Three years ago, Jack Li signed to buy a modest one-bedroom condo in Richmond for about $200,000, a chance to gain a relatively cheap foothold in British Columbia's Lower Mainland.
Then he waited as his new home slowly emerged from the ground. But far more exciting than construction progress was the rapid rise in the value of his purchase as real estate prices took flight. Mr. Li, a Beijing oil and gas worker who turned to real estate when energy prices crashed, decided to buy more.
In January, he bought into another condo development in Yaletown. In July, he signed for a third, in Burnaby. His purchases are part of the rush of foreign money that has sparked a backlash in British Columbia, where Vancouver home prices were up 32.6 per cent year-over-year in July.
He was so sold on the Vancouver region he became a licensed real estate agent in the province.
Altogether, Mr. Li is on the hook for $1.7-million in property. But the ink had barely dried on his most recent purchase when the B.C. government introduced a 15-per-cent tax on foreign buyers in Metro Vancouver, at a stroke upending Mr. Li's Canadian real estate dreams.
The change came only weeks before he expected to take possession of his Burnaby condo, which he expects to keep since it's a relatively small investment.
But when it comes to the other two more expensive properties, which won't be ready for another three or four years, he's already decided what to do. If the 15-per-cent penalty stays, he won't.
"I'm going to flip them," he says. "I'm not going to pay that tax," which becomes due when a home purchase is registered, even for home sales agreed to before the tax was introduced. "If the government had said 5 per cent or even 8 per cent, that's reasonable. But 15 per cent, that's a lot. That's a very heavy tax."
In China, ground zero for the foreign money that has poured into a frenzied housing market, the B.C. government's unexpectedly severe response has stoked a fury that will not soon be resolved — even if few believe the buying will stop.
"Many people believe the government's policy is reckless and irresponsible, and undermines its image and credibility," blasted a report in China's Economic Information Daily soon after the tax was unveiled.
People are "angry. I'm angry. This is not about the real estate market. From my point of view, it's political. It's for votes. It's not for home prices," said Xie Xingyu, who specializes in overseas sales for Homelink, one of China's biggest real estate agencies.
Even the Chinese consul-general in Vancouver, Liu Fei, has publicly criticized the tax for being ineffective – building high-rises would be better, she suggested – and the B.C. government for acting hastily. "If government has no plan, any policy can be the start of a disaster," she said in an interview with Chinese media last week.
Others, like Mr. Li, feel betrayed. Since becoming a real estate agent, he has helped Chinese investors buy 30 or 40 condos over the last two years.
He was drawn by more than roaring prices. He felt a connection to the place, too. He had lived and worked in Canada for a year and a half. He still owns a home in Fort St. John.
But the new tax is souring him on British Columbia. "It's a tragedy," he said. "It's going to have an impact on me, my family and my business, even though I made a lot of contributions to the B.C. economy. I put money there. I have brought people to B.C. And I told people Canada is a good place."
Still, he's not done with Canada. Many of his real estate clients aren't done with Vancouver, either.
Even among Chinese buyers, only a small number are truly mobile. Mr. Xie, at Homelink, estimates roughly 35 per cent of those looking at Canada are new immigrants, while another 25 per cent or more buy homes for students. "They really have no choice. They must have a house or a townhouse," he said.
It's likely, too, even those buying as an investment will eventually look past their ire directed at the B.C. Premier's office. Canada is just too tempting to ignore.
In Beijing, the agents at Global House Buyers began advising clients last year to put their cash into Canada, as the plunging dollar made homes dramatically cheaper.
Anyone who listened then is already up more than 40 per cent as a result of home price gains and a partial loonie recovery – and far more in real terms, since most buyers invest only a small fraction of the purchase price as a down payment. A 15-per-cent tax will erase some of those gains but not enough to change minds among those who have doubled and tripled their cash in a year.
Some clients have backed out on deals, "but only a very small percentage," said Issac Peng, a Global House Buyer agent. Others have turned their attention to Toronto — the company's website currently features the city on its front page. But "not many," he Peng says.
Most remain sweet on Vancouver, where a 0.6-per-cent vacancy rate has convinced Mr. Peng the overheated market will not cool down soon.
"The key issue is not how many houses were bought by foreign investors, but that too few houses have been built," he said.
Canada still compares favourably to other places, too. Australia's economy is so closely tied to China that it's less useful for those looking to diversify, while Australian housing markets have been so hot for so long that Mr. Peng sees "big systemic risks," bigger than in Canada.
The U.S. is currently the most popular destination for Chinese overseas home buyers, with economic growth that gives it prized stability. In Canada, however, mortgage rates are half as high, meaning investors can expect better cash flow out of a Canadian home.
In the U.K., meanwhile, the buying opportunity created by Brexit fears is partly offset by higher prices and stricter bank requirements that create an entry threshold many Chinese buyers can't clear. Buying is easier in Canada.
Still, China's wealthy face an increasing number of obstacles outside their borders. The U.S. has cracked down on home purchases through shell companies, while Singapore, Hong Kong and some Australian cities have raised taxes on foreign buyers.
Add to that the Vancouver tax and it's enough to prompt warnings in the state-run People's Daily.
"Buying a house abroad is not all profit and no losses," the newspaper cautioned Monday. "The moon in a foreign country may not be rounder than it is in China."