Vancouver: The daughters of wealthy Chinese Canadians who star in the reality show the “Ultra Rich Asian Girls of Vancouver” pursue modelling careers, carry Birkin bags, and sip on Veuve Cliquot. And they snap up million-dollar Vancouver homes with the same level of dedication that some of us use to shop for a new pair of shoes.
“It’s not that expensive in Richmond,” 24-year-old Chelsea Jiang told a local news channel shortly before beginning the show in 2014. Jiang, born in Ottawa, Canada, was looking to buy a single-family home in Richmond, part of the Vancouver metro area, in addition to a luxury condo she already owned. “It’s really cheap and I have a budget of $2 million.”
Many locals blame a massive influx of Chinese wealth in recent years for the city’s skyrocketing real estate prices, which have quickly grown to be among some of the most expensive in the world, and left all but the super-rich scrambling for housing. Others say the charge is racist, and complain that Chinese are being stereotyped as clueless and corrupt — a stereotype that isn’t helped by shows like Ultra Rich Asian Girls of Vancouver.
Many Americans in major cities may feel left out by rising housing prices. But these cities have nothing on Vancouver, where a shabby house — described by realtors as a “knock-down property” valuable only for the 32-foot-wide lot underneath — recently sold for nearly $1.8 million.
The stunning rise in Vancouver’s home prices is a relatively recent phenomenon. As Justin McElroy, a Canadian journalist, pointed out on Twitter, the average price of a Greater Vancouver home rose as much in the past six months as it did from 1980 to 2006. (When those figures are adjusted for inflation, the trend looks even crazier. In today’s Canadian dollars, the city’s housing prices grew by only roughly $150,000 between 1980 and 2006, but shot up by $375,000 in the last six months.)
The buyers behind the surge are impossible to trace — British Columbia doesn’t track the citizenship of home buyers, though it announced plans to start doing so. But many experts are blaming the surge on an influx of cash from wealthy Chinese, who are rushing to send investments out of their country as its economy slows.
“Residential real estate in Vancouver and more specifically certain parts of Vancouver are becoming hedges against political, economic, and social instability from other parts of the world,” said Andy Yan, acting director of Simon Fraser University’s City Programme. “It arguably is a blessing and curse of the kind of city-region we’ve built in Metro Vancouver.”
A torrent of money historic in its proportions is currently flowing out of China, driven by expectations of a weaker Chinese currency and an effort to hedge investments against a weaker economy. The Institute of International Finance estimates that $676 billion of capital left China through official and unofficial channels in 2015. By some accounts, it is the biggest occurrence of capital flight in history.
Some of this money has flowed into real estate in Western countries, which the Chinese see as a secure investment, and a good way to diversify their investments.
As economic growth slows in China, so do returns on investments in the country, and that pushes investors to begin looking for opportunities abroad. For a few wealthy officials, who fear being caught up in China’s ongoing anticorruption campaign, the US and Canada also offer the attraction of a strong rule of law and a lack of an extradition treaty with China.
And unlike other investments, buying real estate is often a first step to a life abroad — a goal for an astounding number of wealthy Chinese. In a 2013 study by China Merchants Bank and Bain & Co., 56 per cent of wealthy Chinese (defined as having more than $1.6 million in investable assets) said they were in the process of emigrating from China, or considering doing so. An additional 11 per cent said their child was doing so, often in pursuit of a Western education.
Vancouver might seem like an odd choice given its modest size, but it has an outsize reputation in China for its beautiful scenery, pristine air and receptiveness to foreigners. Nearly a third of the city’s population is ethnically Chinese.
The city is relatively convenient to fly to from China, and it even has the benefit of having good feng shui, with mountains at its back and water at its feet.
Compared with other global cities, metro Vancouver is relatively well-insulated against the risk of climate change, with an already extensive system of dykes and sea gates. And while Vancouver prices might seem expensive to locals, they are cheap compared to China, where rising incomes and limited supply has led to some of the most expensive real estate prices on the planet.
As Yan points out, Vancouver has some of Canada’s most expensive home prices, but ranked last among 10 Canadian cities in median income for 25-55-year-olds with bachelor degrees in 2011. Those who already own homes have seen their wealth increase, but prices have risen so much recently that some homeowners can’t even afford their property taxes.
Local residents are also concerned with foreign purchasers buying property for investment purposes and leaving it empty, thereby hollowing out communities. Besides making cities less vibrant, the practice means there are fewer bodies to frequent local businesses and generate sales tax.
In January, 10 local university professors proposed charging a 1.5 per cent surtax on vacant properties whose owners have no taxable earnings in Canada, which would them be redistributed back to the community.
Yan agrees that cities today need to craft housing policies that recognise the global nature of real estate demand. “If global capital is being parked in unprecedented amounts in residential real estate, then cities ought to be given the powers to increase the costs and capture the value of this type of parking.”