealthy immigrants on top of it.

"You can see what's happening as the numbers keep coming and coming. The Canadian resident, made in Canada, can't keep up with the numbers.

"And the immigrant is at a downfall as well, coming to migrate but gathering in an enclave so large that they never have to leave that community to find out what it is to be a Canadian."

Over the past week, the South China Morning Post has published a series of reports detailing how Canada's investor immigrant scheme ballooned as tens of thousands of mainland Chinese millionaires clamoured for visas so they could move to Vancouver.

Applications were frozen in 2012, but not before there was a backlog of 45,000 Chinese applicants seeking to move to British Columbia.

The scheme has already brought about 40,000 rich immigrants, not just from China, to Vancouver in less than a decade.

Before Tuesday's announcement, some had seen the backlog as guaranteed fuel for the city's real estate market - but there were already warning signs that Canada was closing the drawbridge.

The Post's investigations also revealed that in spite of the huge backlog, approvals of visas for BC-bound investor migrants had actually plummeted in 2012.

Ultimately, with the passage of time, property values should be stable. But anyone planning on selling in the next six to 36 months may want to review their plans earlier rather than later

Now, all 65,000 applicants in the federal investor visa queue will have their applications scrapped.

Vancouver immigration lawyer Richard Kurland, who provided the Post with the data it used in its investigation into the scheme, said he considered the decision to scrap the programme a mistake.

"There's too much money on the table. The scheme was marginally good for Canada, and if they had followed up with the suggested improvements, then they wouldn't have had to throw the baby out with the bathwater," he said.

Kurland predicted that the decision would have a major impact on Vancouver's property scene, particularly the luxury end of the market.

"The immediate impact is a heads up to Vancouver real estate agents, who have to expect a reduction in demand for top-end properties," he said.

"Until the 'for sale' signs pop up on Vancouver lawns like mushrooms, then the locals won't twig to what is going to hit."

According to a 2011 survey by the Landcor data group, 74 per cent of luxury home purchases in Richmond and Vancouver's premier Westside district were made by people with mainland Chinese names, without any English or Cantonese variants.

Kurland said that many permanent residents already in Canada under the investor scheme might abandon their plans to pursue citizenship after the government this year implemented demands that they furnish income tax returns for their entire period of residency.

Tuesday's budget also revealed that the government was ending a five-year grace period for immigrants on the taxation of foreign assets.

Despite the perils of forecasting property prices, Kurland had some advice for Vancouverites: "Whatever you do: Don't buy now. Proceed diligently, carefully, to understand the potential outcome of this decision."

He said that people using their homes as a retirement nest egg should pay particular attention.

"It's tough. Ultimately, with the passage of time, property values should be stable.

"But anyone planning on selling in the next six to 36 months may want to review their plans earlier rather than later."

A small window of opportunity remains open for would-be millionaire migrants, in the form of Quebec's parallel version of the investor visa scheme.

Kurland explained that the Canadian constitution allowed provinces to run their own selection process, but it remained the responsibility of the federal government to issue visas on the province's recommendation.

It remained to be seen if Ottawa would continue to do so in the case of the Quebec investor scheme, he said, adding that it was "a grey area".

"The table has been set for federal-provincial conflict, by this decision," Kurland said.

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