Douglas Todd: Scores of high-end condos are flying onto the market throughout Metro Vancouver, and China’s housing bust is one reason behind it
The signs of distress are everywhere. Many of Vancouver’s priciest condos are being offered at big discounts.
One downtown condo that was bought for almost $3 million is now on the market at $2.3 million. At the elite, funky Alberni, designed by starchitect Kengo Kuma, an “extremely high” inventory of 26 condos is for sale, says realtor David Hutchinson. The curving tower hasn’t had a buyer for three months.
China’s massive housing market, which is especially connected to that of the U.S., Australia and Canada, is bursting after an incredible bubble. As Vancouver’s Steve Saretsky says, there has been a drastic drop in what was once an “unprecedented Chinese appetite to take capital out of the reach of the Chinese government” — mostly by investing in Western real estate.
Canadian condo specialist Jordan Scrinko has estimated that, at the peak of Chinese overseas buying, one third of property investments in Vancouver were made by people from China, with a similar figure for Toronto.
Even though developers of both high- and medium-end Vancouver condos continue to market in East Asia, distributing most of their advertising in both English and Chinese languages, there are strong signs “China shock” is easing, becoming unpredictable.
“Globalization is now reversing,” says Saretsky. “What happens if further Chinese wealth destruction necessitates Chinese liquidation of foreign housing ownership?”
Michael Peregrine of Santiago Capital says that over the last 10 years China’s property market has “fallen precipitously.” And there is “more downside to come.”
The problem has been that many real estate companies in English-speaking countries integrated East Asia’s housing boom into their profit dreams.
“The Chinese property juggernaut (bought) massive foreign housing inventory at inflated prices,” says Peregrine. “It forced locals to pay up in their own markets to compete against Chinese investors.”
Now China’s boom, which was fuelled by debt, is unwinding.
“Toronto condo sales,” Peregrine says, “are already down 85 per cent from their peak volume in 2022.”
All this financial destruction, however, doesn’t mean the river of money from China has dried up completely.
Henley and Partners, which helps the world’s richest people take advantage of various countries’ policies to give citizenship in return for investment, reports that China still has by far the world’s highest number of millionaires trying to get their wealth out.
And Canada shows up as the fourth most desired country for international multimillionaires ready to pay for a so-called “golden passport.” They become permanent residents in Canada through the federal Liberals’ new Start-Up Visa program and through the backdoor of Quebec’s immigrant-investor scheme.
What’s more, Juwai, which monitors the desires of the more than six million residents of China who are worth more than US$1 million, reported that in early 2023 Canada stood out as this wealthy cohort’s third most sought-after country for real estate investment.
That has a big impact on a country like Canada, which has less than three per cent of the population of China. It can particularly jolt Vancouver and Toronto, which have by far the largest cohorts of migrants with origins in the People’s Republic.
The Canadian condo scene now comes with trans-Pacific turbulence, to say the least. Hutchinson says many of the scores of pricey condos that are now going on to the Vancouver market were originally “sold in presentation centres offshore.”
Most, Hutchinson believes, were snapped up as pre-sales. They were designed for flipping. Now many speculators are in a bind.
While their financial pain might end up going deep, there is a chance others could benefit, with a possible trickle-down effect on prices.
Still, in Metro we’ve learned not to hold out too much hope for real affordability.