Canada

China’s Largest Overseas Real Estate CEO: Taxes Won’t Stop Wealthy Foreign Buyers

China’s Largest Overseas Real Estate CEO - Taxes Won’t Stop Wealthy Foreign Buyers

Foreign buying of Canadian real estate has been tapering, but is it the taxes? The CEO of Juwai, doesn’t think so, instead she claims the lack of demand has to do with prices. “Overpriced” real estate has driven Mainland Chinese buyers to places with better value. The foreign buyer tax has a very limited impact, especially when it comes to wealthy Mainland Chinese buyers. For them, paying a tax is just the cost of buying what they want.

Juwai Is China’s Largest Overseas Real Estate Platform

Carrie Law, is CEO of Juwai, China’s largest international property portal. Many Canadians haven’t heard of them before, but the Chinese behemoth plays an important role in the Mainland Chinese buying process. The platform’s users are known to drop hundreds of thousands of dollars on international real estate, often site unseen. Recently they’ve developed sales partnerships with Berkshire Hathaway, Sotheby’s International, and Engels & Volkers. They also power the international real estate listings on Tencent, China’s largest internet company. Oh yeah, and an Alibaba executive sits on their board.

They’re kind of a big deal, and know international buying patterns just a little better than even most governments. Law was a big player in the Asian real estate scene, before being appointed CEO at Juwai. Her opinion has quite a bit of weight when interpreting international markets.

Foreign Buyer Taxes Don’t Impact The Wealthy

“The new and extended property taxes in this week’s budget will have some negative impact on buyers from overseas,” explained Law. However, it won’t be as impactful as some expect. “For higher-income buyers who are committed for personal or professional reasons to buying in Vancouver, the tax will not keep them from purchasing.”

Law anticipates it will change the buying behaviour of lower income foreign buyers. “The increased taxes are likely to put further financial pressure on families from overseas who are already stretching their personal savings to the limit to enable a move to Vancouver,” she explains. “It would be reasonable to expect the average price of homes that middle class buyers acquire to decrease in line with the amount of the tax increase. That would leave their total transaction cost about the same.” Further adding, “of course, if these families can obtain permanent residency in Canada, the tax does not apply to them.”

Few words, but a lot to unpack. She broke down the market into two segments – wealthy trophy hunters, and immigrants. Trophy hunting types of buyers aren’t restrained by income, because… those buying $10 million homes don’t have problems like us scrubs. There is no financial hurdle large enough for these buyers.

Immigrants, she believes, will buy lower priced properties by factoring in the tax, or delay until post-immigration. This point would have an interesting impact. More demand for lower priced property, would place more pressure on the floor of prices. That’s Monopoly Man talk for the cheapest homes get eliminated. Although if they delay until after immigration, there’s no foreign buyer tax.

Vancouver Is “Overpriced,” Mainland Chinese Buyers Peaked In 2015

Law argues that Mainland Chinese demand for Vancouver has peaked, and passed. “Our data shows that Chinese buying interest in Vancouver peaked in 2015,” she explains. Adding “The overpriced market and lack of inventory has restrained Chinese demand since that time. This [BC’s 2018] Budget is two years out of date in addressing a problem we believe no longer exists.”

The declines of Mainland Chinese buying activity are confirmed by several data points. People’s Bank of China (PBoC) numbers show outflows from China were at its worst in 2015. They then tapered until reversing last year, meaning more money is going into China than leaving. The BC and Ontario governments have both produced property transfer data showing a decline in non-resident buying. Neither government was quick enough to measure 2015 data.

Law did have some insights on the future of prices action for the Canadian market, but we’ll leave for next week.

Like this post? Like us on Facebook for the next one in your feed.

30 Comments

COMMENT POLICY:
We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Trader Jim 7 months ago

    Econ 101: Increased taxes take a bite of both the producer and buyer. Ultimately, the producer takes the hit if they can’t buyer refuses to pay.

    Foreign buyers deterred or not, prices are coming down.

    • Tim 7 months ago

      Follow the land Jim, follow the land.

      I have encouraging news on a few fronts =)
      A tease of what may come;
      Small developers across the GTA who purchased land 12-24 months ago who are now ready to get shovels in the dirt are wanting March/April 2017 prices, only to be told by some of the top 1% resi agents that those prices are gone…….LOL SUCKERS! go back to sleep, lets hug it out in September.

      BTW, If Wall street has it right. Rates may actually go higher, faster…..nail in the coffin.

      I wish I felt bad for all the specuvetors. BUT, when I hear stories of single mothers, waitresses, baristas who have 2nd/3rd mortgages on 2nd and 3rd properties with 5% skin in the game you know the jig is up…..
      Is it wrong to be so happy……=)

      • vnm 7 months ago

        Not at all, good to hear, we do need more housing but that’s outrageous profiteering.
        Not exactly the hallmark of a caring society.
        The idea that shortage of supply is behind the bubble in Toronto is highly suspect.
        It’s always been the mantra, but in 1990 when prices starting falling
        there was suddenly more availability. Where did
        the vacancies come from all of the sudden? They had to be there all along, but
        were temporarily taken out of play because of the speculative churn.
        Hopefully the same will happen this time around.

      • Marilena Anderson 7 months ago

        i am a firm believer that homes are for living in so no sympathy for the speculators and foreign investors who think housing is like the game Monopoly

  • bluetheimpala 7 months ago

    Always trying to save face…’our elite are so wealthy, taxes don’t mean anything to us, it isn’t taxes that have killed demand for Canadian housing but they’ve just moved on to places with more value!’…lol, sure, I hear Peru is the next big thing.
    ‘Mac Daddy Xi’ is calling all his ‘Hoes’ to dig into their stockings and give him back his money…it is transparency that has killed the Chinese capital outflows, not taxes.

    • bluetheimpala 7 months ago

      Oh yeah, pumping my own comment…Xi is sucking back his capital. Billions of dollars of real estate seized. Much more to come.
      ime to sell all your crap boys, Papa Xi needs his money back. Pay. Up. Suckas.

  • Z 7 months ago

    Foreign buyers are a symptom, not the cause. But if that’s what you need to do to convince people to stop asking mom and dad to HELOC their home, in order for you to buy a condo that costs 3x what they paid for their house. Then that’s what we have to do.

  • BFB 7 months ago

    Ban foreign buyers! It’s the only way to *actually* stop the issue. NEW ZEALAND IS ALREADY IN THE PROCESS. Trudeau won’t be happy until he’s sold the whole country to China.

    • Joe 7 months ago

      Not to get political or anything, but as the article states the actual inflow of Chinese money has been coming down since 2015. I’m not saying this is due to the federal government, as it isn’t at all, but it seems like you’re blaming the wrong government for not acting. The actual massive run up in foreign investment ramped up and peaked during Stephen Harper’s government, as the federal government refused to act, just like the current one is doing.

      • Tim 7 months ago

        this is not about any one party. This is about votes.

        Period!

        Careful not to step in the B.S. BUT then again this is Canada and were all about BS now a days.

      • Knotmi Reelnm 7 months ago

        I’m not sure where that comment about inflow coming down since 2015 came from, but this cannot be true because Toronto didn’t start seeing exuberance until 2015 so I think this comment is a deflection or inaccurate.

        At the end of the day an actual ban with no loopholes for wives, mistresses, family, students or dogs becoming residents can be permitted to avoid the tax. Let the lefties tax the rich for a few years if it will keep this capital from destroying our country.

    • Hrm 7 months ago

      I really loved your comment

    • vnm 7 months ago

      100% agree. Canada is increasingly one of fewer targets.
      With an airhead PM and Ontario Conservatives pumping a corrupt creep.

    • Marilena Anderson 7 months ago

      agree. Homes are for living in. this is not the game monopoly folks

  • Functioning Brain 7 months ago

    September

  • Justin Thyme 7 months ago

    A super-rich person admitting they don’t mind high taxes?

    This person lost all credibility from that point on.

    Nothing but typical yadda-yadda-yadda one would expect from someone in the real estate business.

    They are trained to make a swamp sound like prime real estate.

    • Al Daimee 7 months ago

      Speaking to some clients who came from mainland China and have shared Chinese perspectives toward Vancouver and Toronto, they revealed that there is status with owning luxury homes in Vancouver (as well as in London, Manhattan, L.A. and San Francisco to name a few others) and that status comes from the show of wealth. The ultra-wealthy can afford to pay the premium and by doing so, display more wealth = higher status. The “less” wealthy who can’t afford to buy in Vancouver? They can go to Toronto.

      If you look at the top end of the art/collectibles market, the attitudes can be similar. Buyer A outbids all other buyers… not always because they see value in the item or love it so much that they have to have it, but for status to silently say “I have more money than my peers”.

      It sounds illogical to us, but that is a cultural value among the wealthy in China that has been driving the luxury markets and products around the world. When I was travelling within Italy in 2012, a tour group of Chinese tourists poured into Louis Vuitton. The store had been locked down to manage the traffic flow and we were later told by staff that there was a cap on what could be purchased, otherwise the Chinese tourists would buy up too much inventory and take it back home to resell for a premium to wealthier people.

      Maybe we can take a cue from L.V.!

      • Knotmi Reelnm 7 months ago

        Then tax them 100% per year and remove all BC income tax.

  • Jim 7 months ago

    There you go. For the last several years, the government and the industry had been busy denying the magnitude and impact of foreign buyers in Vancouver. Now that measures are implemented, they come out and admit and insist that either the policy measure will crash the market or the policy is useless as foreigners have moved on.

    Considering the responses from the industry in the last couple of days, the NDP government nailed it.

    So this article shows that the recent policy measures won’t hurt the economy contrary to the industries warning and help increase tax revenue, which will help fund affordable housing.

    The industry is in disarray.

  • vnm 7 months ago

    An interesting and instructive story! Ultimately by not protecting his market, the shop owner presumably determined that a quick windfall wasn’t worth the long term repercussions, and alienating local customers. We probably should take a cue from L.V.
    What people who support the more-than-just-a trickle-up economy don’t seem to realize or care about is the damage it can do the overall social and economic environment, to the detriment of all.
    There is rural town where I used to go in summers as a kid which has been transformed by wealth.
    Less than 100 houses in the town proper — very small, yet thriving, with a couple of full time grocery stores, garages, hardware store, and a post office. It’s a lovely area geographically, and a few years back, a billionaire decided it would be perfect place for a new rural estate (he has others). He bought up huge swaths of land, and poured more than $100 million into the property. Then deciding he wanted a buffer zone between his estate and the town, over the next few years he bought out 30 locals, and now owns a third of the town’s houses. He’s not only rich, he’s nuts. To him, it’s like a dollhouse collection. They have all undergone million dollar renovations, and remain empty. He apparently has no intention of selling them, and even if he wanted to the remaining locals couldn’t possibly afford them. The consequence of this? The down is essentially dead. He also bought the main village store, and turned it into essentially a personal boutique which is only
    open during the summer tourist season. Withe the decline in local population all the other businesses have folded. 100 people work on his estate, it’s like a nonsense machine, all the jobs involved are service positions to maintain the buildings, stables and gardens.
    One further amusing anecdote … he only rarely visits the place, flying in by helicopter. After the main mansion was completed, he was inspecting the rooms and got a bee in his bottom about the height of the electric outlets in walls, at the usual height, just above floor level. “They are too low,” he complained to the property manager. “It’s to far to bend to plug things in.” What those things might be was never revealed, and if the eventually ever came up, he’d have someone do it for him anyway. But what happened was that the builders were called back in, and told to raise every plug six inches.
    Can you imagine, no exaggeration or embellishment!

    • vnm 7 months ago

      A bit long winded, and forgive the typos, but wanted to reinforce your suggestion that at a certain level of wealth, the cost, and any amount of tax, is almost irrelevant.

  • Bob 7 months ago

    Go to an open house for any new house listing on Vancouver’s west side. Better yet, list a house yourself and see who comes to look at it. There will be, outside of the odd neighbor, an exclusive supply of offshore buyers kicking tires on the house. They are, at the very least, still hovering.

    More than taxes, what will kill interest from offshore buyers will be a concerted effort by all levels of government to make sales publicly transparent. If everyone knows who is really buying, and the federal government blocks buyers from claiming principle residence status when it’s not true, and the federal government does away with favorable capital gains tax rates for offshore buyers – then and only then will we have a level playing field with other countries. At that point, the idea of buying $3,000,000 teardown dumps will finally start to feel insane.

    • bluetheimpala 7 months ago

      I agree 1000% this is all about transparency and Xi wanting his money back.
      If the only market that is killed is the $3M+ then I guess jesus has returned and lives in Vancouver. Seriously, Vancouver was the epicenter for chinese money. The vaccuum that will be created in the next 6 – 24 months is going to decimate the region. Vancouver has higher real estate prices than the GTA but, and no offense to my western compatriots, is a boil on the ass of Ontario’s GDP. They can clammer on about soft wood, tech (lol) and wine but when it comes down to it, Vancouver isn’t even Ontario’s little brother…it is the dog licking its balls in the corner looking for scraps. But I guess they have nicer weather…good on ya.

      • snarcastic 7 months ago

        Nicer people here, in BC, too. Are we the ‘boil’, and Ontario the ‘ass’ ? I’d rather be the dog than your li’l bro T.O. Get over yourself, at least you forgot to bitch about Montreal. ‘ No offence’. taken here, considering the source. (licking dog balls, ass boils, lol.) If it makes you feel better, I’d prefer GTA real estate prices to be higher, and ours to be lower, too. Why ‘Blue the Impala’ ? is that your car? gotta go, jesus is at the door again.

  • John 7 months ago

    Soon Canada will be run by the chinese and they will rename Canada as “Chinada” and china towns will no longer exist.

  • Brian 7 months ago

    Foreign residential non-resident residential real estate ownership must be eliminared like New Zealand and other jurisdictions are doing or have done. Protecting residential real estate affordability for residents must take precedence over non-residents to ensure domestic economic independence and prosperity.

  • Dman 7 months ago

    You have to be out of your mind to buy real estate in Canada right now. It’s 50% over-priced. Ask anyone in Toronto who bought in last fall and are now underwater and sinking fast.

  • Justin Thyme 7 months ago

    ‘One of China’s largest overseas buyers just had its operations seized by the government. The China Insurance Regulatory Commission (CIRC), the state runned regulator…’

    And exactly who ‘runned’ it? And how long have they ‘runned’ it for?

    Even MY spell-check flagged this one.

    Someone really rushed this one to publication,.

  • China’s Largest Overseas Real Estate CEO: Taxes Won’t Stop Wealthy Foreign Buyers – TheChinaBiZZ 7 months ago

    […] They then tapered until reversing last year, meaning more money is going into China than leaving. The BC and Ontario governments have both produced property transfer data showing a decline in non-resident buying. Neither government was quick enough to … ( read original story …) […]

Comments are closed.