The nixing of Ottawa’s immigrant visa scheme has led to concerns that wealthy individuals could inflate prices in US
Massoud Hayoun
Other
A housing price boom in Vancouver fueled by the arrival of wealthy Chinese investors could be heading south of the border after the Ottawa government rescinded its immigrant investor scheme — and not everyone is happy about it.
The cost of property in the city have soared recently, with average home prices climbing by 23.5 percent in just five years, according to the Real Estate Board of Greater Vancouver’s Home Price Index.
Spurred in large part by an influx of overseas investors, U.S.-Chinese business experts say, rich internationals — now shut out from investing in Vancouver in return for citizenship — may look toward the U.S. and its analogous EB-5 visa program. It could potentially drive up the cost of housing in major American cities, prompting fears that it could also push out low-wage workers and make it harder for prospective first-time buyers and young renters alike.
New York and Vancouver are both major North American hubs for Single Resident Occupancies, or SROs — local-government-subsidized, sometimes closet-size apartments that anti-gentrification advocates have characterized as a last-ditch effort to house low-wage labour in cities.
In the coming years, however, U.S. cities may experience another surge in housing prices analogous to the one experienced by Vancouver in recent years, EB-5 analysts say.
President of the U.S.-China Chamber of Commerce Siva Yam said the end of Canada’s investor visa in February, which chucked some 65,000 applications, mostly from Chinese nationals, “will draw some Chinese investors to America” who would otherwise have made a bid for Canadian residency.
The Canadian Immigrant Investor program was simpler than its U.S. counterpart: A foreign investor worth at least $1.6 million had to lend the Canadian government $800,000 without interest for a period of five years.
Under the U.S. system, EB-5-seekers must invest $1 million, or $500,000 in state-designated “Targeted Employment Areas,” and prove they created at least 10 jobs for American residents for a minimum of two years.
The draw of a shot at a green card is attracting a steady stream of wealthy Chinese applicants, a group coming under increasing scrutiny as Chinese President Xi Jinping attempts to weed out corruption in the economy of the People’s Republic.
Canada’s losing game
But the experience of Canada’s Immigrant Investor may pose a warning to the U.S.
The program was originally designed to invite wealthy internationals to pump their assets into the economy. Ottawa says that in practice, this wasn’t the case.
“Research shows that immigrant investors pay less in taxes than other economic immigrants, are less likely to stay in Canada over the medium to long term and often lack the skills, including official language proficiency, to integrate as well as other immigrants from the same countries,” Canadian Immigration Department spokeswoman Nancy Caron told Al Jazeera.
China was Canada’s “top source country” for overall new permanent residents in 2012, Caron said. Many were part of a wave of wealthy newcomers to Vancouver. Real estate analysts say a surge in housing prices came largely on the back of wealthy Chinese individuals attempting to move some of their assets into property.
But that didn’t affect Canadian immigration’s decision to end its program, Caron says.
As Immigration Minister Christopher Alexander recently told reporters: “We don’t take our cue from the housing market.'”
University of British Columbia real estate professor Tsur Somerville told Al Jazeera that the hike was due to an influx of wealthy immigrants, mostly from mainland China, although statistics verifying who is buying up high-end Vancouver real estate remain unavailable.
And many in Canada’s West Coast metropolis seem to agree.
“I think it’s safe to say that this has become somewhat of a truism” that wealthy mainland Chinese bought up a considerable amount of Vancouver real estate, said Wes Regan, director of the sustainable local Vancouver business development group Hastings Crossing BIA.
“We all hear the stories of real estate agents driving around wealthy Chinese investors or Chinese hoping to buy property to aid in immigrating to Canada, or real estate companies and developers making concerted efforts to market Vancouver properties to wealthy Chinese buyers,” Regan said.
Though more than 60 percent of condo sales are identified as investor sales, the median income and median housing prices are “just not adding up,” he said, meaning that average income is nowhere near that which could support the average house price. As such, Regan said, it’s “universally accepted in Vancouver that money from outside the city is driving much of our real estate development and pushing up housing prices.”
Still, Regan did say that some “caution racist overtones in this truism.”
Parking cash in property
If Chinese immigrants did indeed drive Vancouver’s recent real estate price boom, “you are looking at people looking to park cash out of places that are riskier,” Somerville said, adding that real estate is often an attractive option.
“If you’re living in a world where U.S. Treasuries are paying 1 percent [interest], there’s something to be said for wanting to park cash in an asset that holds value. Real estate at some level is less traceable and subject to being frozen than bank accounts,” he said.
Somerville emphasized that real estate salespeople are also complicit in driving up rents when a population of moneyed newcomers arrives.
“The old-time residents of Vancouver’s West Side complained of foreigners with wealth coming in, driving up prices so their kids couldn’t live in their neighbourhoods,” he said, “but they were more than happy to sell their property at twice the price to wealthy immigrants.”
Yam spoke to the phenomenon of Chinese émigrés buying up unused real estate.
“They immigrate here, and sometimes don’t live in the U.S,” Yam said of wealthy Chinese who have already sought U.S. immigration status.
That appears to have been the case in Vancouver, where Somerville says many wealthy Chinese bought high-end condos in Coal Harbour. Somerville cited data indicating that close to 25 percent of Coal Harbour residences remained uninhabited in recent years. Meanwhile, some Vancouverites struggle to find more modest accommodations.
“I think it’d be impossible for a busboy at a restaurant in Vancouver to live in Vancouver on his or her own. They would need to live in a basement with someone else,” Somerville said.
While an influx of rich Chinese might be good in aggregate, it may pose a problem for individuals, according to Yam.
“When they come here, they buy real estate and drive real estate values up — that’s good. That makes the economy strong. But local people will have difficulties finding affordable housing,” Yam said.
And what Yam called a taste for luxury brands among China’s rich may breed resentment among lower-income Americans.
“The Chinese like to show their wealth,” Yam said. “They buy name brands and like to show their wealth. Sometimes it creates more tension.”
That too appears to have been the case in Vancouver, according to Somerville.
“Everyone wants to have poor immigrants who come and work really, really hard,” he said, adding, “Wealthy immigrants lead to resentment.”
© 2014 Al Jazeera America, LLC. All rights reserved.
