Why Is Vancouver so Popular for Foreign Investors?
Vancouver has one of the hottest real estate markets anywhere in the world with prices seemingly reaching new heights each month.
There are many reasons real estate prices keep going up, some of which has to do with demands from foreign and immigrant buyers. Foreign buyers have recently been a hot button issue with politicians and Vancouverites and will likely continue to be so for the foreseeable future. But how did we get here? To understand a little bit about why Vancouver is so attractive for foreign buyers let’s look at some of the reasons why they invest here.
Canada’s Millionaire Visa
The Canadian government started to attract wealthy immigrants as early as 1976 when Pierre Trudeau started a program where foreigners could actually buy their way into the country. Those who had $365,000 in net worth and who invested $183,000 would be put into a fast track to immigrate. They also had to create one job and establish a home in Canada. This was one of the first programs of this kind and, sometimes criticized as being too lenient, allowing a large number of wealthy immigrants to settle in Vancouver. Since then, the program has come and gone, the most recent requires a $2 million investment into Canada.
British Leave Hong Kong
The British gave Hong Kong back to China in 1997 and the colony come under communist rule. At the time, people began to worry about that would actually look like and they began to worry. Especially when they looked at how China treated its citizens. Most Hong Kong migrants moved to other Commonwealth countries like the UK, Australia, and Canada. It is estimated that over 100,000 Hong Kong residents came to Canada before the hand-off to China. Many of which moved to Vancouver.
Fixed Yuan
In 2008, the Chinese yuan was fixed against the US dollar. This caused the yuan’s value to sink in order to stay competitive against the US economy. This problem was compounded by the fact the Chinese economy was doing well at the time so the currency fixing caused the yuan to artificially weaken. As a result, people trading in foreign currency took a hit on every transaction. In 2010, the Chinese government reversed their decision and ended the yuan fix, causing the yuan to gain value, rising by 13% in a couple of years. This fluctuation caused the rich Chinese to take haven in foreign economies like Canada where their money was a little more stable.
Corruption Campaign
China has an unfortunate reputation for corruption. It’s estimated that in 2003, that government officials took $86 billion in bribes, roughly 3% of the overall GDP. Money, lavish gifts, property were sold in exchange for political favours. In 2013, Xi Jinping was elected General Secretary of the Communist Party, and he swore to eliminate corruption. In 2015, over 300,000 government officials were punished for corruption. The laundered money would often be shipped to bank accounts and property overseas. According to some reports, Canadian banks haven’t been vigilant enough in tackling this problem.
The corrupt officials would break up the money into smaller chunks and then give them to a number of people who would send the money to separate bank accounts. This avoids the detection of financial regulators and was a loophole in Chinese law. From 2014 to 2016 officials estimate one trillion dollars has left China for other countries. Much of the money ends up in Canada. It’s impossible to estimate how many homes are bought with laundered money but one thing is for certain: Vancouver has benefited from the influx of cash.
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