Canadian Housing Bubble caused by Money Laundering from #China #bubble

Canadian housing markets has not yet experienced a housing bubble bust like the US did yet, but they have never been a run-up in prices like the past 20 years either, nor have they ever had such insane levels of household debt. Canadian housing markets are in a category of their own. No housing market in the US – no matter how crazy Housing Bubble One was, which began to implode in 2006, or how crazy Housing Bubble Two is or was , can hold a candle to the most splendid housing bubbles in Canada. Instead of a Financial Crisis and a mortgage crisis and Housing Bust One, the bubbliest Canadian markets only had a little-bitty dip, and within months were back on track to what would be an 18 year housing boom that is now coming undone. Prices are completely disconnected from local economies , especially in Vancouver and Toronto where you have Foreign millionaires ,90% of which are Chinese competing with the middle class incomes for housing . That is the play, with a large portion of Central Banking credit expansion and interest rate suppression. Money from China as causing a huge distortion in prices and affordability . Dirty money from China being laundered through real estate has flooded this country which is fast becoming the money laundering capital of the developed world. Add to that the persistent policy of the Canadian governments of bringing 1% of the population into the country each year through immigration is putting somewhat of a floor under prices. It would be like if America was allowing in 3.5 million folks every year and having them settle in California and New York. For Vancouver the biggest driver of housing prices has been “hot” money from China. Canadian authorities obviously looked the other way while this happened. Vancouver is what happens when foreign corruption is permitted to run totally amuck! This has hurt ordinary working Canadians big time! Toronto, Canada’s second biggest housing bubble has also been driven by “hot” Chinese money too. The difference is Toronto is a much bigger city than Vancouver so it would take maybe 3 times or more of the “hot” money to duplicate Vancouver housing bubble. The huge run up in property prices has also resulted in a huge surge in property taxes! Government’s, municipal, provincial, and federal have all been the main beneficiaries of the housing bubble ! . That is probably why they have all turned a blind eye towards the foreign “hot” money being laundered in Canada that has badly hurt ordinary working Canadians! . In addition the capital gains on one’s principal residence in Canada is tax free which is a big incentive for many Canadians to buy the biggest house they can afford. In Canada mortgage interest is not tax deductible per the US. Also property taxes and provincial taxes are not deductible from federal taxes per US. Secondary real estate like cottages faces full capital gain taxes. It is painfully clear that the Canadian housing bubble is demand driven both from immigration and off-shore buying. Not exclusively, but overwhelmingly from mainland China. for decades but starting in earnest in 2009, as the Canadian dollar was under pressure during the credit bubble and subsequent financial collapse centered in the United States. Crony capitalists were moving money out of totalitarian China at attractive foreign-exchange rates and moving into relatively safe havens. Who could blame them? In Canada, they found the rule of law, property rights, clean air and pristine water, freedom, democracy, magnificent infrastructure including world class public and private schools and Universities and Colleges . There is absolutely no question that the housing market in Vancouver and Toronto has been severely impacted by the ingress of dirty money from abroad. Generationals in both cities have been displaced because of the distortion that this money caused in the housing market. There is simply nothing else that can explain the change in the relationship between generational income levels and the price of housing. The Toronto and Vancouver housing story represents a massive generational challenge and significant long-term policy problem. There are numerous cases made to explain the cause, but in reality it is a cocktail of policy failures that puts all levels of government and oversight boards in disrepute. That authorities allowed Canada to become one of the most attractive destinations for laundered funds is a stain that cannot be washed. The degree of incompetence, apathy or worse, collusion in these practices by authorities at all levels is sickening. The British Columbia and Ontario government's pathetic responses to obvious distortionary capital inflows , sopping up units with no intention to rent them, were too little, far too late. yet still managed to conclusively prove that the bubbles forming in both markets were in fact being fueled in part by foreign capital . Foreigners buying a home to park capital, letting it sit empty for years is as commonplace in Vancouver and Toronto . The classic economic tenants of supply and demand do not function in a distorted market. As foreign capital is juicing the market, gobbling units and driving up prices. In many cases this is done to avoid capital controls or launder funds. In such instances, there is little imperative to rent them out. Money laundering , QEs , Low interest rates and the Search for yield have fueled wild speculation across all assets whether it is Housing or the stock market. Those fortunate to buy at the market bottom in 2009 may be wise to sell now before the Bubble pops again . Many Canadians need a big big wake up because the longer this nonsense continues the worse it is and the more drastic the finish.









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