The Crackdown Begins: Chinese Bank Sues To Seize Vancouver Real Estate Assets

Tyler Durden's picture

From the very beginning of Vancouver's housing boom episode courtesy of an invasion of shady Chinese hot-money laundering home buyers, which has now officially driven the average list price of Vancouver single homes above $4 million...

... we have wondered how long before the Chinese government and financial institutions, if not Canada's local authorities which apparently have no problem with a soaring housing bubble in their midst, finally crack down on these flagrant violators of China's capital controls, whose children have been so openly flaunting their parent's illicit wealth as reported in "My Daddy’s Rich And My Lamborghini’s Good-Looking": Meet The Rich Chinese Kids Of Vancouver."

We now have the answer.

According to the Globe and Mail, China CITIC Bank has filed a lawsuit in Canada to try to seize the assets of a Chinese citizen the bank claims took out a $10 million loan in China then fled to Canada.

In a first of its kind attempt at intercontinental repossession, the bank is looking to seize numerous Vancouver-area homes, valued at at least $7.3-million, along with other assets, according to the lawsuit, which was filed in the Supreme Court of British Columbia in Vancouver on Friday.


This $3.5 million home in Surrey B.C. is one of four homes a Chinese bank
claims are owned by a fugitive who defaulted on a $10 million loan.

The defendant, Shibiao Yan, owns three multimillion-dollar properties in a Vancouver suburb and lives in a $3-million Vancouver home owned by his wife, according to court documents, the Globe and Mail reports.

China has been in the midst of a major corruption crackdown and has stepped up efforts to find fugitives it says are hiding stolen assets abroad. In which case it will have lots of fruitful leads in Vancouver where virtually all real-estate purchases over the past year by Chinese "figutivies." The lawsuit comes amid a debate about the role foreign money, particularly from China, has played in Vancouver’s property boom.

“The person involved left China with a large debt owed,” said Christine Duhaime, a lawyer who represents China CITIC Bank in the case, adding that she was not aware of any criminal charges against the man. Yan has not yet filed a response to the lawsuit and the claims have not been proven in court. We doubt he will appear.

Duhaime  would not comment on the proceedings, but tweeted that the case was of "global significance for China". The reason is clear: it sets a precedent for many future such lawsuits, and confiscations.

As CBC adds, last week, Justice Gregory Bowden issued a temporary Mareva injunction against Yan, freezing his assets as the bank tries to make good on an arbitration ruling it claims to have obtained in March, ordering Yan to pay RMB 50 million plus RMB 2 million interest. According to the court documents, Yan incorporated a company in B.C. called TYMY Investments in March 2014, and his 36-year-old wife paid $2.5 million for a house in Vancouver a month later.

China has been working with Canada for years to finalize a deal on the return of ill-gotten assets seized from those suspected of economic crimes. The agreement was originally announced in July 2013 and has not yet been ratified.

But, as G&M notes, it is rare for Chinese banks to use Canadian courts to pursue those who have left the country. Chinese Foreign Ministry spokesman Hong Lei said the bank was protecting its rights in accordance with the law.

“This is a normal thing to do internationally,” Hong told reporters in Beijing.

According to the lawsuit, China CITIC Bank is seeking repayment for a line of credit worth 50 million yuan, or roughly $7.5-million, taken out by a Chinese lumber company and personally guaranteed by Yan, who was the company’s majority shareholder at the time.

Just like this website, Vancouver residents have questioned the legitimacy of foreign funds invested in the city’s real estate market and have urged authorities to do more to scrutinize their origin.

So far Vancouver authorities have done a terrible job of responding to these requests, and as a result housing prices in the west coast city have jumped 30 per cent in the last year, in the process pricing out virtually all local buyers, especially since in recent weeks local banks have clamped down on the issuance of mortgages for the luxury sectory, well aware that the bubble is about to burst.

And since Canada would do nothing to hinder the parking of hot Chinese money locally, China decided to take matters into its own hands. If successful, and it will be as we doubt Mr. Yan will dare to appear in court resulting in a prompt confiscation of his assets, the action will have a chilling effect on all future purchases, and will most likely lead to a selling avalanche as the Chinese elite in Vancouver scramble to offload its domestic assets and find a new safe haven where it can park its money for the next few years.

In other words, with CITIC's lawsuit, the beginning of the end of Vancouver's housing bubble has officially begun.

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trader1's picture
Explosion flattens Mississauga homes Canada News  6 minutes ago Reports say four homes were damaged in the blast near Toronto on Tuesday afternoon. https://twitter.com/i/moments/747894580763303940
robertocarlos's picture

Another meth lab up in smoke.

Stuck on Zero's picture

I really hope the Canadians crack down on these Chinese criminals.  Then they'll come here to California and spend all that pilfered loot.

Arnold's picture

Central Valley has a long history of coolies.

'Rich' Chinks, not so much.

In fact, having spent some time there, the spics would take care of business.

knukles's picture

Stoilen leveraged refuge money.
Brilliant.
Anybody ever tell any of them about "low profiles"?

Automatic Choke's picture

Vancouver real estate crash coming in 5.... 4.... 3.... 2....

willwork4food's picture

That appears like a gas line rupture viewing the vids.

Handful of Dust's picture

I'm surprised it took so long for the Chinese to figure this out. When they start hacking away at SF we will see thousands of embezzlers running in every direction. So far, all they are after is the stolen loot. If they decide to chase them on criminal charges we'll see some real action! The local law enforcement will surely cooperate if they get a share of the repossession money.

 

If I were a Chinese  embezzeler, I would be selling fast before the collapse [ and indictments] and moving into something easy to hide like Gold, Bitcoin, Platinum, Silver,  etc.

Quantum Bunk's picture

The local speculators and banks are the most culpible for these prices. Not just the Chinese.

 

 

fiatmadness's picture

I heard london is now free of the shackles (and oversite) of the EU and a really really good place to hide your ill gotten yuan.

Quantum Bunk's picture

The Brittle limey chavs will be worse than the eu

pitz's picture

Only problem is, throwing a few Chinese "criminals" out won't make one iota of difference to the Canadian RE market which is levitated on account of Canadian citizen speculators using credit from Canadian banks.  It might be good for show and tell, but won't accomplish anything but PR. 

U4 eee aaa's picture

Then why is it only happening in trophy cities Vancouver and Toronto if it is a Canadian problem? I agree the policies for RE are contributing to it

pitz's picture

There's extremely inflated RE in many other Canadian cities.  Lethbridge.  Medicine Hat.  Red Deer.  Kelowna.  Kamloops.  Winnipeg.  Regina/Saskatoon.  Perhaps not to the same extent, but the multiples are extremely stretched beyond their historic levels in those cities as well in addition to many smaller centers.  Domestic speculation, not foreigners.  It gets amplified in Toronto/Vancouver on account of the concentrations of speculators who are de facto non-recourse borrowers in those cities. 

 

bigkahuna's picture

Im sure our friends up north saw what happened down here when we blew our fuse in 07-08. Hopefully they will not repeat it (CDOs and other fraudulent mortgage backed securities).

If your (and our own) banks start getting into this crap again - we get what we deserve.

pitz's picture

In Canada, instead of fraudulent securities, the bad mortgages are mostly passed onto the government owned subprime mortgage guarantor. 

Laowei Gweilo's picture

the recent viral Youtube videos of the family brawl at a Mississauga Walmart and the downtown 'this guys hardcoreeeee'/driving on rims Mississauga police chase....

another meth house blows up....

 

Surrey ain't got nothing on Mississauga !

Event Horizon's picture

Another propaganda piece by the Tyler Durden(s), must be real short those Canadian mortgage Co's... right guys...

The Vancouver area housing bubble must be caused by all the Chinese buyers who are using dirty money or all those corrupt realtors breaking the rules or maybe the corrupt local governments..

Nope, it is the supply stupid, the number of single family detached properties (where all the big price gains are) is not rising. Vancouver is built out, they can only go up, more condos and less detached single family homes. Condo prices are rising modestly with fundamentals but the SF detached homes are skyrocketing because they are supply constrained..

94% of the land in BC is crown and 5% is ALR (no development) that leaves 1% private developable land compared to 60% on average for US States.. add to that the BC climate and geography and you have a very tight land supply concentrated in the Lower Mainland, 2/3rds of which is in ALR.

To blame a few corrupt Chinese buyers or corrupt realtors as a driver of price is propaganda by short sellers and Leftists who want more taxation and redistribution.. 

They get headlines but are just a strawman..

 

 

 

 

 

Quantum Bunk's picture

What is your point ? They can open up 1000's of acres of ALR land plus the 2000 acre military base in Langley could be sold off.

 

This is one of the greatest real estate bubbles of all time no matter how you slice it and it is going to explode.

Event Horizon's picture

No they can't politically, but if they did open up the ALR and added supply it would have an effect on prices. The "Left" here would go nuts about touching the ALR, ironically they are the same ones complaining about rising prices.. the "LEFT" is pushing urbanization and they support restrictive land use legislation.

but, I am 100% correct unlike the Starwman BS stories ZH has been running for maybe 5-7 years trashing Vancouver RE and wrong the entire way..

If you take a map of BC, overlay Crown land, then overlay ALR land you'd understand how little land is really left.. and everyone want to live in the Lower Mainland due to climate and geography..

In the US, the average is 60%, not 1%...

 

crown vs private land, private purple..

http://40.media.tumblr.com/2410fe72393357ea0b00f50272065562/tumblr_mmeay...

and ALR (Agricultural Land Reserve) map, zoom into the Lower Mainland..

http://apps.gov.bc.ca/pub/dmf-viewer/?siteid=7180127263339106301

 

Contrary to what you hear from the punditry class, it is the land supply that is the real driver... other factors are on the margins..

 

 

 

 

 

jcaz's picture

Dude, you try to yammer your theory (which is not backed by the numbers you clearly made up) every time Tyler mentions Vancouver real estate-  fuck off already.

Event Horizon's picture

Pinhead...  ZH crowd has really gone downhill over the years, too many are closed minded and accepting of the propaganda.. must be that "Progressive" education.. ZH has been wrong on Vancouver RE for a very long time..

If those are the actual numbers then I have a credible argument right,,

Well, they are the numbers, go look them up... 

 

Dubaibanker's picture

Research and data suggests that over one third of all homes sold in Vancouver area and now many in Toronto are purchased by mainland Chinese. This is nothing but money laundering since each individual is only allowed ot bring USD 50k pa per person out of China.

Chinese real estate investors are reshaping the market - Maclean's

 

http://www.macleans.ca/economy/economicanalysis/chinese-real-estate-inve...

http://www.bloomberg.com/news/articles/2016-04-13/chinese-buyers-hungry-...

The Canadian Central Bank Governor as well as the Mayor of Vancouver have sounded alarm and want to tax the "empty home syndrome" in Vancouver.

Poloz Sounds Alarm on Toronto, Vancouver Housing Risks

 

http://www.bloomberg.com/news/videos/2016-06-10/poloz-sounds-alarm-on-to...

http://www.bloomberg.com/news/videos/2016-06-07/vancouver-mayor-seeks-to...

Question is: Should we believe the real data/Mayor and Central Bank Governor or....you?

Event Horizon's picture

The one third mainland chinese study was a BS back of the envelop estimate by an individual with zero statstical evidence. In fact the number was one third of the value, not homes sold as you incorrectly stated. The Mainland Chinese are buying the higher end of the market so higher value per transaction..

The Vancouver Mayor is a moron Progressive nutcase...  he won't admit that zoning and massive development costs are contributing,, on average $100,000 per unit..

BS on BOC,, Poloz actually said that the rate of increase unsustainable, true 30% in one year is an outlier but the propagandists twisted it to infer a collapse. Of course the RATE of incease is unsustainable that doesn't mean a drop in price, just a drop in the rate of increase. Typically Vancouver area prices will have a short steep ramp up then level out or drift down for a few years then have a quick ramp up..

So, your data is bogus or half truth propaganda to scapegoat,, Real Estate is very complex and very localized, Vancouver has been very overpriced for at least 40 years.. and BTW since when does a Lefty Mayor and a central banker suddenly get cred??? WTF is that.. You beleive everything from Yellen and De Blasio..

I have reserched this and my data is correct, I am not a realtor either, supply is the primary driver the other factors do play a role but are being elevated by those who are either ignorant or have an agenda.

 

 

Dubaibanker's picture

OK, We get it!

Everything from National bank to Bloomberg to Mayor to Central bank to RBC is BS but ...you (of all the people) are correct!

Ho hum!

This is what London used to say and so did HK and so did Sydney....and all have dropped....

so...big LOL

Canada has been stable thus far, but we all saw what happened in Calgary......but money laundering haven for Chinese, thats the backbone of Hongcouver. 

But you wont get it unless you open your mind or understand economics....or how do Chinese actually bring money to Vancouver when it is banned in their own country to take it out....

pitz's picture

The "30%" claim is entirely on account of a severe shift to the sales mix.  Not that individual houses have actually appreciated.  If only high end units in a market 'move', of course average transactions will rise.  If you sniff beneath many transactions in the GVR, you'll see that they're between not even truly arms-length entities.  With most rental properties cash-flow negative, the big landlord families that control them have to create the allusion (delusion) of rising prices to keep bankers happy lending at the inflated valuations.

"Chinese" are minimally involved.  The speculators are almost entirely Canadians.

 

Richard Head's picture

The dumb fuck "Event Horizon" must be a Vancouver realtor still telling everyone that "it's a great time to buy!" because the market is healthy. So just go ahead and ignore the Chinese dirty money bubble. "Buy now or get priced out forever", right jerkoff?

Event Horizon's picture

No, not a realtor, but your childish personal attack and lack of intellectual integrity suggest a severe underlying emotional issue..

Bay of Pigs's picture

At least he's not in denial like you are. Who do think you're kidding with this crap?

Event Horizon's picture

I'm not the one in denial..  

Quantum Bunk's picture

It can only offcially be a bubble if we have retards like you.

 

Thanks for the muich needed proof

Event Horizon's picture

I see logic isn't your thing..

pitz's picture

Land shortages would be reflected in rents.  Rents are not particularly high.  If anything, renting is pretty cheap in Toronto/Vancouver.  The ALR will eventually be developed as physical demand presents itself.

Omen IV's picture

MAKES NO SENSE

Vancouver existed for 100's of years w/o run up of this magintude until the chinese showed up and engaged in parking

- the source of income in V. is timber / mining / fishing / software / ?? - there is nothing in the margins from those businesses that is so terrific for local cash flow - even in the heyday of Medellin where bIllions were minted the RE never got silly even without the 1% land availability as you suggest

 

Parking !

Kirk Lazarus's picture

Well said Event Horizon.

Safe and politically stable country, beautiful city, severe constraints on new supply and a world market for offshoring of wealth. Why the moral outrage or shock? The odd character might be illegit but most are just wealthy people looking to park their cash. No story here except virulent envy by the wage slavers who aren't in on the action.

Don't worry, your masters at ZH, Daniel I and his legion of goons, have probably invested millions of their wealth in this hot market while you dismiss it as a bubble. The irony of this pathetic site never ceases to amaze.

Déjà view's picture

London is hot again...must be 10% £ devaluation you have not heard about.

pitz's picture

Its not even "Chinese" or "Chinese money" driving this (there is next to no evidence of 'money').  If anything, East Indians are far more responsible, especially the "landlord families" that control 20-50 units amongst their extended families, heavily on mortgage credit.  Not sure why Chinese get blamed here, other than, they're an easier target.  Similar problems in San Francisco as well.

sun tzu's picture

Of course, because the Vancouverites all make $500K a year and can afford to buy $7 million houses. A shortage of land automatically translates to people making $500K a year

 

How does one short the Vancouver housing market? Is there an ETF?

Event Horizon's picture

short Canadian mortgage Co's like TSX:HCG

pitz's picture

Own CAD$ and GoC bonds which should shoot to the moon once the debt deflation cycle really starts accelerating.  Stay the hell away from the bubbly consumer stocks, and selling deep out of the money puts on the banks might capture some tail risk associated with political chatter concerning the CMHC.

Killdo's picture

Vancouver is a shithole - I lived there and could not wait to get out. Small town mentality, lots of drug addicts and crappy weather - I remember once it rained non-stop for 3 weeks. Probably the most boring town I have ever seen (I like Stanley Park though). And very gay

Event Horizon's picture

It has some bad areas, mild climate and socailist Mayor brings many transients,  but it is the best place to be in Canada if you can afford it.

Bay of Pigs's picture

What rubbish. Crowded, horrible traffic, cost of housing is insane. Victoria is a far better city than Vancouver, not to mention many other better places to live in the province. You're fucking delusional.

Event Horizon's picture

Wrong, Vancouver is more desired than Victoria.. 

Maybe you can't read, I wrote if you can afford it.

Canadian Renegade's picture

Let me guess. You own real estate in Vancouver and are in denial?

Median incomes in Vancouver are lower then in Edmonton and Calgary. I know we have no shortage of land in Alberta but at some point the income/home price does matter. Unless you think foreign money will pour in forever or local ponzi scheme investors will be able to continue to borrow huge amounts of money with no rents to cover the payments?

It is this delusional thinking that allows the bubble to build to these proportions to begin with.

jusman's picture

I used to live ('83 - '96) about 5 blocks from there!

mtndds's picture

Its about phucking time!!

Arnold's picture

Yan should write a book I might read.

I'd steal it though.

https://en.wikipedia.org/wiki/Steal_This_Book