donderdag 27 juli 2017

Seattle Home Prices Go Vertical As Laundered Chinese Money Flows In

Last summer we declared that "China's favorite offshore money laundering hub is officially no longer accepting its money" after the city of Vancouver slapped a 15% tax on foreign real estate buyers. The tax was intended to curb a massive real estate bubble which had resulted from an influx of Chinese money over the preceding years. The move seemingly worked as it resulted in a staggering and immediate 96% drop in foreign buyers (see: Foreign Buying Plummets In Vancouver: Sales To Foreigners Crash 96%).
According to data released by British Columbia’s Ministry of Finance on Thursday, foreign investors officially disappeared from Vancouver’s property market last month after the local government imposed a 15% surcharge to curb a record-shattering surge in home prices. Overseas buyers accounted for a paltry 0.7% of the C$6.5 billion of residential real estate purchases in August in Metro Vancouver; this represents a 96% plunge from the seven weeks prior, when foreigners were responsible for 16.5% of transactions by value. According to the latest data overseas buyers snapped up C$2.3 billion of homes in the seven weeks before the tax was imposed, and less than C$50 million in the next four weeks. The government began collecting data on citizenship in home purchases on June 10. The ministry said auditors are checking citizenship or permanent residency declarations made by buyers and also reviewing transactions to determine if any were structured to avoid tax (spoiler alert: most of them were). So, take a look at the chart below and see if you can figure out where all those Chinese buyers may have gone...


As The Seattle Times points out today, Seattle's sudden surge in home prices is the market's most rapid ascent since just before the housing bubble collapsed a decade ago. It marks the most rapid housing-price increase here since 2006, when home values were rising at an unsustainably brisk pace, up to nearly 19 percent growth, before dropping during the recession. The previous high-water mark in the current boom came in fall 2013, when home values soared 13.2 percent. The price hikes also surpass anything Seattle saw during the 1990s or early 2000s (Case-Shiller’s data began in 1990). The market isn’t just hot by Seattle standards: No region in the country has had prices soar this fast in the past three years. The last metro area to get this heated was San Francisco, where home costs soared more than 20 percent in 2013 and 2014.
# Meanwhile, to our complete 'shock', the Times goes on to point out that the Seattle market has seen a lot of interest from Chinese buyers of late who like to pay cash (also shocking) for luxury homes that they don't even bother to visit before buying and rarely ever actually occupy. For the past few years, a small but growing portion of homebuyers had been coming from overseas, especially from China, targeting mostly upscale homes, and often paying cash, sometimes sight unseen. Interest soared last year, after British Columbia enacted a tax on foreign buyers in the Vancouver area. At one point after that tax took effect, Seattle was the No. 1 American city for inquiries from Chinese homebuyers, according to Juwai.com, which helps people in China buy homes abroad.
Foreign homebuyers have themselves contributed to rising prices in some ZIP codes here: Real-estate agents say foreign buyers are more likely to pay cash and bid up homes than other buyers. They also tend to eye luxury homes. In some parts of West Bellevue and along the Lake Washington waterfront, Realtors have reported that half or more of their business now comes from foreign homebuyers. Juwai’s data show 38 percent of Seattle buyers from China purchase the home primarily as an investment. Some of those buyers might also live in their new home or allow family members to live there, but in other cases, they sit empty. But it's probably nothing...maybe Americans are just suddenly attracted to Seattle's thoroughly depressing climate where residents can go months and months without ever actually seeing the sun....