A Little Money Laundering Can Have a Big Impact on Real Estate Prices (2019)
This is how my sale went a few years ago in Toronto. One contractor, one couple with their realtor, and one realtor on the phone representing a remote client.Everyone put in a bid. The realtor representing the remote client gave an offer 200k over asking. Never saw the buyer. Drove by months later and still no one living there. Neighbor told me a young Chinese couple showed up a few weeks after purchase, got out and looked at the property for a minute and drove off, didn't even go in. Property was still empty 2 years later.Extended family remember sells house in Toronto (Bloor West Village). House is at least 100 years old and in rough shape. Gets an offer for 1.4 million (about 150k over asking) as is from a 20 something year old Chinese University of Toronto Student. The student tells family member not to be alarmed if the name on the contract is different from hers. House was rented out a few months after sale.I have dealt with many Chinese factories in a previous life. Many were State factories and everyone from the sales person to the accountant to the factory floor supervisor is on the take. They skim and over time accumulate some serious money. This money leaves the country in capital outflows into the real estate market in Canada. The thinking is I don't care if it makes any money as an investment, I just got to get it out of China so the CCP can't take it away. Banks are no good, so lets just put it in real estate. Who cares if we lose 200k on property, better than losing it all to the Chinese Gov.Another interesting story, real estate agent representing me tells me this story. He's on the phone with an agent representing a Chinese client who wants to buy a Condo in a new development in downtown Toronto. Realtor says client will take one. My Realtor asks him what kind of unit? Chinese buyers tells him not a unit but the whole 8th floor.The average price of a house in Toronto will be in the millions in the next decade. Anyone earning less than 200-300 k a year will not be able to afford one, unless they have a windfall inheritance. Now with a possible Hong Kong exodus, there is no limit to the insanity. Young Canadians in major cities are screwed. Renters for life.