The Canadian Housing Boom Fueled by China’s Billionaires
The walls of Clarence Debelle’s Vancouver office on Canada’s west coast are lined with gifts from his real estate clients: jade and turtle dragon figurines; bottles of baijiu, a traditional Chinese alcohol; and enough special-edition Veuve Clicquot to fuel several high-end cocktail parties.
They are the product of Vancouver’s decade-long real estate frenzy. The city, with its stunning views of the mountains and yacht-dotted harbor, has long been one of the world’s most expensive places to live but price gains have reached a whole new level of intensity this year. Low interest rates, rising immigration, and a surge of foreign money—particularly from China—have all driven the increases.
Consider the latest milestones:
• The cost of a single-family home surged a record 39 percent to C$1.6 million ($1.2 million) in June from a year earlier.
• More than 90 percent of those homes are now worth more than C$1 million, up from 65 percent a year earlier, according to city assessment figures.
• Vancouver is now outpacing price gains in New York, San Francisco and London over the past decade.
• Foreigners pumped C$1 billion into the province’s real estate in a five-week period this summer, or about 8 percent of the province’s sales.
After copious warnings over the last six months, including from the Bank of Canada, that price gains are unsustainable, the provincial government of British Columbia moved last week. Foreign investors will have to pay an additional 15 percent in property-transfer tax as of Aug. 2 and city of Vancouver was given the authority to impose a new tax on empty homes.
As Canada waits to see what effect, if any, the moves may have, here are the stories from the city’s wild ride.
The Luxury Broker
Debelle, the broker with a large Chinese clientele, specializes in luxury homes above C$2 million, located in such neighborhoods as Point Grey, where Lululemon Athletica Inc. founder Chip Wilson has a C$64 million house, the most expensive in the city, according to appraisals.
Most of the 59-year-old’s clients are Chinese and multi-billionaires. His website attests to that, featuring links to doctors who practice traditional Chinese medicine, lawyers, language classes and maintenance providers. He advertises on WeChat, China’s most popular app, and in local Chinese newspapers.
“I show homes every day to Chinese families from Shanghai, Beijing, cities I’ve never heard of, and sometimes it’s just the mother and kids because the father is working,” Debelle said, referring to so-called astronaut families with the father working in China and mother and children staying in Vancouver. “It’s typical of any wealthy person to move money abroad to preserve their wealth. They’re concerned about the market there and they want hard assets to preserve and protect their capital.”
Debelle, whose Mandarin-speaking sales associate drives a white Bentley, sells at least 25 homes a year, earning a commission of about 3 percent. He’s so busy that he’s taken only one vacation in the last eight years, working weekends and evenings with buyers on the phone in Hong Kong and mainland China.
One of his listed homes is opulent, even for Vancouver. It’s a seven-bedroom custom-built mansion with ocean views that sits on 2.3 acres (0.4 hectares), the biggest plot of residential land for sale in the city, and backs onto a park. It has a wine cellar for 2,500 bottles, several crystal chandeliers, cabinetry and paintings completed by artists who flew in from Los Angeles and Italy, and a wall-to-ceiling violet marble bathroom. It’s listed for C$24 million and Debelle has shown it to about one client a week.
“The wealth here pales in comparison to the wealth in China,” he said from behind the wheel of his silver Mercedes-Benz on Marine Drive, the waterfront road that winds through West Vancouver, passing luxury listings, quiet restaurants and cafes, and parks. “The number of people I deal with who have at least C$2 billion, it’s amazing. I had a client who had C$2 billion, was 43, and thought it was a good start.”
Everyone benefits from the real estate investment boom, Debelle said. “It’s not just the agents. It’s the guy at the dock unloading a Sub-Zero fridge or custom sink off the boat for the house. It’s the decorators and landscapers. Chinese investment has spurred an entire economy.”
The Car Dealer
One of those benefiting is a luxury car dealership run by Caleb Kwok, 37, general sales manager at Vancouver’s MCL Motor Cars. It’s selling Bentleys, Jaguars, Aston Martins and Range Rovers so fast that it has had to extend its hours and boosted staff by nearly a third.
“For not being a real big-time city, there sure are a lot of luxury cars in Vancouver,” Kwok says as he walks around the downtown showroom where a special edition, C$250,000 Range Rover SVAutobiography with two-tone paint, reclining rear seats, and tray tables for drinks is about to be driven off by a customer.
Demand for luxury cars has risen alongside housing prices in Vancouver, with 1,100 high-end vehicles on the streets of Vancouver as of Dec. 31, 2015, almost double the 2009 count, according to the Insurance Corporation of British Columbia.
Customers have to be ready to part with anywhere from C$49,000 for a basic Land Rover to more than C$500,000 for a Bentley Mulsanne luxury sedan. Those who do so usually make the decision in less than two hours, Kwok said.
Kwok has hired three new Mandarin speakers to help serve the 5 percent to 10 percent of clients who don’t speak English. What buyers have in common is that they’re wealthy and often in a hurry. Kwok describes the most outrageous request he’s ever gotten involving a Bentley Bentayga SUV.
“‘I want the vehicle, I want it right now,’” his customer said, according to Kwok. “The car wasn’t built, not even announced. It was four years away. They saw it on some website. He asked, ‘How much do I need to pay to get that car right now?’”
The Desperate Buyer
Stephanie Goudriaan isn’t having nearly as good a time amid the boom. She wants to have children, but the housing market is derailing her plans.
The 31-year-old paralegal and her husband, an apprentice plumber, live in a two-bedroom, 1,200-square-foot (111-square-meter) apartment built more than 20 years ago in Surrey, a neighborhood about an hour’s drive from the downtown core where they work. Goudriaan, who has a large Italian family in Vancouver, wants to start a family of her own in a bigger home and with a bit of green space. She can’t afford it.
“Kids are becoming a luxury item that only the rich can have in Vancouver,” she said during a break at work. “We’re not living this extravagant lifestyle, and we’re still stuck. We can’t move up. It’s crazy.”
Detached homes are out of reach for the couple and they’re also steadily being priced out of townhomes and even another condo. The couple qualifies for a mortgage on a house worth C$450,000, according to a broker they spoke with this year, and she searched online for properties with a maximum price of C$500,000. She was stunned.
“There was barely anything for us,” she said. “Old townhouses for half a million that we’d need to renovate. Large condos that were basically the same as our current apartment, but more expensive.”
She’s not alone in being priced out. It would take a record 120 percent of the average Vancouver household’s median income to purchase a detached home in the city, according to Royal Bank. The affordability measure is based on average household income of C$64,000 and a 25-year mortgage with a 25 percent downpayment.
“Do we stay and raise our child here,” Goudriaan said, “or leave Vancouver, leave the province?”
Linda Todrick, 68, lived in a subdivision 45 minutes south of the city for 26 years, until her partner began thinking of retirement and a broker friend told her how much the house was worth. At the end of 2015, her detached home was appraised at just shy of C$1 million. A month later it had shot up to C$1.3 million.
She listed it in April for C$1.288 million, appealing to local Chinese buyers with the lucky number eight. Within 24 hours, four bids came in. They sold within just a few days to a young family for C$1.5 million, no conditions.
“It was surreal,” the retired Air Canada flight attendant said from a boat near her new home in Qualicum Beach, a town of 10,000 people on Vancouver Island a 1-1/2 hour-ferry ride from the city. “It happened so fast. You can’t believe how many people have done the same—moved to Qualicum and the islands. People are flooding in from the mainland with cash in their pocket.”
She bought her new house for less than half of what she got for her old one, part of the flow of “halfers” from Vancouver, as brokers call them. The new property is double the size at 4,000 square feet and has five bedrooms, a view of the water, and half an acre of garden.
Todrick said one factor driving her to sell quickly was the risk of the market cooling. “It’s not going to get more silly,” she said.
The Tear-Down Specialist
Real estate broker Lorne Goldman walks around a 100-year-old, 2,000 square foot detached home with aquamarine siding and burgundy trim in East Vancouver. The front steps are broken and creaking, the mudroom is draped with cobwebs and the walls contain asbestos, a health hazard when airborne. The home is listed for C$1.4 million and “priced to move quickly,” according to the newspaper ad.
“This is a perfect starter home for a young family,” Goldman, 61, says.
Goldman approves of government moves to stop shadow flipping, where brokers help a buyer sell a sales contract, often multiple times, before a deal closes at a higher price, then split the profit. But he says critics should also direct their anger to those who set the rules.
“We’re doing everything by the book,” Goldman said. Meanwhile, the city allows perfectly livable homes to be demolished and there isn’t enough supply.
In the one-hour tour of the East Vancouver home, his phone rang a dozen times before he finally muted it. The message: the insanity isn’t ending.
“Would this house have been the same price a few years ago?” Goldman says. “No chance. Five years ago this would have been $700,000. It’s gone up, up, up. It keeps going up. And at some point it’ll slow down, maybe 20 years from now. But not anytime soon.”