"This Is A Ridiculous Joke" - An Abandoned, Rotting Vancouver House Is Listed For $7.2 Million

Tyler Durden's picture

One month ago, we wrote about the curious story of several Vancouver homes which sold in 2011 to Chinese buyers for millions and dollars, and which had since been left completely abandoned, vacant and rotting. As Postmedia News first reported that the home — in the 4100-block West 8th Avenue, bought for $4.6 million in July 2011 by Huaican Ren and his wife Xuepei Sun, was subject to a City of Vancouver "untidy premises" order.

A quick reminder for those new to the story:

The Point Grey property stopped functioning as a home and became a storage of wealth six years ago, according to property documents and a neighbour’s account.

 

It was well-cared for in 2010 when it was sold to an investor. Since then it has been flipped through a property transfer in a Beijing law office and left unoccupied.

 

Current owners of the other vacant property residing on the 4100-block 8th Avenue West home are Huaican Ren and Xue Pei Sun.  Since the purchase, the current "owners" have not been seen. Huaican Ren is founder of a number of China-based companies with interests in real estate development, as well as gemstones, retailing, tourism, and restaurants. His wife is a shareholder in companies.

 

City hall is currently trying to estimate how many Vancouver homes are vacant. And these online communities are anecdotally gathering photo evidence and coming to conclusions that offshore investment is to blame. In other words, the "Chinese."

The property, because "house" is too generous a word, in question - located on the 4100-block West 8th Avenue in Vancouver - is shown below:

 

According to the Global Real Estate Institute, Huaican Ren is chairman of Kunming North Star Enterprise Company Limited and is among “the world’s leading real estate players.”  According to other sources, he is the "founder of a number of China-based companies with interests in real estate development, as well as gemstones, retailing, tourism, and restaurants."

Whatever his profession may be (or was) one thing is certain: he is long gone. 

The Chinese businessman aka "launderer of hot money into Canadian real estate" and his wife also own a $3.57-million Arbutus Ridge home that also appeared to be vacant. The Province attended the Arbutus Ridge home last week seeking to speak to Huaican Ren for this story, and attempted to reach Huaican Ren through the listing brokerage for the Point Grey home. No one answered the door at the Arbutus Ridge home.

What is fascinating is the history of flips involving just this one home, and involving Chinese "investors: Huaican Ren, then listed as “businessman,” and his wife Xue Pei Sun, “homemaker,” bought the home from Wei Min Zhang in July 2011 for $4.6 million.  Wei Min Zhang in turn had bought the home in July 2010 for $3.35 million.

And it is about to be flipped again: according to Sam Cooper of PostMedia news, the vacant, rotting, "ownerless" $6.2-million home is on the market again. For $7.2 million!

While we don't know who the seller is - after all the official owner appears to have disappeared - we have no doubt it will be sold: recall this chart of Vancouver real estate prices, which incidentally is the best indicator of China's capital outflow problem:

We are sad to say that this "abandoned, rotting" house will sell, and almost certainly above asking. At that point we can begin counting down the days until the new owner (Chinese, of course) will likewise disappear. We explained this odd dynamic a month ago:

What is happening is quite simple:

  • Chinese investors smuggled out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
  • They make "all cash" purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in perso, in cities like Vancouver, New York, London or San Francisco.
  • The house becomes a new "Swiss bank account", providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.
  • Then the owners disappear, never to be heard from or seen again.

We also said that "as more Chinese scramble to engage and repeat if only the first three steps, the price of local housing, which is merely a store of value to price indiscriminate foreign buyers, soars while it makes home purchases for the domestic population prohibitively expensive and virtually impossible."

For its part, the local government has no incentive to stop this recycling of real estate: after all the higher the price, and the more the "flips", the greater the taxes collected.

We do, however, express our condolences to the local population which not only can not afford to chase these ridiculous bids ever higher, but is left out in the cold... literally.

It remains to be seen how much longer such Chinese house flipping will continue, because the natives are getting restless, and also angry. 

As we reported earlier this week, when we brought readers the story of another Vancouver shack selling for hundreds of thousands of dollars above asking, everyone involved in these kinds of transactions can not believe what is going on, starting with the real estate agent, who was incredulous. "For it to go over $4 million is remarkable. I had five offers,” he said. “These were local buyers just looking to make a shift who wanted to move into this area."

Thomas Davidoff with UBC’s Sauder School of Business told Vancity Buzz: "These prices are getting pretty freaking nuts in my opinion." 

As a proposition for someone who’s going to live in that house and what you’re getting for four million plus – that is a ridiculous joke and that is not something that’s going to work for people who just make a living in Vancouver," Davidoff says.

We can't wait to learn the reaction of the people who "make a living " in Vancouver when they learn that this "rotting, abandoned" sheck is about to sell above its $7.2 million asking price.

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Freddie's picture

This all has to be some weird way the Chinese are laundering money between other Chinese friends and cronies.

Cognitive Dissonance's picture

There's an old saying. Get while the getting's good.

J S Bach's picture

This is getting to be almost as ridiculous as the fools who pay millions for modern  "art" of elephant dung on the Virgin Mary.

Whom the Gods would destroy, they first make mad.

TeamDepends's picture

Carlton Sheets is spinning in his grave.

lincolnsteffens's picture

Some weird new kind of gentrification. Only the price goes up but the neighborhood deteriorates. If I had a shack in Vancouver and could get that kind of money I'd be a seller, take the loot and go on vacation until the prices collapse. Come to think of it, I'd just move and go on vacation for the rest of my life.

BuddyEffed's picture

Are competing HFTs bidding on this BC house?

Bumpo's picture

Add a coat of paint and ask for $14,000,000. On second thought, just Photoshop the improvements.

Paveway IV's picture

So how do they figure property taxes in Vancouver? Is someone really paying $30K/yr or whatever for property taxes or don't they have any?  

Lore's picture

BC Assessment: Understanding the Assessment Process 

2016 Assessment Overview (c/o YouTube, 5min, published 4-Jan)

Here's an interesting twist:  an unknown number of aging Vancouverites with zero savings and drowning in debt have been withdrawing equity from their homes through reverse mortages (e.g., to buy lottery tickets, no kidding) while simultaneously taking advantage of a multi-year tax deferral program... 

PROPERTY TAXES? DEFER THEM. (Financial Post, 2011)

"It's the norm for people in Vancouver."

Never One Roach's picture

Ho Lee Kow!

 

Those Renovation (Twin) Brothers would love to get their hands on a place like that. For $3.28 million they can fix it up.

Vendetta's picture

yep... move a couple interior walls around, put in some double paned windows, some new carpet, new toilet seats replace formica kitchen counter tops with some marble .. voila' 3.28 million please.... the market only goes up!  They're not producing any more land

zeronetwork's picture

These are times for you to sell online your rotten shed in the mountain of Idaho for $3.5 million. your Chinese buyer will not feel the difference.

847328_3527's picture

The Mainlander money launderer may never even see his purchase. Anything to get the money out. Very inelastic demand/supply.

pitz's picture

There is little to no evidence of any "money" showing up from China into Canada.  Heck, there's not even that much CAD$ overseas that could even be bought to support the sort of flow alleged ito Canada. 

A lot of people have been duped by the local speculative community, in typical Vancouver fashion.  Its unfortunate because the resentment that's building against the scapegoated "Chinese" community in Vancouver is really getting nasty.

TradingTroll's picture

The truth is that because  local developers take out full page ads for their condo towers (there are no single family detached housing ads as Vancouver  doesn't make them anymore aside from some single home  teardowns and renos) the Vancouver  lamestream  media will never criticize local developers. So the scapegoat is the Chinese. But developers  buying land assembly blocks at $30m  for 8-10 houses are reporting negative  margins but they keep going hoping things will improve.  By that it means developers need higher condo prices to cover costs. In the stats chart in this post it shows avg. condo  prices of $721k. Since Vancouver  is now at $1200 per buildable Sq ft that's a small condo. The developers want higher condo prices but when the City of Vancouver  takes $100k in fees and permits per condo you can see how skinny margins are. So, when the developers stop depleting supply then prices will stabilize. This year  the City of Vancouver  is slated to demolish almost 1000 homes. Many of those will be replaced with condos. Eventually  though the developers  will start hemorrhaging  money. When the developers stop buying and demolishing, prices will drop a bit and a torrent of supply will show up.

 

 

pitz's picture

Condo developers have been caught hiring local "Asians" to stand in line-ups to create hype.  And fabricating hot air balloon and helicopter rides of "Chinese" investors. 

I_rikey_lice's picture

 

Every overpriced shitshack in Vancouver is being sold to Chinese buyers. "Local" buyers are also being funded by their Mainland Chinese counterparts. Real local buyer are either selling or buying about to be leaking, poorly constructed condos/townhouses because that is all they can afford ....until the interest rates start rising.....then they will be fucked!

Son of Loki's picture

Chinese Mainlander cash [from who knows where] even in Texas:

 

Chinese cash floods North Texas with developments in a national trend

 

“When Chairman Zhang saw the strength of the Texan economy, he decided it was time that the Asian community should be presented an opportunity to invest in the American Dream,” marketing materials for the development read.

Zhang paid $6.8 million in cash....

On average, buyers from China, including the mainland, Taiwan and Hong Kong, pay $831,800 for a home, more than three times as much as Americans spend ....

For typical U.S. homebuyers who require mortgages, the influx of Chinese money makes it even more challenging in markets facing low inventory and rising prices. A majority of home purchases by Chinese buyers — 69 percent — are entirely cash, according to the Realtors association.

http://www.dallasnews.com/business/residential-real-estate/20151130-chin...

golden kafir's picture

pitz you obviously don't go to richmond much

pitz's picture

I'm there every few months, why?  Yes lots of Chinese there.  But that doesn't mean they're not Canadian citizens and that doesn't mean that they brought any money from China. 

ebear's picture

"The Mainlander money launderer may never even see his purchase."

Or the people who move in and live there rent free.

MaxMax's picture

I am guessing that this is just another way for Chinese to get their money out of China.  Probably goes something like this:

#1 Start with one rich Chinese guy who wants to get $100M out of China.

#2 Buy a Canadian house for $1M.  Txr $1M out of China for purchase.

#3 Sell house to wife (or second shell corporation) for $2M.  Txr $2M out of China for purchase.

#4 Sell house to son for $4M.  Txr $4M out of China.

#5 Repeat with other friends, neighbors, shell corporations.  I am sure that if they buy from a friend, then their friend is simultaneously buying a property from him as well.

They know they aren't going to sell to a Candian at the end of the day, but that wasn't the point.  They are buying from themselves so there isn't any loss.  With enough Chinese buying in the same area, they can push up property prices so that the Chinese authorities can't say the house value doesn't make sense.

I don't even need to follow the money trail to figure this out because it is so obvious.

pitz's picture

The only "money trail" to follow is that from the local banks who are writing credit to the local speculators.  There is no 'money trail' to follow back to China, that's for sure.

johnconnor's picture

Someone need to open a short Vancouver 3X ETF pronto, before everything implodes

effing idiot's picture

Have the Chinese done any price shopping accross the border? If I was a realtor in say...Bellingham, WA or even Seattle, I'd be taking out billboard ads or ads of whatever kind and advertising wildly overpriced properties. They'd look like downright steals. What am I missing here?

ZD1's picture

 

 

No need to advertise.

Rich Chinese buyers have been snapping up properties in the Seattle area for the past few years.

http://www.seattletimes.com/business/economy/affluent-chinese-see-upscal...

 

 

Kirk2NCC1701's picture

Great time to be a Mandarin Realtor. As if anyone else has a chance.

In their case, it IS a big club, and you ain't in it, you 'Hosers'.

U4 eee aaa's picture

election is coming next year. People are counting down already

Normalcy Bias's picture

Sheets was a piker compared to Real Estate uber Pimp, Tom Vu...

https://www.youtube.com/watch?v=kzsSpDyBc_4

Gold Pedant's picture

Virgin Mary's image on a grilled cheese sandwich, however, is modern art in my book.

 

I can usually pick up on what I read in the postings here, but would someone clarify the implications of this?

What is happening is quite simple:

  • Chinese investors smuggled out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
  • They make "all cash" purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in perso, in cities like Vancouver, New York, London or San Francisco.
  • The house becomes a new "Swiss bank account", providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.
  • Then the owners disappear, never to be heard from or seen again.

Presuming that this is necessarily happening in a bubble (and driving a bubble hard at that), why does the house retain its value of the cash outflow once the bubble has collapsed? Is the implication that the buyer and seller are the same party? Sorry, been a long day, but I want to get this...

 

pitz's picture

There is no "Chinese money" in Vancouver.  Once you are disabused of that notion, and realize that its local speculators, like this guy quoted in the Globe and Mail, driving any alleged "appreciation" (whcih is only against a very narrow cross-section of properties), you'll understand that most of these "Chinese" money stories are mere concoctions.

http://www.theglobeandmail.com/news/investigations/the-real-estate-techn...

"“It worries me a lot that this could all come crashing down. I worry about it all the time,” said one Re/Max agent, Khalid Hasan, who said he owns or co-owns 15 to 20 properties, all destined for resale."

monk27's picture

Who exactly has the money to pay this sort of money from the locals ? Pray tell us...

pitz's picture

The local banks are extremely easy with credit.  And a lot of it is just flipping amongst themselves.  Speculator A sells Speculator B house X, and Speculator B sells Speculator A house Y.  If Price of Y = Price of X, then no actual "money" changes hands on the net, but they claim a much higher valuation.

Since evidence of "Chinese" involvement in Vancouver RE is minimal at this point, and exports of currency are a bigger concern, this is likely what is occurring. 

MayIMommaDogFace2theBananaPatch's picture

Are the names of the owners, listed in the article, concocted?  Would you go so as far as to say that?  Just askin'.

pitz's picture

In the specific instance quoted in the article, the Chinese guy is trying to sell into the bubble.  *sell*, not buy.  Which makes perfect sense given the collapsing business environment in China, particularly in the RE sector, and the need for liquidity to support collapsing Chinese investments.

I don't know if this listing will result in a sale, but you can't fault the guy for trying to hawk his property. 

The narrative, that its Chinese coming to Canada trying to convert cash to housing, is demonstrably false, and is definitely not supported by this "listing" which actually portrays quite the opposite.

Spitzer's picture

You are 100% right. I am so glad somebody is saying it.

I live just outside of Van and the speculation is leaking outward. Even to agricultural land reserves. ALR land an hour away from Vancouver is selling for $77,000 an acre. All you can do on the land is grow grass and yes there is industrial sized farms in the area. But they rent the land amongst each other for $300 an acre per year. Yet they will pay 70 to 80,000 for it.

adeptish's picture

ALR land an hour away from Vancouver is selling for $77,000 an acre.

Bullshit.

Where?

buzzkillb's picture

Who do you think is buying? And any ideas why?

I know for sure Chinese are still buying in SoCal. Its still quite insane what I am seeing through my own business.

I see this playing out very differently. If you can buy for cash and RE drops who cares, then the businesses will come in and scoop up the remaining land for cheap. Eventually you have no mortgage people and businesses owning all the land. That's how you win at monopoly at least.

I know one local LA RE company that owns a huge portion of commercial RE in one major LA City, and it took them about 40+ years to do this.

pitz's picture

Local speculators.  Realtors who own "15 to 20 properties" such as this guy quoted in the Globe and Mail:

http://www.theglobeandmail.com/news/investigations/the-real-estate-techn...

"It worries me a lot that this could all come crashing down. I worry about it all the time,” said one Re/Max agent, Khalid Hasan, who said he owns or co-owns 15 to 20 properties, all destined for resale." 

 

ebear's picture

"The narrative, that its Chinese coming to Canada trying to convert cash to housing, is demonstrably false..."

Then demonstrate it. So far, all you've done is wave your hands about and point to a few news articles.

Do you even live in Vancouver?

Deliverator's picture

The narrative, that its Chinese coming to Canada trying to convert cash to housing, is demonstrably false, and is definitely not supported by this "listing" which actually portrays quite the opposite.

BS. It is demonstrably obvious to anyone living in the West Side of Vancouver, like myself. You obviously don't have the first clue what you're talking about.

Reichstag Fire Dept.'s picture

You couldn't be more wrong, pitz. I lived in the Vancouver area and have seen the "invasion" first hand. Furthermore, I have a friend in Korea with a Private Equity firm that confirmed the horribly complex scheme the Chinese use to get money out of their country.

The properties change hands because the fees need to be paid at some point The fees are driving the price increases, that's why there is no correlation between the price and the market. They try and hide these valuations by shopping in big markets...only problem is, Vancouver is more like a village and you tend to find out everyone elses business eventually.

MisterMousePotato's picture

This is what I also cannot figure. Sure; overpay by a few thousand or a couple percent maybe, but to pay many, many multiples of what something (anything) is worth is nuts, hot money or cold.

pitz's picture

Its not nuts if you (and your speculator brethen) hold hundreds of houses against which the amount of credit available is set based on a reference price.

Pay an absurd amount for 1 house, and wham, the bank will extend much more credit against 100 others in the neighbourhood.  Cash that can be extracted and secreted for the inevitable collapse.  Specu-vestors, Realtors, etc., likely hold many thousands of units in Vancouver that they're trying to get rid of against collapsing demand at this point.

 

 

MisterMousePotato's picture

Even if you're correct (and I can see how, ultimately, the taxpayer[s] end[s] up eating the losses), still, wouldn't it be easier, with less risk, for the hot money simply to buy (other) assets at or about their actual value?

nmewn's picture

So, the Canadian government sold off all their gold huh? ;-)

aurum4040's picture

Yup and their next move is going to be nationalizing the Vancouver real estate market instead of Canadian mines. It will surely stop the loonie from free fall. 

 

/ sarc