Photo: Open Grid Scheduler/Flickr
A single arrest at an airport in Western Canada earlier this month might be enough to further weaken Vancouver’s deflating housing market.
On December 1st, Canadian authorities detained Meng Wanzhou, CFO of China-based tech company Huawei — which earned $48 billion in revenue in the first half of the year — at Vancouver International Airport.
The arrest of Wanzhou, also the daughter of Huawei’s founder, followed an extradition request from US prosecutors. They want her to stand trial stateside for allegedly helping her company sidestep US sanctions on Iran, CNN reports.
So what does all of that have to do with Vancouver real estate? The controversy could turn wealthy overseas investors off of the city, reports reputed investor magazine Barron’s (paywall).
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Barron’s cites commentary from a new report by Smartkarma, a fintech company advising global investors. “China property investors and economic migrants flowing into Canada and North America got a loud message this week with the arrest,” writes Charles De Trenck of Smartkarma.
“This is coming when property transactions continue to roll over in the formerly overheated Vancouver property market. … Price data are likely to be a little softer already, with new political drivers not yet reflected,” De Trenck continues.
Chinese buyers looking to invest in Vancouver real estate already face an additional levy of 20 percent on residential property purchases. BC originally introduced a 15-percent tax for Metro Vancouver in August 2016 before increasing the tax by 5 percent this February.
As fallout from Wanzhou arrest, existing migrants might “reconsider their overall commitment to a Canada move for the extended family, as well as encouraging potential new China migrants to consider shifting migration patterns to more friendly climates — or perhaps even to consider that rising nationalism requires them to keep closer to home,” De Trenck writes.
If that happens, it could signal the reversal of a recent trend. In the third quarter of this year, Chinese interest in Vancouver real estate surged, according to the Juwai.com, a property portal that connects overseas investors in China with international properties.
Inquiries into Vancouver properties made by Chinese users via Juwai.com surged 130.8 per cent from the previous quarter, the Vancouver Courier reports.
Juwai CEO Carrie Law tells Livabl in an email statement that not enough time has passed for the final impact on Vancouver real estate to be known. “We can say that the buyers we work with are not mentioning this case to us. It doesn’t seem to be relevant to them so far,” he says, noting Chinese inquiries in Vancouver properties were at typical levels in the week following Wanzhou’s arrest.
Law adds that the stakes are high, as hundreds of thousands of Chinese tourists visit Vancouver annually, giving a big boost to the city’s tourism industry.
“If the city misplays its current media moment, it could lose much of that business and the jobs it supports. On the other hand, by showing a positive face to the world, Vancouver could hugely benefit. It won’t be long before Chinese tourists begin to show up in Westside to take selfies in front on Miss Wanzhou’s mansion,” he continues.
Wanzhou is not the first Chinese tech exec to be arrested on North American soil of late.
Richard Liu, JD.com’s CEO, caught the attention of US law officials in September and was arrested as a result of suspected criminal sexual conduct. Although he was released and returned to China, the rapid succession of the two controversies involving notable Chinese nationals could lead to “a conclusion that Canada property price corrections in key markets might gain moment,” De Trenck writes.
Wanzhou was released on $10-million bail yesterday, and US President Donald Trump says he may intervene in the proceedings.