Chinese buyers of property in Canada and the US must stop flaunting their wealth
Albert Cheng says the flood of Chinese money buying up North American property and the flashy behaviour of some new immigrants are causing resentment and inviting a backlash
Politically, China is the arch-enemy of the US. Ironically, as far as the property market is concerned, China is a lifesaver for North America. According to the Rosen Consulting Group and Asia Society, Chinese buyers spent US$110 billion on American real estate last year. This is the single main driving force that has enabled the US property market to recover from the 2008 subprime crisis. In San Francisco, the median price of residential property in 2015 rose by 12 per cent. It was eclipsed by Vancouver, whose market surged 25 per cent over the same period.
Today, a detached house in Vancouver costs on average C$1.4 million (HK$8.4 million). The figure lags behind that of Hong Kong, yet it has become a major cause of public discontent in the Canadian city.
Chinese buyers have pumped an apparently endless supply of capital into North America. The phenomenon has raised eyebrows not just in Canada and the US but also in China. The Canadian media recently reported that a Chinese overseas student had acquired a mansion in Vancouver for C$31.1 million. The student owned 99 per cent of the title and managed to secure a mortgage of C$9.9 million. The Canadian press branded the mansion the most luxurious student boarding house in history. The deal has also triggered heated online exchanges in China focusing on how a student could have that kind of money at his disposal. It was suggested that the princeling in question was the grandchild of a Chinese national leader.
The wealthy in China are eager to transfer their money out of the mainland, exploiting every means, legitimate or otherwise, to do so, in case of any policy change or because they find themselves the subject of anti-fraud investigations. Sending their offspring overseas is one such insurance policy.
Property agents are keen to exploit Chinese buyers’ compulsion to close a deal quickly, often talking mainlanders into paying between 30 and 200 per cent more than the asking price. As a result, genuine local home buyers have been driven out of the market. A decent house in a popular residential area in Vancouver is beyond the reach of average Canadian salary earners.
In the 1980s, there was a flood of Hong Kong immigrants into North America because of political uncertainty. Canada, in particular, became a preferred destination for Hongkongers. To the chagrin of the local communities, some early Hong Kong immigrants dismantled heritage premises to make way for so-called “monster houses” of up to 10,000 sq ft in size. Students from Hong Kong drove flashy Mercedes-Benzes and BMWs to school and adorned themselves with designer labels.
Today, mainland Chinese have taken over as the main influx from East Asia. And the mainlanders are now outshining Hong Kong immigrants. New drivers from the mainland can be seen in Ferraris, Maseratis and Lamborghinis. New Yorkers, Londoners and Parisians may have taken such arrogance for granted. In the eyes of the easy-going Canadians, however, showing off one’s wealth is offensive.
To allay growing local discontent, a professor from the University of British Columbia has urged the Canadian authorities to impose an additional 1.5 per cent annual property tax on foreign buyers. This proposal is obviously a blatant way to appease voters at the expense of migrants without a ballot. This populist approach has exerted considerable pressure on the ruling party to act. It may as well be the first of a list of anti-Chinese immigrant measures.
Despite Beijing’s ongoing anti-corruption campaign, there is no effective way to stop flows of illicit money being channelled into foreign property markets. The Chinese authorities can, however, cooperate with foreign law enforcement agencies to investigate suspicious property transactions.
Early Chinese settlers from Hong Kong, Taiwan and the mainland were keen to assimilate into the community. Yet, these newcomers have deep pockets and make no apologies for flaunting their wealth. If they do not change their outlook and attitude, they will only have themselves to blame when things turn sour.
Albert Cheng King-hon is a political commentator. [email protected]