Chinese Driven Vancouver Housing Bubble Moves To Seattle - "This Is Vancouver 2.0"

Tyler Durden's picture

Back in August we noted that the Vancouver housing market was doomed after the implementation of a 15% property tax on foreign buyers targeting the massive influx of Chinese money driving real estate prices to astronomical levels.  Sure enough, within a matter of weeks home prices had plunged and so had the volume of residential real estate transactions (see "As The Vancouver Housing Market Implodes, The "Smart Money" Is Rushing To Get Out Now").

Three weeks after we suggested that the Vancouver housing bubble had popped in the aftermath of the implementation of the July 25 15% property tax in British Columbia targeting the Chinese free for all in Vancouver real estate, we got confirmation of that last week when we reported that only one word could describe what has happened to Vancouver housing in the past month: implosion.

 

Zolo, a Canadian real estate brokerage, which keeps track of MLS home sales in real-time and reports prices as an average rather than the “benchmark price”, showed as of last week a major correction underway in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago. 

The number of transactions has likewise slammed shut: while August is typically one of the slowest months for real estate transactions, MLS sales data from the first two weeks of the month shows what many have been hoping for during the last few years of escalating prices. According to MLS listing data, there were only three home sales in West Vancouver between Aug. 1 and 14 this year, compared to 52 during the same period last year. That’s a decrease of 94%.

But, of course, all that laundered Chinese money has to go somewhere...and preferably somewhere without a 15% penalty tax on foreign buyers.  So, at just a hop, skip and a jump across the border, wealthy Chinese citizens looking to move hot cash offshore have set their sites on Seattle.  According to Bloomberg, within days of the implementation of the new Vancouver tax, real estate brokers in Seattle saw a noticeable increase in inquiries from Chinese buyers.

Just a few days after Vancouver announced a tax on foreign property investors, Seattle real estate broker Lili Shang received a WeChat message from a wealthy Chinese businessman who wanted to sell a home in Canada and buy in her area.

 

After a week of showings, he purchased a $1 million property in Bellevue, across Lake Washington from Seattle. He soon returned to buy two more, including a $2.2 million house in Clyde Hill paid for with a single cashier’s check.

 

Shang says she’s been inundated with similar requests from China and Hong Kong after Vancouver’s provincial government enacted a 15 percent tax on foreign homebuyers in August to help cool soaring real estate values. With Chinese investors -- the largest pool of foreign capital -- looking for a place to put their cash, the unintended consequence of the fee has been to push demand to cities such as Seattle and Toronto.

 

“The tax was the trigger of this new wave of investment now coming to Seattle," Shang said. “Why pay more for the same thing?"

 

“Chinese money isn’t going to sit and wait," said David Ley, a Vancouver-based professor at the University of British Columbia’s Department of Geography, who focuses on housing. “Investors are going to find another city," and Toronto and Seattle are the top two contenders, he said.

Home-purchase inquiries from China have jumped materially in Seattle and Toronto since the Vancouver tax was announced, according to Juwai.com, the country’s largest overseas property website.

Vancouver

 

Just like Vancouver, the biggest impact from the influx of foreign capital is on the higher end properties in Seattle with one broker pointing out that the share of homes selling for over $1mm has doubled year-over-year.  And, in case there was any doubt about who was driving those high-end real estate prices higher, Sotheby's notes that 50% of the houses it sells in the Seattle suburbs are now going to Chinese buyers, up from roughly 30% last year.

While there are no figures specifically showing purchases made by offshore buyers, brokers say demand in Seattle and Toronto has been robust, particularly for the high-end properties Chinese investors tend to favor. In Seattle, about 12 percent of all homes this year sold for at least $1 million, double the share over the last decade, according to brokerage Windermere Real Estate. Single-family home prices in King County, where the city is located, jumped almost 15 percent in October from a year earlier, data from the local Realtors association show.

 

The average price of a Greater Toronto home rose 23 percent in November from a year earlier to C$776,684 ($586,530), while sales soared almost 17 percent, the local real estate board reported Dec. 2. In Vancouver, meanwhile, sales have plunged since July and were down 37 percent last month compared with the prior year.

 

Dean Jones, chief executive officer of Realogics Sotheby’s International Realty, which specializes in high-end properties and has a unit that caters to Asian buyers, estimates that about half of the homes his firm sells in Seattle’s suburbs are going to Chinese purchasers, with many of the transactions requiring the use of interpreters, international banks and multiple escrow deposits. That’s up from about 30 percent last year, he said.

 

“This is Vancouver 2.0," said Jones, who lived in the Canadian city about two decades ago, when the capital flow from Asia started to accelerate. “A lot of the same motivations and goals are being replicated in Seattle.”

Well it should be fun to track exactly how many quarters it takes for Seattle's high-end real estate prices to bubble over and crash...any guesses?

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Schmuck Raker's picture

Wait, there's a "Vancouver West" AND a "West Vancouver"?

Hunter S. Thompson's picture

Yes there is, one is just south and west of Downtown and the other north across Lions Gate bridge on the west side.

bamawatson's picture

half past a monkey's ass
a quarter to his balls

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) bamawatson Dec 8, 2016 1:33 AM

Yo China... You can't eat a house.

https://localbitcoins.com

Buster Cherry's picture

True, but no one wants to eat their gold in the cold rain either.

Schmuck Raker's picture

+1, I'd give an extra +1 if I could just because it took me a week ;)

TradingTroll's picture

Vancouver West is the Western side of the City of Vancouver

West Vancouver is an incorporated municipality across the bay from Vancouver and Vancouver West, on the North Shore. The North Shore also includes North Vancouver (city and district).

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) TradingTroll Dec 8, 2016 1:35 AM

I like East Vancouver. Yeah it's freaky... but at least the people there are real which is more than you can say for much of the other cookie-cutter consumers living in Vancouver. Plus lots of cool pawn shops, coin shops and stuff that will bargain with you to make a sale.

HRH Feant's picture
HRH Feant (not verified) Schmuck Raker Dec 8, 2016 1:55 AM

North Vancouver is where the filthy rich live.

There is also a city in Washington state that is called Vancouver.

Bellevue is a burb located across a floating bridge or a non-floating bridge (there are two bridges) from Seattle. Good luck dealing with traffic. No subway, there are two bridges or you can drive around the lake (which is huge). Keeps out the low-life's and riffraff. Apparently the Chinese buyers didn't realize that Seattle is run by fucking communists in the same way that Vancouver is run by fucking communists. Sooner or later they will smell money and once the commies start sniffing, good luck keeping your money out of their hands.

evoila's picture

So far no state income tax. It's just a matter of time unfortunately.

Herodotus's picture

They should come to Detroit.  They will get more bang for their buck.

imapopulistnow's picture

More bang......much more bang.

sinbad2's picture

If the US would give up any claim of sovereignty, they would buy Michigan. Hawaii would be an attractive purchase for China, how much you want, I buy your wife, your children, how much?

It would be one way of getting the debt levels down.

hawaiian waverider's picture

Surprising they aren't buying Hawaii up yet.  It's closer, safe and they may feel more at home here than on mainland.  Maybe they are afraid of hawaii.gov jacking taxes as Vancouver did.  It is what hawaii.gov does best.

sinbad2's picture

Well they should do what successful American businessmen do, buy the Government. Politicians are quite cheap.

ILIKEMITTENS's picture

Too late. Japan already owns hawaii. Chinese are about to own wash. and oregon. Is this what the brown clown meant with the pivot to asia? Our defiler n cheif strikes again. How hard is it for people to realise that niggers are incompetent and incapable of running a .gov. They keep hiring them though. Maybe because its cool,like rap music and crack.

andrewp111's picture

They could go to Detroit and buy entire 10 sq mile tracts on the cheap for Chinese houses. But they would have to then pay property tax up the nose to pay for Detroit city leeches.

HRH Feant's picture
HRH Feant (not verified) andrewp111 Dec 8, 2016 1:59 AM

Property taxes in King County Washington will not decrease any time soon. Bellevue and Seattle are both located within King County. Sadly, the entire county is ruled by fucking communists. Don't do what they say and you have to submit an environmental impact statement. Don't want to submit that statement? Don't want to jump through their hoops? Fine. Time to sell. Maybe the Chinese buyers thought they would be free in King County. If so, they thought wrong. The first sellers in a Ponzi always make bank. Those that follow afterwards? Not so much. They will learn.

BarkingCat's picture

I welcome the news of the Chinese doing to Seattle what they did to Vancouver BC.

I own a house in Sesttle and would love to sell it at an even more insane price than it is already "worth".

I really hate that city with a passion.

RaceToTheBottom's picture

They have had direct code sharing flights with South China Sea airlines for a few years and they have been speculating buying whole blocks of Detroit for a while....  

NoDebt's picture

"Come to the light.  All are welcome in the light."

This house is clean.  Bitchez.

IridiumRebel's picture

Poltergeist!
What'd I win!?!?!

Bay of Pigs's picture

You wonder how he will spin this and say there are no Chinese buyers in Seattle either.

umdesch4's picture

Haha! I made a point of scanning all the comments here first, to see if he was gonna spout some crazy lies here. He must be on vacation or something.

Edit: Whoops! I spoke too soon...

golden kafir's picture

i know right..in pitz's defense i had a drunk Sikh in vancouver tell me white people were just renters in their mothers basements not sure if that helps lol

user2011's picture

wack the mole.. countries are taking turns to wack these chinese buyers.. Wack them in vancouver, they move to seattle, milk their money, wack them with big taxes... They take a lost, go to another city. Repeat the steps until all their money is gone.

Abby Normal's picture

It's true.  Neighbors sell houses in a day for multiple offers higher than the asking price.  Local people can't afford a starter house anymore.  

dchang0's picture

Notice that the people who are anti-offshoring aren't complaining about this.

Yet, this is the US dollar coming home to roost. It's all one giant cycle:

  • US consumer buys less-expensive Chinese goods at Walmart = US consumer wins, Walmart wins, Walmart shareholders win
  • Walmart buys Chinese goods from Chinese factories = Chinese factory workers win, US factory workers lose
  • Chinese factory owner amasses small fortune = Chinese factory owner wins, US factory owners lose (maybe, unless they are offshored to China)
  • Chinese factory owner buys US houses from US consumer = US house seller wins, US real estate agents/brokers win

So, we can see that the US house owner is essentially making the money that the US factory workers lost. We have shifted money from one industry (manufacturing) to another (housing).

 

People easily forget that every trade has a counter-party. I have a friend that sold his house in Southern California where Chinese demand is high to move to Dallas where he bought a bigger house for much less. He bought two houses in Dallas for cash using the proceeds from his Calif. house sale, renting out the other, while still working a full-time job, and he's going to retire a millionaire (he's in his early-40s with no rent/mortgage to pay AND a rental income AND a salary). Good for him! But you won't see his winning story told on the news, just the US factory workers who lost their jobs (who are, as usual, asking the gov't to step in and help them).

 

On the flip side, we see the winners of the Carrier jobs deal, but we don't see the many taxpayers of Indiana who will have to pay for some part of it.

Xena fobe's picture

It's been happening in Southern Calif for 20 years.  Blame the traitorous baby boomers who sell to them.  Tney sell and the community is destroyed for the rest of us.

pparalegal's picture

Boomers are not leaving SoCal by choice. Extreme taxes, failing roads, infrastructure and not wanting to live in the third world Mexicans shooting it out with the blacks over turf. The daily police pursuits are entertaining though.  

canisdirus's picture

I live in the region and the madness has spread a solid 90-120 minutes in all directions from the Seattle-Bellevue area. Housing prices are so out of hand that even people with incomes in the top-10% for the region can't afford mere average homes. Add to that the bidding wars on anything even marginally livable.

We also have an extreme shortage of rental units for at least 50 miles in all directions.

Kirk2NCC1701's picture

Keep going south, till you hit Portland. Lots of Residential and Commercial RE, better value than Seattle.

And make it less "Keep Portland weird", with more Chinese restaurants.

Magnum's picture

Lot of scuzzy people in Portland--everywhere. Not sure if Chinese would want to buy in Portland over Seattle. Scenery is nicer in Seattle and there are already so many Chinese buying on the eastside.  I think Chinese are buying more in Newcastle, Bellevue and Redmond than Seattle.  I could be wrong...

sinbad2's picture

The Chinese have a mountain of dollars that are about to expire, they would buy a shit sandwich at the moment. Nobody wants to be stuck holding dollars when the music stops.

dchang0's picture

It could take an instant to wipe out all the value, if the "big one (earthquake)" described in the New Yorker article about the Cascadia Fault Line hits...

WIIIIIIIIPE OUT!

christiangustafson's picture

Could China please hyperinflate and implode already?

bitplayer's picture

Chinese are the first wave. Sontarans are next. 

hawaiian waverider's picture

Best deal Seattle area, easy ferry ride to Bainbridge wayy less in price than comparable Seattle homes but will appreciate once area is discovered

 http://www.zillow.com/homes/for_sale/Suquamish-WA/pmf,pf_pt/2108858829_z...

G-ray's picture

sorry.  thumbs down was a slip.  what I really meant to say is "fuckyou"

 

the people of chief seattle

canisdirus's picture

On the reservation... I work minutes from here and the commute through Bainbridge is a nightmare (it's a two-lane road through a bunch of rich hippies that fight everything tooth and nail; they would never allow a highway widening or bigger bridge).

It is cheap, but it has already appreciated well beyond what that junk is worth (the houses are literally garbage). A few years ago housing was 1/3-1/2 as much there before all the Seattle people moved in and drove out the natives. It used to be nothing but drug addicts and drunks, and there's still a little seedy underbelly there.

Poulsbo is nice, but you're at least a megacommute (90+ minutes) from jobs that pay more than Seattle's minimum wage.

in4mayshun's picture

PET-PEVE ALERT!!!! The houses are LITERALLY garbage? What type of garbage are they made with? Surprising a community would allow an entire neighborhood to made with garbage.

Or did you you mean they are "figuratively" garbage? Because "literally" means the exact opposite.

Please for the love of God, stop using this word in the exact opposite of its meaning.

And yes, I know something this petty earns me the tool-of-the-day award, but this phrase figuratively drives me bananas.

canisdirus's picture

In this case, it's accurate. Many houses there are a sort of cold-weather wooden version of a third-world shanty. Ramshackle structures based on an old trailer (or, occasionally, a small wooden house) that were extended and repaired using any materials available (many seem to be built of pieced-together construction waste or scavenged from old trailers). In recent years, many of the broken windows covered in plastic have been replaced with glass and some have even had real rooves installed to replace all their frayed old tarps/rocks, but the terrible rotting base structures remain.

I am fairly sure nobody enforced any kind of building code for much of the history of the town.

south40_dreams's picture

I spent two years in Seattle metro and I must agree that most houses are more than a bit shabby. But that goes along with being the white trash capital of the world. Some people love the place, I never did understand the appeal.

Dr. Bonzo's picture

Dear Commie Money Launderers,

You'll thoroughly enjoy Seattle. Unlike Shangcouver, Seattle has an actual indigenous negro population that has been economically stagnant since the 1960s. They refuse to work, wouldn't know how to work if work hit them in the head and althought they are only 2% of the local population, young black males between the ages of 14-31 make up the perpetrators on over 47% of all criminal complaints. Luck you! Here's some more good news though... another 22% of criminal complaints are produced by other minority ethnic groups including wonderful Latino population, actual African Africans, and of course the smorgasbord of Southeast Asian errant yout. Yeah! The "mulitcultural" dream is alive and well in Seattle. You Han commies will fucking luvvvvv it.

Your appetite for metropolitan nightlife is well known. Seattle will not disappoint. All the main hipster yuppie watering holes are smack dab in the middle of urban crime hotspots. You will be able to enjoy drive-by shootings, assaults, gang fights, random shootings, and all the other delectable offerings of the floundering American dream. Oh, and don't forget the home invasions. As new immigrant assholes, you're presumed to be unarmed, loaded with cash... and highly unlikely to call the police when you get liberated of your own ill-gotten gains.

On behalf of all local Seattle gangstas.... bring dat shit yo.

Magnum's picture

I don't think so.  If you compare Seattle today: areas like the Central District, Queen Anne, West Seattle, even Rainier Beach, everytihng is WAY nicer than it was in the 1980s or 1990s.  I'm talking about how to homes are really well-kept, sidewalks clean, etc.  I can't believe how nice Seattle has become.  Then you go to the eastside and literally everytihng is immaculate, for miles and miles and miles.  Home invasion?  Doesn't happen.  In days gone by White Center was a war zone.  Even Delridge and White Center area  bit nicer, though not much.  All the riff-raff seems to be in Tacoma/Federal Way/Kent, and those places are NOT Seattle.

canisdirus's picture

Very accurate. It's often shocking how much of the area is so dangerous. It's also odd how the town has so few blacks but they commit so much crime.

You didn't touch on the homeless. The homeless population is so big that they've produced entire named shanty towns in vacant lots throughout the city.

pparalegal's picture

I love getting the daily Seattle Times leftie updates in my email. Lately it is the do-gooders banging on the city's tables demanding free doctors, nurses and buildings for a city funded free clean needle heroin flop house or two downtown. It seems way too many of the unicorn candy sanctuary city's addicted are expiring on the sidewalks, blocking the tourist and 9 to 5'ers foot traffic. 

Xena fobe's picture

They love the U.S., Hide wealth and bring grand ma over to get taxpayer funded medical and medicare. Open a cash only business. I just wonder what we'll do with all of them in the event of war with China.