China’s rich swoop on homes overseas
Source: China Daily
BEIJING – An increasing number of China’s rich are snapping up properties overseas in the expectation that domestic inflation will continue to rise after the consumer price index reached a 34-month high in May.
According to Colliers International, a real estate service provider, the proportion of Chinese buyers in Vancouver’s property market is on the rise. At the end of the first quarter this year, it increased to 29 percent of all homebuyers.
In the past six months, Chinese spent 1.3 billion yuan ($200 million) through Colliers’ international property department, with Canada, the UK and Australia topping the buying list.
“We are expecting a clear increase in the extent of mainland buyers’ purchases of overseas properties this year because of the government’s rigorous restraint on the number of homes a family can buy in key cities,” said Alan Liu, managing director of Colliers International (North Asia).
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The situation in London is similar. Last year, overseas nationals purchased 28 percent of all resale properties across all prime London sites and 54 percent by value in the prime central London area in the more than 5 million pound ($8 million) price bracket, according to a recent report by Savills research.
“If the money from China were to start flowing into London at the same rate it does from billionaires in other countries, we would expect the value of ultra-prime London properties to grow by as much as 15 per cent,” said Yolande Barnes, head of Savills residential research. “The issue at present is that Chinese buyers aren’t taking, or can’t take, their money out of China.”
The biggest increase in global billionaires since 2007 has occurred in China and the Commonwealth of Independent States (CIS). While CIS buying activity has been strong, accounting for 15 percent of prime central London purchases by value, Chinese billionaires have yet to have a real impact, accounting for just 3 percent of prime central London resale purchases by value.
But more Chinese from the mainland are seeking various ways to manage their wealth globally.
“An increasing number of people from the Chinese mainland came to us and put their money into a property trust unit in Jersey to save VAT and avoid heritage tax as well as capital gains tax when trading again,” said Geoff Cook, chief executive of Jersey Finance, situated on the British island which is a noted offshore financial center.
“Purchasing properties is necessary for the super-rich to allocate their resources globally, but it might not be a good choice for domestic investors from the middle class because it implies that you are betting on the depreciation of the renminbi,” said an industry expert helping people purchase properties overseas who declined to be named. “Meanwhile, property prices in mature markets are usually steady, without too much room for price appreciation.”
How China’s bullet trains are powering its economy
How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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China’s high-speed rail project is the biggest transportation infrastructure plan in human history and it is transforming the Chinese landscape.
At a dizzying pace, Beijing has managed to bring to fruition its long-cherished dream of having a modern, super high-speed train system that criss-crosses the nation and is able ferry millions of passengers slashing travel time by over 60 per cent.
In just a few years, the Asian giant has managed to lay down over 5,000 km of new high-speed rail lines. And the plan is to expand it further . . .
Large sections of China’s population are becoming more mobile, remote regions of the country are opening up, and Chinese businesses are racing to meet under-served consumer demand.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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A new Morgan Stanley study by Jerry Lou and Allen Gui explains how the ultra-fast bullet trains will change the Chinese economy forever.
High-speed rail is the key to China’s balanced, sustainable double-digit growth. By 2020, four super-city clusters will emerge in China and two existing super-cities will expand as a direct result of the population’s increased mobility and the surge in domestic traffic in China.
A more mobile workforce and newly accessible markets will serve to narrow the country’s geographic and economic disparities.
The impact is imminent . . . by 2013, 50 per cent of the cities on the planned network will be connected to the high-speed rail grid. The economic impact of this increased connectivity will continue well beyond the immediate gains in key industries, however.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Some industries are clearly well placed to derive long-term benefits from China’s infrastructure build-out.
Morgan Stanley analysts, from 12 industries and three continents, have identified the opportunities associated with this mega project.
The global investment bank has created geographic and sector baskets based on its investment analysis, which it believe will capture the secular opportunity in China for the coming 10 years, especially in hotels, restaurants, tourism, car rental, property, and rolling stock. However, aviation and toll roads may not fare as well, claims the Morgan Stanley report.
How high-speed rail is reshaping Chinese economy
China’s ever-expanding high-speed rail system is transforming the country, both, economically and socially.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Over the next decade, China’s high-speed rail system will increase the mobility of the population, affecting some 70 crore (700 million) people; contribute to the creation of four new super-city clusters, and enhance two existing super-cities; and boost hub cities’ traffic exponentially.
The high-speed rail system is the solution to China’s growth sustainability. A more mobile work force and more-accessible markets will narrow the country’s geographic and economic disparities.
Structural changes are imminent, but the economic impact is long term.
Over the next few years, China’s high-speed rail will take shape quickly. Investors, says the Morgan Stanley report, must understand the imminent structural changes and take positions today.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Morgan Stanley’s investment strategy on China’s high-speed rail focusses on the following at the regional level:
Western and Central China; and
The most rapidly rising hub cities.
At the industry level, it focusses on:
Near-term immediate beneficiaries — railway infrastructure and rolling stocks industries;
Mid-term beneficiaries — leisure/lodging and properties;
Long-term beneficiaries — consumer staples and consumers ‘discretionaries’.
China, the most populous country in the world, will soon set another ground-breaking record: in the coming decade, its high-speed rail system, currently under development, will become the largest in the world.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Morgan Stanley says that development will be no less economically significant than China’s urbanisation story.
And here is why it believes the Chinese economy will continue to outperform:
The China high-speed rail system will span 30,000 km, connect more than 250 cities and regions with a total population of about 700 million, mobilise 400 core (4 billion) travellers per year, and add 1,600 billion km to China’s domestic passenger throughput annually (i.e., four times the total domestic passenger throughput in Japan today) by 2020.
At peak speed, the high-speed rail grid can support speeds of 350 km per hour, increasing commuting efficiency many times over.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Large, existing, stand-alone cities in the same region will see their boundaries merging to create connected metropolises, boosting secular service industry demand and creating new business opportunities in the consumer, leisure and lodging, and property sectors.
The investment bank calls these merged cities ‘super-city clusters’ (SCCs) and predicts that four new SCCs will emerge and two existing SCCs will expand in the coming 10 years.
Many economically challenged cities in west and central China will be revitalised because of the hub effect created by the high-speed rail system.
Some cities will even see passenger flow growing by as much as 10 times in the coming decade, making them strategically important targets for many industries such as hotel, catering, logistics, and properties.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Geographic and economic rebalancing
Despite its rapid economic growth in the past few decades, China still faces bottlenecks in the distribution of its wealth, with a marked imbalance between the geographic development of the coastal areas and that of inland and western China.
Indeed, this geographic imbalance has been worsening as the coastal areas continue to develop at a much faster rate than do the inland and western regions.
Until now, most of China’s economy vibrancy has been trapped on the eastern and southern coasts of China, and as one travels across the region, the huge asymmetries in economic development make different cities look more like different countries.
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How China’s bullet trains are powering its economy
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Those who visit Shanghai-centered coastal China, for instance, will find this region more like well-developed countries such as the United States and Europe and less like central and western China, even though the coastal region and the central/western regions occupy the same continent.
While regional economic differences are not rare in a global economy, China’s regional differences are by far the most disparate of any in the world.
The high-speed rail network will tap this geographic-economic imbalance in an unprecedented and aggressive fashion by improving market access, encouraging population mobility, and enhancing logistics efficiency.
Morgan Stanley said in the study that it expects to see lifestyle changes among the population, which in turn will stimulate innovation and creativity and lead to the creation of new businesses in the long-term.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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The study said that by 2015, city clusters with travel radii of three hours would start to take shape in China. By 2020, there will be six such city clusters taking shape, overlapping with each other throughout most of China except the northwest and southwest.
These city clusters will cover about 70 per cent of the Chinese population and account for about 75 per cent of China GDP.
The study also said that by 2025 all of these city clusters would be so mature that the regional economic differences in China will narrow to Western economy levels.
According to the investment bank’s ‘rough estimates’, the parts of China that lag behind (central and western China) collectively will be growing at a rate of 15% real GDP in the coming 10 years, compared with their more-developed coastal peers.
Commercial and residential real estate value in the currently lagging cities covered by these city clusters will receive strong support from the launch of new high-speed rail lines.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Timeline: Investors should build positions today
Because China’s high-speed rail grid has 10 years more in its construction life cycle, Morgan Stanley is analysing the economic impact of HSR over a 10-year timeframe.
Nevertheless, the investment case is, in fact, imminent: The high-speed rail grid will take shape quickly over the next few years, so investors should take positions today, says the Morgan Stanley report.
According to the national high-speed rail construction plan and our own modelling, more than 50 per cent of cities planned for the high-speed rail grid over the next 10 years will be connected before 2013.
Addressing the concern: Profitability and sustainability
Will the China high-speed rail project be sustainable? This is clearly a valid question to ask. The operating capital required for such a mega project will be substantial.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Morgan Stanley transportation analyst Edward Xu and capital goods analyst Kate Zhu believe that on average every 1,000 km of China high-speed rail will require Rmb4.5 billion per year in operating cash to function (this includes maintenance, parts replacement, and day-to-day operational costs).
On the other hand, the operating revenue, based on our ticket price estimate (using the same per-thousand-kilometre price to per-capita GDP ratio on the eastern portion of the national grid), per-thousand kilometre revenue will be around Rmb6.5 billion per year.
This translates into a national operating cash surplus of Rmb2 billion per year, which should be able to cover most, if not all, of the interest expenses.
The funding capabilities of the Chinese government too need to be looked at. The high-speed rail will create substantial new passengers flow, generate new business opportunities, and raise asset prices (such as land and properties).
All these will mean higher fiscal revenue for the local governments. It is estimated that at the national level, every 1,000 km of high-speed rail will create at least Rmb2 billion per year in new fiscal revenue. This is more than enough to close the high-speed rail funding gap.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Thus Morgan Stanley analysts conclude that the high-speed rail will create enough economic value to keep itself financially sustainable.
HSR’s sector investment implications
As the high-speed rail grid builds out quickly in China, its scale and logistical significance will start to create new business opportunities.
So how big would such business opportunities will be?
Among the sectors where opportunities will arise, according to Morgan Stanley, are:
Budget hotels;
Restaurant and catering;
Tourism (theme parks, resorts, and agencies);
Consumer staples;
Retailers and brands;
Car rental;
Commercial and residential properties;
Railway infrastructure; and
Capital goods and rolling stocks.
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How China’s bullet trains are powering its economy
Last updated on: June 16, 2011 10:33 IST
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Not surprisingly, the high-speed rail grid is also expected to pose new challenges to existing logistics forms:
Aviation
The aviation industry in China is likely to feel the heat once the high-speed rail projects are complete. Regional jets will have limited market potential in China and will do well only in those regions where the HSR will not reach, such as the northwest and southwest, assesses Morgan Stanley.
Airlines also will face tough competition on existing regional routes where HSR capacity will increase and divert passenger traffic.
Analysts believe that HSR would be competitive for airlines at a distance of 800-1,500 kilometres and highly competitive at a distance of 800 kilometres.
Because regional jets are usually targeting short- to mid-haul distances between 500 and 600 kilometres, it faces high risk from HSR on overlapping routes.
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How China’s bullet trains are powering its economy
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Toll roads
The competition that HSR poses to toll roads will be much smaller than that to airlines due to HSR’s expensive ticket price and lack of convenience for short-distance travel.
Analysts expect 1-3 per cent passenger traffic dilution in 2011-13 from toll road to HSR. Furthermore, as HSR can free up cargo capacity in traditional railway system, the potential movement of cargo traffic from toll roads over to traditional railway is likely to be material.
Meanwhile, Morgan Stanley forecast a 10-12 per cent cargo traffic dilution from toll road to traditional railway by 2015.
Other countries’ cases turn to support our findings. Japan and the US experiences suggest that the construction of rapid-transit systems led to the urbanisation of local communities, boosted demand of commercial premises, and shored up regional economies.
In addition, passenger railway networks such as the high-speed rail system are expected to have significant positive impact on property values.
On the other hand, history shows the operation of high-speed rail could take substantial market share from conventional operators.
Europe and Japan observed severe blows to their airline traffic from high-speed rail on overlapping routes below 800 km.
Wanna learn English, anyone?
Source: http://edition.cnn.com
June 10, 2011 — Updated 1103 GMT (1903 HKT)
Editor’s note: “Jaime’s China” is a weekly column about Chinese society and politics. Jaime FlorCruz has lived and worked in China since 1971. He studied Chinese history at Peking University (1977-81) and served as TIME Magazine’s Beijing correspondent and bureau chief (1982-2000).
Beijing, China (CNN) — One of my first jobs in China was teaching English through songs on CCTV, China’s national television station.
That was in 1979, when the People’s Republic was just coming out of the tumultuous Cultural Revolution. Ordinary Chinese still wore drab Mao tunics, and top officials debated whether the foreign cultural influences seeping into China were “spiritual pollution.”
Still, the CCTV station producers wanted to use national television to popularize English language, and they wanted a light program.
I was recruited to join a group of amateur musicians to produce “Let’s Sing,” a series of 30-minute specials to complement its weekly program, English on Sunday. Along with three Chinese performers, I would strum my guitar and sing English songs, including “Clementine”, “Puff, The Magic Dragon” and “El Condor Pasa.” Viewers learned new words, grammar and syntax as they learned the songs.
Station producers closely vetted the lineup of songs and narration we prepared. They vetoed a few, including Bob Dylan’s “Blowin’ in the Wind.” We produced 10 shows, which aired for weeks and replayed many times. We became local celebrities, occasionally recognized and stopped in Beijing’s shops and alleys. Even today, the odd Beijing resident occasionally stops me and says he or she first learned English through my TV show.
“It opened a new world to me since you guys were always in costumes and staged the shows differently,” recalled Karen Cai, who watched the show as a Beijing high school student. “I remember you clearly because you usually played hero or prince-like role. Until the launch of ‘English on Sunday,’ I did not have the opportunity to watch people speaking English without any Chinese translation.”
English — and other foreign languages — were virtually taboo when I first arrived in China in 1971. Years earlier, foreign-language books were burned or impounded as “poisonous weeds.” Only authorized translators and academics dared to use English.
President Richard Nixon’s China visit in 1972 caused a brief “English craze”. The late Premier Zhou Enlai, who had lived abroad in his youth and spoke a bit of English and French, encouraged this and even launched a program where young children of Chinese elite were sent to the U.S. to live with families and attend local schools to learn English.
–Chen Lu, Peking University student on studying English
Some Chinese schools taught English, but students’ vocabularies were limited to rudimentary greetings (“How do you do?”) and political slogans (“Long live Chairman Mao!”). When the Cultural Revolution reached another xenophobic height in the mid-1970s, English again became politically incorrect.
English regained popularity after Chairman Mao died in 1976 and Deng Xiaoping launched his economic reforms and opened China to the outside world.
In today’s China, English is king. “It’s important to get a good job and even just get information from various sources,” says Chen Lu, a 19-year-junior at Peking University. “It gives me an advantage in a very competitive environment.” More than 400 million Chinese, about a third of the total population, are studying English, says China Education Daily.
China’s rapid economic growth and the boom in global trade and tourism have made fluency in English a much-valued commodity. Small wonder that pushy parents in Beijing are willing to fork out 300 RMB ($45) for a six-hour English course in schools who have hired native speakers from the U.S., U.K. and other Western countries.
“They want to learn another language to be more adaptable to an increasingly global world,” says Mikala Reasback, an American college graduate who came to China to teach English. “It’s usually upper middle class and elite families sending their children to private lessons and taking adult lessons.”
An English language teaching industry has flourished, involving universities, foreign-financed training institutes and countless private language schools. The market for China’s English teaching business, experts estimate, has doubled in the last five years to over $3 billion.
However, experts say, the quality of teaching varies widely, citing the need to set up a credit-rating system. The rush to learn English has also created a shortage of good English teachers, especially native speakers.
Reasback, who taught in a private language school in Beijing for four years, says that compensations for teachers vary widely. Most legitimate companies offer from $1,200 to $1,800 per month (before taxes) for a 40-hour work week. They also cover visa fees, paid national holidays and an end of contract repatriation bonus.
However, she tells CNN, the rates of pay vary from city to city — English teachers in Chengdu or Qingdao are paid less than those in Beijing. In some cases, English teachers are given housing allowances and reimbursed for medical expenses but, Reasback says, these have to be negotiated in contracts.
English-teaching has apparently become a popular if not lucrative profession in China. Who would have thought? When I was recruited to teach English songs on Chinese TV, we did not negotiate nor signed a contract. I was all too glad to be paid the equivalent of $10 per program and fed steamed pork buns during the taping.
IMF Mission Completes 2011 Article IV Consultation Discussions with China
Press Release No. 11/225
June 9, 2011, Source: IMF website
An International Monetary Fund (IMF) team, led by Mr. Nigel Chalk, Senior
Advisor of the Asia and Pacific Department, visited Beijing, Shanghai and
Chengdu from May 23 to June 9 to conduct the annual Article IV review of
the Chinese economy. The team held wide-ranging discussions with senior
officials from the government, the People’s Bank of China, private sector
representatives, and academics, to exchange views on prospects for the
economy and the challenges ahead. The IMF's Acting Managing Director, Mr.
John Lipsky, and the Director of the Asia and Pacific Department, Mr.
Anoop Singh, joined the final policy discussions and met with Vice Premier
Wang Qishan, People’s Bank of China Governor Zhou Xiaochuan, and Finance
Minister Xie Xuren.
The mission team also conducted for the first time a Financial Sector
Assessment Program (FSAP) review, and held discussions on the spillover
effects of Chinese policies on the global economy in the context of the
latest Article IV consultation. The FSAP is a comprehensive and in-depth
analysis of a country’s financial sector, and is a key instrument of the
Fund’s surveillance and provides input to the Article IV consultation.
At the conclusion of the visit, the mission issued the following statement:
“The Chinese economy remains strong and is forecast to grow at around 9½
percent in both 2011 and 2012 underpinned by solid domestic and external
demand. Inflation should soon peak and is expected to fall to around 4
percent by year-end. However, there are upside risks, from higher global
commodity prices or weather related food supply shocks in China.
“The steps taken by the Chinese authorities to tighten monetary policy,
normalize credit growth, and withdraw fiscal stimulus are fully
appropriate. A more balanced use of monetary policy tools, including more
reliance on interest rates and less use of direct administrative limits on
loan growth would help achieve the intended policy objectives more
effectively.
“The measures that the authorities have progressively taken to slow down
the rise in real estate prices are having the desired impact. However,
China still has a propensity for property bubbles driven by high savings,
cheap financing, low carrying costs, and the lack of alternative
investment instruments. Any durable solution will need to involve broader
financial development, a higher cost of capital, and increased real estate
taxation.
“Staff expect the current account surplus to begin to rise this year as
external demand recovers and the fiscal stimulus unwinds. A package of
policies, many of which are included in China’s comprehensive 12th
Five-Year Plan, will need to be deployed in the coming years to prevent a
reassertion of the current account surplus. Efforts will be required to
strengthen the social safety net, raise household income, liberalize the
financial system, and increase the costs of various inputs to production.
A stronger renminbi will be a key ingredient of this comprehensive package
of reforms and would very much be in China’s interest, helping to achieve
the objectives set out in the 12th Five-Year Plan.
“Drawing on the work of the FSAP, the mission particularly underlined the
importance of financial sector reform in ensuring a smooth transformation
of China’s growth model toward a more inclusive economy that is focused on
improving people’s livelihoods. A successful reform and liberalization of
the financial sector would boost household income, lessen both corporate
and household savings, improve the efficiency of investment, and mitigate
the risk of asset bubbles. A roadmap for reform should include a
strengthening of the monetary policy framework, improvements in the
regulatory, supervision and financial stability framework, development of
the financial markets, deregulating loan and deposit interest rates, and
eventually moving to an open capital account with the renminbi as a fully
convertible currency.
“The discussion and analysis undertaken for the upcoming spillover report
for China put in context why the agenda to transform the country's
economic growth model is so important to the rest of the world. The
positive outward spillovers from China will contribute significantly
toward a strong, sustained, and balanced global growth if economic
transformation is managed successfully. However, if that process moves too
slowly, and stresses from the current policy framework cause disruptions,
then the world will have to cope with a shock from a country with a
central position in the world trading system.”
Vancouver homes more expensive than New York or London
Buyers from mainland China are leading a wave of Asian investment
Expensive home sales in Metro Vancouver have skewed average sale prices upward for B.C. and Canada
Photograph by: Mark Van Manen, Vancouver Sun Files, Vancouver Sun
VANCOUVER — Vancouver’s Royal Pacific Realty had such a surge of business during the first two weeks of February that agents and assistants worked day and night shifts to find homes for Chinese buyers visiting during the Lunar New Year.
“It was unprecedented,” said Royal Pacific Chief Executive Officer David Choi. “I called them sleepwalkers.”
Sales of detached homes, townhouses and condominiums in metropolitan Vancouver jumped 70 percent in February from January, to 3,097 units from 1,819, and were up 25 percent from a year earlier, according to the Real Estate Board of Greater Vancouver. In March, sales climbed 32 percent from February, to just shy of a record for the month of 4,371 transactions set in 2004. Sales increased by 80 percent from two years ago.
Buyers from mainland China are leading a wave of Asian investment in Vancouver real estate as China tries to damp property speculation at home. Good schools, a marine climate and the large, established Asian community as a result of Canada’s liberal immigration policy make Vancouver attractive, said Cathy Gong, who moved from Shanghai to the Shaughnessy neighbourhood on Vancouver’s west side about three years ago.
“The schools here are the best and there are a lot of Chinese people here,” said Gong, whose son is in sixth grade at Shaughnessy Elementary School. Eastern Canada wasn’t an option because “I cannot bear cold weather,” Gong said. Vancouver has the second-largest immigrant Chinese population in Canada after Toronto.
China Curbs Speculation
China, where home prices rose 28 percent in Beijing and 26 percent in Shanghai last year, according to the country’s biggest real estate website owner SouFun Holdings Ltd., has taken steps to curb property speculation within its borders. Chinese home prices gained for 19 straight months through December and climbed in almost all 70 cities tracked by the government during the first quarter. Premier Wen Jiabao placed curbs on mortgage lending, boosted down-payment requirements and limited the number of purchases.
“As the Chinese get more and more prosperous, they are diversifying their assets out of China,” said Jim Rogers, an American investor who moved to Singapore from New York four years ago so his daughters could learn Chinese. “Vancouver is very high on the list.”
Pricier Than New York
In 2010, Vancouver had the third-highest housing costs among English-speaking cities worldwide, according to Canada’s Frontier Centre for Public Policy. Only Hong Kong and Sydney, another magnet of Asian immigration, were more expensive. Vancouver’s median home price of C$602,000 ($618,000) was 9.5 times the annual median household income of C$63,100, the group said in a study released Jan. 24. Canada had a 4.6 national multiple, making it “seriously unaffordable,” while the U.S. at 3.3 was “moderately unaffordable,” the study showed. To be affordable, the multiple must be 3 or less.
Vancouver was more expensive than San Francisco, London and New York by that measure, the Winnipeg-based center said.
“This makes it all the more difficult for people who are already struggling to get into the market or businesses who can’t hire people to come here because of the high housing prices,” said Peter Ladner, a former Vancouver city councillor and a columnist for the Business in Vancouver weekly newspaper. “There are a lot of people who are really frustrated.”
Unlike London or New York, “we don’t have enough jobs with high incomes to justify” the home prices, said Ladner. He noted Australia has placed restrictions on foreign home ownership. The British Columbia government also could consider an increase in property transfer taxes for foreigners, he said.
‘Control the Price’
Cecilia Huang, a Canada resident since 2003, also is concerned about rising prices.
“I hope the government can do something to control the price” so younger generations can buy, said Huang, who paid almost C$1 million for a condo in the Westside’s Kitsilano neighborhood two months ago so her daughter, now aged 6, could attend school nearby. She couldn’t afford a house and prefers apartment living because she doesn’t like yard maintenance. She also likes the views from her sixth-floor condo.
Holidays in China have been a popular time to look for houses in Vancouver. Sales picked up in October during China’s weeklong national holiday, said Winnie Chung, a Royal Pacific agent who represented buyers or sellers in C$285 million of home sales in 2009 and 2010 combined. Chung employs eight full-time assistants and travels to China twice a year to meet potential clients.
50 Sales
Mainland Chinese are buying houses primarily in Vancouver’s Westside, boosting the median sales price to C$2 million in the district known for its wide boulevards, beaches, expansive parks and stucco Tudor mansions. Prime Westside neighborhoods include Point Grey, Shaughnessy and Dunbar. The University of British Columbia is at the area’s western end.
“Our office has done 50 sales this year, which is pretty incredible,” said Vancouver realtor Tom Gradecak at his office in Point Grey, where he has one colleague who speaks Mandarin and Cantonese and is hiring a second. “Half of those sales are from mainland China.”
One Chinese buyer paid C$1.7 million in March for a five- bedroom, three-bath house that the previous owners had completely renovated in 2003, C$150,000 more than the asking price, said Gradecak. The buyer plans to tear it down and build anew.
“There’s more value in the land,” he said. “We’re seeing a lot of empty nesters cashing out.”
Many existing houses were built in the 1940s and ’50s and have outdated electrical systems and plumbing and are “much smaller” than allowed today, said Vancouver architect Loy Leyland. As buyers prefer to demolish old houses than renovate, new homes for Asian clients make up two-thirds of his more than 30 current projects.
“I’ve never been busier” in a 30-year career, Leyland said.
Leyland’s clients usually stick to traditional styles such as Villa or Georgian for exteriors. Inside, designs are changing. Every new house has two kitchens: a large Western- style one and a small “wok” kitchen with a stove, sink, strong exhaust fan and door to seal off cooking aromas, said Leyland.
Some buyers acquire multiple homes, one to live in and others for investment, said Chung, the broker. Her clients made their money in a variety of businesses, she said, including mining, stainless steel manufacturing and real estate. About 10 percent of them speak English, she said.
The Westside, also known as Vancouver West, had the biggest five-year gain of all 15 areas in greater Vancouver, edging out Richmond, the municipality just south of Vancouver, according to the Real Estate Board. Westside home prices rose 77 percent during the past five years through April amid the housing collapse in the U.S. People of Chinese or South Asian ancestry make up more than 60 percent of the residents in Richmond, a hub of Hong Kong immigration during the 1990s.
In 2010, the average home price in greater Vancouver rose 14 percent from 2009, according to the Real Estate Board. Excluding the three most expensive areas — the Westside, Richmond and West Vancouver — the average price gained 8 percent. West Vancouver is a separate municipality on the north shore across Lions Gate Bridge from downtown and not to be confused with the Westside. The three priciest areas usually account for about one-third of annual home sales in greater Vancouver.
Third Wave
The current group of Chinese homebuyers in Vancouver is the third “wave” from Asia since 1990, following Taiwanese and Hong Kong immigration, said Manyee Lui, a veteran Vancouver realtor. “People from mainland China are the new immigrants,” Lui said.
Vancouver’s Expo ’86 was pivotal in the city’s growth. In 1988, the Expo site downtown on the shore of False Creek was acquired by Concord Pacific Developments with investors led by Hong Kong billionaire Li Ka-shing. The group developed high-rise condos and sold them in Asia during the early 1990s. Concord Pacific Place today is Canada’s biggest master-planned urban community, comprising about 50 buildings with 10,000 homes, parks, a school and daycare centers.
“That was like turning on a switch; it’s okay to invest in Vancouver because Li Ka-shing did,” said Peter Cowley, who grew up in Vancouver and is director of school performance studies at the Fraser Institute, which grades schools in Canada on academic performance. Chinese immigrants routinely check the Institute’s website to decide where to buy homes.
Migration to Vancouver also was spurred by the 1989 Tiananmen Square massacre and a flight from Hong Kong in the years before its return to Chinese rule from British sovereignty in 1997. Vancouver home prices dropped when some people returned to Hong Kong after the handover.
British Columbia, the province where Vancouver is located, gets about 55 percent of Canada’s investor-class immigrants, people who have a minimum net worth of C$1.6 million, said Cameron Muir, chief economist of the British Columbia Real Estate Association. The province drew a total of 3,779 investor- class immigrants from China last year, or 69 percent of all investors moving to British Columbia, said Muir.
Starting about 18 months ago, so many homeowners applied to change the last two digits of their addresses to remove or shift the number 4, which in Chinese sounds like the word for death, or add the numeral 8, which is considered lucky, that Vancouver began turning down some requests, said Bonnie Lee, addressing coordinator for the city.
“We used to do eight or nine a month but in March we did 25,” said Lee. “A lot of it is cultural. A lot of it is just people trying to change it before they list because estate agents are telling them to.”
It’s not just the Chinese who are shopping for homes, said Gradecak. Korean and Taiwanese buyers also have been active, he said.
“Foreign investment in Vancouver residential real estate is showing no signs of slowing,” said Gregory Klump, chief economist of the Ottawa-based Canadian Real Estate Association, in a May 9 report. The surge of multimillion-dollar sales in Vancouver prompted the trade group to revise its forecast for national home sales. It now expects Canada home sales through the Multiple Listing Service to fall 1.3 percent in 2011 to 441,100 units, less than the 1.6 percent decline it forecast in February.
Low Rates
Low interest rates inflated home prices and created a bubble, said Lawrence Wong, an immigration lawyer with many Chinese clients. Unlike the U.S., Canada has no tax deduction for mortgage interest.
“There is this psychological fear that ‘Ok, if I don’t get into the market, I might not be able to get in later on,” said Wong.
Chinese buyers frequently are absentee owners, wealthy businessmen who buy second or third houses for their wives and children while continuing to live in China for work, said Norman Chow, a fourth-generation Canadian engineer who lives near Quilchena Park on the Westside.
“You see a lot of these satellite families,” said Chow. He said it’s not unusual to see college-age kids of wealthy Chinese parents driving Bentleys, Maseratis and Porsches around the Westside. “The kids seem pretty nice,” he said.
Forty-one percent of the pupils at the Westside’s Maple Grove Elementary have English as their second language, according to the Vancouver-based Fraser Institute, the school- ranking organization. The institute doesn’t break out ethnicities for ESL students. The Living Word Chinese Baptist Church at Arbutus St. and 33rd Avenue West introduced a Mandarin fellowship last October after 16 years of only Cantonese and English.
While education for children often is the primary goal, some immigrants just want to move money out of China because they don’t feel it’s safe, according to one homebuyer who moved to Vancouver from Wuhan with her son two months ago and asked that her name not be used. Her husband remains in Wuhan for work.
Interest is spreading to other parts of Vancouver as prices on the Westside jump. The latest hot markets are West Vancouver and the southern bedroom community of White Rock, said Raymond Wong, a local realtor.
Because houses in West Vancouver are built on the mountainside with their backs to the Coast Range, they generally face south, providing views of English Bay and Burrard Inlet. This situation conforms to the principles of feng shui, the proper placement of features within and surrounding a house to increase wealth and deflect bad luck, said Wong.
In November, Osaka Supermarket, part of Canada’s biggest grocery chain, opened its second Vancouver-area store in West Vancouver’s Park Royal shopping center. Osaka offers items ranging from marinated duck wings to a full dim sum bar and Asian fruits such as mangosteens, rambutans and longans that can be hard to find in North America.
“Five years ago, Chinese buyers avoided West Vancouver because of the Lions Gate bridge — it just wasn’t convenient,” said Wong. “Now Osaka makes it much better and Chinese people are spreading the word.”
By contrast, Richmond has cooled since the March 11 earthquake and tsunami in Japan, said Wong. Parts of Richmond are at or just above sea level because of its location in the Fraser River delta.
Nonstop Flights
Beginning June 15, China Southern Airlines Co. will offer Canada’s first nonstop flights to China’s most populous province, Guangdong, with service between Vancouver and Guangzhou, the province’s capital city.
“Canada is a very attractive country these days for many reasons,” said Rogers, the investor. “They’ve done a much better job than the U.S. has over the last 15 to 20 years.”
Canada’s natural resources-based economy has gained from the economic growth in China and other countries. The Canadian dollar climbed 70 percent against the U.S. dollar since 2002, reaching parity in 2007 for the first time since 1976 as rising prices for commodities such as oil and gold boosted Canada’s export revenue. Nine years ago, one Canadian dollar bought 65 U.S. cents. Today it buys $1.03.
Overseas homebuyers can act much more quickly on a purchase since their offers often aren’t contingent on the sale of another residence, said Gradecak, the Westside realtor.
“It’s definitely for real,” Gradecak said. “How long it’s going to last, that’s an unknown. I get asked the same question every single day.”