Douglas Todd: China's real-estate investors down on Vancouver, but not out – The Kingston Whig-Standard

Huawei CEO Meng Wenghzou must stay under mansion arrest following this week’s court decision in Vancouver. China’s authorities rage, while continuing to unfairly jail Michael Spavor and Michael Korvig and drastically cut imports of Canadian canola.

Rival ethnic Chinese groups clash in the streets of Vancouver over Beijing’s clampdown on Hong Kongers’ freedoms. COVID-19 kills more than 6,800 across Canada and lockdown virtually ends international travel, sending home many of China’s foreign students, especially from Toronto and Vancouver.

China-Canada relations are at their lowest ebb in decades, particularly according to China’s pervasive regime-backed media outlets, which this week called Canada a “pathetic clown.”

And that has implications for Metro Vancouver’s housing market.

This region of 2.6 million is feeling the impact of soured relations with China, even while polling suggests the city continues to retain some of its traditional allure to the world’s most populous country as a desirable place to experience and invest in.

In addition to geo-political tensions, however, it must be said that Metro Vancouver’s real-estate market has also lost some of its global appeal because of financial trends. As a result real estate prices fall in many parts of the West, especially in the Lower Mainland. That’s while housing values have been rising in China.

Let’s look closer at what’s leading China’s upper- and middle-classes to steer away from buying into Metro Vancouver real estate like they once did.

China’s investors are also this year not pouring the same billions into high-end commercial or residential properties in adjacent Hong Kong, which has up until now been the top investment destination for China’s wealthy.

One reason for China’s investors pulling back is their rising suspicion of the West, including because of the erratic ways the U.S., some European countries, Canada and others have handled the coronavirus outbreak.

Although the World Health Organization and other health experts say COVID19 emerged in Wuhan, China’s state media claims the country has kept a better lid on it than the West. That’s lead to nervousness among many Chinese citizens about getting sick abroad, as well as fear about being blamed for spreading the virus.

The South China Morning Post, for one, has been talking to rich and middle-class people around China and discovering they’re losing their appetite for buying real-estate “investment vehicles” in the West, in part because of such COVID-19-related fears and mistrust.

That’s goes with their weakening desire to send children to study abroad, where many became involved in real-estate on behalf of their families. At the end of 2019 there were 640,000 students from China around the world, 144,000 of whom were in Canada and 50,000 in B.C.

In addition, however, an equally strong force that is diminishing Chinese people’s interest in buying Metro Vancouver’s pricey houses and condominiums, according to the Hurun Report, is that the city doesn’t offer the same profits it once did.

Housing values have dipped in Metro Vancouver since 2016, when buyers from China were deeply engaged in pumping up the city’s luxury market. And the Canada Mortgage and Housing Corporation predicted this week prices could fall an additional nine to 18 per cent in Canada because of the pandemic, and even slightly more in British Columbia.

Bigger real-estate profits are to be made in China.

The widely read Hurun Report is considered an authority on what it calls “China’s high-net-worth individuals.” And its 2020 report said, even before COVID hit, that China’s rich were finding some of the most rewarding real-estate ventures were in their own country.

“Twenty-seven Chinese cities entered the top 50 cities (around the world) with the highest house price increases,” said this year’s Hurun Report. Many of those Chinese cities had values leap 35 to 45 per cent over just three years. There’s no suggestion such hefty profit margins are being seriously dented by COVID-19.

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Much of the sharp rise in China’s real-estate prices is the result of its authorities becoming more intent about enforcing a US$50,000 a person limit on the movement of funds out of the country – and banning the widespread use of credit cards, including China’s UnionPay, for buying foreign real estate.

Vancouver realtor David Hutchinson said this week that, for many of the reasons mentioned here, “China is not coming” to local real estate like it once did. “That ship has sailed.”

His perspective echoes that of West Vancouver realtor Nicole Lee, who said earlier that many rich clients from China are looking elsewhere now that B.C. has brought in a foreign-buyers tax on housing, along with a speculation and vacancy tax.

However, even though Metro Vancouver and it’s real estate might be down in the minds of many of China’s wealthy, they’re definitely not out.

Although five years ago China’s rich ranked Metro Vancouver as the third most desirable city in the world for “overseas property purchases,” this year’s Hurun Report says they still rate this relatively small city on the West Coast of Canada as seventh.

In addition, the Hurun Report says China’s high-net-worth parents pick Canada as their fourth favourite place to send their children for an education. As well, out of the 10 million Mainland Chinese who are transnational migrants, according to the Migration Policy Institute, half have ended up in Hong Kong and the U.S., while Canada has been, and remains, their third most popular choice, with Australia fourth.

There are now more than 500,000 ethnic Chinese people in Metro Vancouver, the majority, because of recent migration trends, from China. They can find familiarity in the city’s vibrant ethnic Chinese supermarkets, retail outlets, entertainment, restaurants and housing.

There might not be quite the tremendous volume of money coming out of China into Canada’s property market as there has been in the past two decades, but streams of Chinese capital are sure to continue to make their way across the Pacific.

That should be the case despite the tensions wrought by COVID-19 lockdowns, Huawei controversies, Hong Kong clashes and even a stumbling local real-estate market.

dtodd@postmedia.com

Follow @DouglasTodd

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