Monday, 5 November 2012


Hong Kong is cracking down on real estate speculators. It has taken what it calls "extraordinary measures under exceptional circumstances” precipitated by a housing affordability crises.  The measures include a combination of taxes discouraging flips that extends now to 3 years.  There is also a  15 per cent tax payable on property bought by non-permanent residents.

The immediate effect was that the number of apartments sold on the secondary market in Hong Kong fell by almost 50% over a weekend.  
Meanwhile in Vancouver, developers and their drum majors,  the Mayor and Council, can look forward to an orgiastic future. The City will be swamped in cash otherwise destined for Hong Kong, from China’s kleptocracy.

The  extent of corruption in China was exposed  when a high speed bullet train crashed on July 23, 2011. The train, touted to be faster than France's TVG, was a cornerstone in China's great leap into a better environmental future. High speed trains could replace automobiles in the country where the Buick is the prestige car.  China had an investment of hundreds of billions of dollars in its recent transportation infrastructure upgrades. 

There were payoffs at every step. A  detailed report on the wreck acknowledged “serious design flaws,” a “neglect of safety management,” and problems in bidding and testing. China’s proud project was shown to be an "ecosystem of  corruption." The scale of plunder was an exhibition of official and private villainy that included the mal-functioning part that caused the train crash. 

According to Bloomberg News, the extended family of China’s incoming President, Xi Jinping, has tens of millions of dollars in real-estate and financial assets. Since 1990, eighteen thousand corrupt officials have fled the country, having stolen a hundred and twenty billion dollars. This was described as a sum large enough to buy Disney or Amazon.

In this context, Mayor Robertson used the platform while in China to express his opinion of democracy:

" can be critical of a lot of regimes around the world, and you can question how worthwhile democracy is in a lot of countries right now which are, frankly, ignoring the biggest crisis in the history of our species which is climate change. That's where you see the Chinese government taking radical dramatic action in investing in turning the ship around. And you do not see that in Western governments right now, democratically elected, and that's because they're afraid. And that's not serving the greater interests of society." []  fn 33

Anyone who has ever attended a zoning hearing can appreciate that Robertson's distaste for government of the people, by the people and for the people, was if nothing else, sincere. I do not recall any of his colleagues stepping back from it.

An article appeared in the Far Eastern Economic Review in June 2009 by Patrick Chovanec, China’s Real Estate Riddle” [] Chovanec,  a professor at Tsinghua University's School of Economics and Management in Beijing, China says this:

Not only do the Chinese seem to have a voracious appetite for homes they never intend to live in, this appetite has persisted for a remarkably long time, almost defying economic gravity. So when housing prices dipped 1.3% in March (compared to the prior March) on concerns over a supply glut, buyers poured into the market, sending sales volumes to their highest levels in two years.
Chovanec describes a phenomena that is all to familiar in Vancouver:

[Why] the seemingly endless rows of luxury megaliths you can see sprouting up in every provincial capital or third-tier Chinese city worth its salt, with nary a resident in sight. Beijing has no monopoly on ghost-condos.

One possible key to this riddle occurred to me after I heard about the Chinese tour group that recently (and famously) traveled to the United States hunting for post-bubble real estate bargains. I heard that one of the reasons they returned empty-handed was that they were shocked—shocked!—to discover that in the U.S., property is taxed annually on its value. China has taxes on real estate transactions, but no recurring tax on holdings. The group’s discovery, and their disappointment, got me thinking.

He observed that  the U.S. tax system creates  strong incentives for residential property owners to either use it to live in or to generate income by renting it to others to live in, and penalize them for letting it stand idle.

That is not how it works in China. 

Chovanec continues: “In China,  real estate—occupied or not—offers them a visibly reassuring place to park their money, sheltered from inflation. *** with little or no holding costs, Chinese owners are unconstrained by the need to make the property “pay” in cash or in kind. For them, an empty condo is a store of value, much like gold, another asset that performs no practical function besides retaining its worth.”

He concludes: Apartments in China aren’t for living in, they’re for investing. That is the real source of demand.

If the money is the product of corruption, then there is a need to get it out of China. Vancouver ranks #8 in the list of favorite places for this purpose.

Given the Mayor's expressed feeling about the inadequacy of democracy, it should be no surprise that he does not seem to be on the same side as those in China who are fighting for it.  He has consistently sided with the local development industry - who stand to be  profiteers in all of this.  He has turned to them for his solution. 

You can bet he will  do everything to  make real estate even more attractive to off shore investors by allowing ever  increasing density. That is like trying to discourage the use of oil by offering it in smaller barrels. It is like printing more lower denominational bills to make the condominium, the new medium of exchange for people trying to get funds out of China,  a more convenient instrument of investment. 

 They call it  “smart growth.” VISION's message  to every neighborhood that wants a say in the planning process seems to be, “Hey you (expletive deleted) nimbys - get with the program!


  1. Why does Mayor Robertson's speech in China remind me of Kevin Falcon remarks there a few years ago: "China really has the ultimate Kevin Falcon government structure... [The Chinese] don't have the labour or environmental restrictions we do. It's not like they have to do community consultations. They just say 'we're building a bridge' and they move everyone out of there and get going within two weeks. Could you imagine if we could build like that?"

    Hmm. Well, actually it seems we do. And what do we get? The earth's leakiest subway tunnel and widest bridge? Glass and concrete ecological dinosaurs, aka luxury high-rise buildings, or are they just the new "Speculator Van Specials"? The demolition of all affordable housing, or anything else that can't be sold to overseas investors?

    Worry not that the collapsing and newly re-regulated RE market in China--occurring in that order--will send waves of new foreign house hunters here, since they are already leaving. Resales of recently bought homes on the West side are rising markedly.

    Where is the "smart money" now going? What do they say about the first off a sinking ship?

    We'll get our city back, with a great big "Foreclosure" sign glued to City Hall.

  2. Density by speculators, investors, and developers does not make for a community, livability, sustainability or "affordability". And it does not provide local residents that contribute to both the economy, tax base, and neighborhood sense of community. This kind of density, apart from real growth in population, just destroys our city! ( and my hometown)

    In looking at real estate property values both locally and elsewhere, I'm feeling more and more that Hawaii is MORE affordable and livable than Vancouver, and without the traffic congestion & high rises. I know I'm not alone in this thinking, and in weighing whether to get out of Vancouver's artificially inflated real estate crush to live & spend my life & money elsewhere.

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