Canada

Canadian Real Estate Developers Are Ramping Up Mainland Chinese Marketing

Canadian real estate developers facing soft domestic demand are looking to China. Juwai.com, the largest overseas property portal in Mainland China, conducted a developer survey. Over a third of Canadian developers are looking to spend more to attract Mainland Chinese capital.

Who Did They Survey?

Juwai surveyed “dozens” of North American real estate developers, on Chinese marketing plans. The survey focused on the Chinese market, specifically in Mainland China and Singapore. The vast majority of developers were small, launching less than 500 units since 2016. In fact, 47% of developers surveys launched less than 50 units since 2016. Keep the size of these developers in mind when reading, since it marks an interesting shift.

Chinese Buyers Represented 1 In 10 New Project Buyers

The Chinese market is an important funding source for nearly all North American developers. More than 90% of respondents said 1 in 10 units were sold to Chinese buyers. Juwai notes that this is consistent regardless of size, city or developer surveyed. Only 13% of Canadian developers have dedicated Mandarin speaking staff, with the rest outsourcing. Confirmation that Mainland money is a significant, but not majority, of the building boom.

Canadian Real Estate Developers Plan To Ramp Up China Marketing

Canadian developers are looking to Chinese buyers to pick up domes market slack. The survey shows ~40% of Canadian developers plan on raising overseas marketing budgets. Specifically, they’re looking at scaling efforts in China and Singapore. “Nearly half” will keep their current budgets, and only 13% will lower. This comes as foreign buyer taxes have hit both Toronto and Vancouver, and Montreal has one in the works.

The shift to ramping up pre-sale construction marketing overseas isn’t surprising. New home absorption in Toronto is less than a point away from a buyer’s market, and ditto with Vancouver. Developers can either sell overseas to massify, lower prices, or cancel projects. The last point is difficult as rates rise, making sitting on land less profitable.

Greater Toronto New Home Sales To Active

The ratio of sales to active listings for new homes in Greater Toronto, for the month of September.

Source: Altus Group, Better Dwelling.

One important takeaway from the survey is the developers aren’t all large. Large developers with dedicated resources to reach the Mainland market are noted for chasing foreign capital. However, the survey shows smaller developers are increasingly interested in the source of funding.

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25 Comments

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  • Trader Jim 4 weeks ago

    Oh great, we’re dependent on the Chinese debt bubble. Don’t tell the developers it’s over, I want them to lose a little more money marketing there.

    https://www.ft.com/content/45bd8052-59dc-11e8-bdb7-f6677d2e1ce8

    • Tim 4 weeks ago

      Oh, if the walls could talk. the land party is over. The big boys bank, while the small me toos burn….Residential development has killed other segemnts of the market which create jobs and add to GDP. Its here….how will you deal wiht it?

      Going back to sleep now, wake me up in April….when its in our faces.

  • Yusef 4 weeks ago

    Do Chinese investors think Canadians will have more money after rates hike? Because that’s not how this works usually.

    • Mica 4 weeks ago

      They aren’t. They’re hoping to squeeze inventory for Canadians, to ensure a paid premium. Only problem is EVERY developer thinks they can do that. Projects in Alberta have been sitting overseas for a while now.

  • Agent Schoen 4 weeks ago

    This piece of writing really love has worth in it. I say good luck for the Canadian Developers.

  • SUMSKILLZ 4 weeks ago

    From a planning perspective, building units in Toronto likely to be unoccupied makes sense. It keeps people working.

    https://www.abc.net.au/news/2018-06-27/china-ghost-cities-show-growth-driven-by-debt/9912186

    Humm, maybe I was wrong about that.

    • Ian 4 weeks ago

      Canadian developers must have read the Bloomberg article on 22% of China’s housing stock being empty, and said that could be us!

      For those that haven’t read it yet, this is probably what’s inspiring them. https://www.bloomberg.com/news/articles/2018-11-08/a-fifth-of-china-s-homes-are-empty-that-s-50-million-apartments

      • Vnm 4 weeks ago

        Gotta love it.
        Speculators buy up houses and condos taking advantage of low interest rates theoretically designed to help Canada avoid an economic downturn, which end up being way too expensive for the vast majority of Canadians to buy or rent, and remain empty as monuments to unfettered greed, inequality, and stupidity.
        Meanwhile government /industry continues to promote these activities, despite the potentially catastrophic social and economic consequences.
        And the bozos are screaming that socialism is wrecking the country?

    • someguy 4 weeks ago

      Interest rates were so low, you’d have to be crazy to *not* build empty cities that might be useful later.

  • Dar Robbins 4 weeks ago

    Re: “Toronto is less than a point away from a buyer’s market, and ditto with Vancouver. ”
    Seriously? Who comes-up with this crap?

    • Leeroy Jenkins 4 weeks ago

      People with experience in real estate, that know a buyer’s market is when buyers can request lower prices.

      What I’m wondering is who are these people that are so unbelievably confident in their lack of knowledge?

      • tim 4 weeks ago

        If there is any GTA agents claiaming the market is hot. Contact TREB and report them. its not, far from it. Most agents who have atleast 5 years in the business, educated and not newly immigrants =) will testify to this. The latter….well good luck. =P

  • Jay 4 weeks ago

    How do they plan on securing Canadian mortgages when China is squeezing the supply for FX funds coming out of their country?

    If they prove income overseas, does that mean they’ll have to start to actually pay taxes here in Canada for all their satelite babies and mamas?

    Can’t go the old drug dealer washing route anymore, so imo this is a hail mary that nobody is gonna catch.

  • Cash 4 weeks ago

    Just pathetic. It’s illegal for Chinese citizens to exchange RMB to buy foreign property. Anyone can pull title at closing for any of these units and forward on the the PRC government. Seems like a lot of stupid risk to a buyer especially in a falling market.

    Anyone have any idea how pre-selling to Chinese buyers without placing the chinese buyers at risk would work? I have an idea myself but don’t want to look like I’m wearing a tinfoil hat.

  • Bob 4 weeks ago

    Why are they wasting their time? Didn’t you hear – Chinese money has had no effect on Vancouver real estate prices:

    https://www.straight.com/news/1161056/kennedy-stewart-and-new-vancouver-council-must-counter-public-ignorance-about-factors

    “According to a study by the Canada Mortgage and Housing Corporation, about three-quarters of the cause of Vancouver’s high prices was attributable to three factors: income, population, and mortgage rates.

    The remainder was related to the inelasticity of housing supply in Vancouver.”

    So Chinese money has absolutely no effect on supply, demand or prices of RE in Vancouver. Whew. Good to know. As a developer, there is no need to market offshore, as local incomes can easily support $1300/sqft closet condos.

  • William 4 weeks ago

    It sure would be nice to see a news story that is not based on information from a totally bias source.

  • oakville rob 4 weeks ago

    Possibly people with scads of money locked up in a less democratic country might feel some risk that a future authoritarian decision might confiscate their money. Canada might be seen as a safer haven even in a losing market. So they buy a house(s) in Canada – for as many millions as they want – and essentially ship that money out. Even if they sell the house for half, they have at least salvaged some of the capital, but in the meantime they have inflated the price of real estate beyond what Canadians can afford and gutted neighborhoods of residents to support the local businesses. Houses fall apart when they are not lived in too. A logical outcome would be that prices drop when those investors need to realize their cash again, but the neighborhoods may be forever changed by years of vacancies.

    • MH 4 weeks ago

      Too bad the long-term effect of RE bubbles gets very little attention now, given how devastating it is. The sad irony is that while “the new RE elite” keeps chanting about the “world-class city” they are quickly stripping the very same city of what makes it great. Those ghost cities simply represent a logical conclusion of the RE speculation game… Barren wasteland good neither for people nor for businesses.

      BTW, when a year ago there was a rumor about Amazon looking to North Virginia for HQ2 because of affordable housing among other things, it became clear that Toronto has zero chance of winning. So here you have it, the long-term effect of RE speculation.

  • Yun Yang 4 weeks ago

    The smaller developers will crash like in Australia, then everyone on wechat will avoid the Canadian property for years.

  • Joe 4 weeks ago

    Whether the market does indeed crash a not is up for debate but the fact is Chinese buyers are buying up properties in Canada. I agree with what Rob said about moving money out a less democratic country to a safer haven like Canada. This makes complete sense if you are thinking in the shoes of a Chinese citizen. (And yes, the Chinese love real estate, especially the less investor oriented citizens who work regular jobs compared to stock markets.)

    For example, one can buy a house/condo in Toronto and rent it. Some rent it out and let the local people service their mortgage. If the house/condo appreciates, it’s a bonus, otherwise they can keep renting it out. Worst case scenario, the market tanks and I lose on the investment but I still can get a steady stream of cash flow with the hot rental market in Toronto. The population in Toronto is definitely not shrinking (be it tighter immigration policy or whatever) and people need a place to live so I really doubt the rental market will tank. In addition, rent controls have dissuaded private developers from building purposely built rental apartments…will Canada Govt provide incentive to change this? Maybe. But looking at how things are moving in Canada, like the oil pipeline or the Scarborough subway line (probably not good examples but seriously you get the analogy), things are not going to change fast and maybe when they do, the renters have paid for the property I bought.

    Furthermore, many Chinese are sending their children to Canada for school and buy these properties under their name if they have landed immigrant status. That means no capital gains tax!

    At the end of the day, ask yourself, would you amass wealth and store it in a place where it can get taken away anytime? Why Canada/Toronto? Currency is weak now, government is liberal about immigration , prices are not that high compared to other global cities like Hong Kong/New York/London/etc, country is relatively safe, education is decent, etc…so why not?

  • Luxury BC 4 weeks ago

    Our little pocket of Canada here in Victoria are seeing a lot more Chinese buyers and shell companies making the transactions for properties over $2M CAD. While the Chinese investor might slow down, India is also the next HNW population and they’re going to follow in the next decade. I think the luxury condo market specifically is going to be a fantastic investment for a lot of folks so long as they buy in the right building.

  • rustinpeace 4 weeks ago

    a guy i know came to study at U of T from abroad. His dad bought him a Condo about 4 years ago. He finished his degree, sold his condo and went back to his country. The appreciation alone paid for his education, a fancy car and a few 100k in pocket change. He basically got a free education in Canada made some money and left. How does this help the domestic economy? Unless the government puts stronger controls on foreign I dont see an end in sight. We need an outright ban like New Zealand

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