Saturday, May 21, 2011

HAM- the Good, the Bad and the Ugly...

We have a new euphemism in the Canuck language. HAM no longer means what it used to. In Vancouver, anyway, it refers to the tide of money coming out of Mainland China and into our RE market. Why is it hot? Well for several reasons. Sometimes it seems like the owners of this money cannot wait to get rid of it. It is almost like a 'hot' potato and has to be thrown at the asset as soon as possible. No time to bargain for what you want, just buy it at full price or even higher to make sure you get it.

'Hot' also because in some cases it is not clear how this money was acquired and no-one seems very concerned to find out.

Of course like any phenomenon, there are good effects and bad effects. The floods in Manitoba are a disaster now, but will probably leave rich, silty soil for good crops in future years. Ask the Egyptians who lived around the Nile, they prayed for floods to enrich their soil with natural fertilizer.

OK back to HAM. I am going to review briefly some effects, feel free to throw your own ideas in:

The Bad...

First I am going to describe an anecdote that was told to me. Since it is second hand, I cannot vouch for it's veracity, however I have no reason to doubt it and the point is illustrative in any case of others.

A professional couple were recruited by a high tech company. They had specialized skills and were brought over form the UK. He has an Indian background, she has an English. They have two kids and rented on a two year agreement while they decided what to do. After one year, the landlord said he needed to do some repairs and they would be inconvenienced. He offered up to two months free rent while they looked for a replacement. They didn't fight it, but looked around and decided to go with a one year lease this time and hoped to buy in the interim.

After a few weeks, they saw their old rental house spruced up, listed and sold. The previous neighbours said it was bought by an absentee Mainland China buyer.

Their current lease is due to expire soon (they didn't find anything reasonable to buy) and the landlords, who are a retired, local couple listed the house and almost instantly sold it. The new owners are HAM and say they do not want to rent it out, but leave it empty until one child is old enough to come here with a relative and attend school.

The couple are fed up with their housing experience, and are not wiling to mortgage their future, especially when they work in a field where mobility is essential and have asked to be transferred to one of the company's office in Western USA and work from there. It looks like the company will agree.

Net result: We lose a family who added vibrancy to our city, as well as two high paying taxable jobs. We gain two absentee owners who would rather leave the home empty (taking housing out of the stock and putting pressure on those remaining) and tax revenues have dropped.

At present they are absent and so are not using services (maybe a net gain) but when they are occupied- it is very unlikely that the owners will report all their income to be taxed in Canada while still using our costly services.

This is the downside of allowing unfettered access to our assets to anyone with money. However we are now in such a globalized world that it is very difficult to restrict anyone's access, for fear of retaliation in another area (eg lumbar)

The Good....

Lets look at the two examples above. Both homes sold for near $2M. That means the BUYER has thrown $40K per transaction into the Provincial Government's coffers. $80K just for these two. No small peanuts. The steroid-induced prices also mean that the Realtors shared $60K in commissions per transaction. $120 K for the two. Think more taxes, BMW lease payments, secretarial staff, advertising etc. There will no doubt be redecorating and furnishings which could probably add as much again.

So these two transactions have brought $4 Million into Canada and generated probably $300K in economic activity in a very short time. Almost nothing else has this degree of impact. Now you can see why Governments are very reluctant to restrict foreign ownership. Usually these transactions are also cash.

Also these properties are bought from baby-boomers. HOPEFULLY that means they will be able to pay for their own medical care and drug care and not be such a drain on the tax-purse and eventually this money will make it's way into the wallets and purses of their kids, either through debt forgiveness or down-payments on property. The windfall will get sread around in families.

The US would love to attract these investors to bail-out it's collapsing housing market and generate economic activity (for the first time in my living memory Canada has a lower unemployment rate than the US).

What we have too much of, they would like a little of!

The Ugly...

I have seen comments that we have become a resort City. People fly in, have fun, check out their properties, chat with their bankers and then fly off to go make serious money (sometimes illegally) elsewhere. meanwhile the rest of us beaver away here making sure the streets are safe and the services are run and paid for waiting for their return..

What does that sound like?

Mexico. The many resorts that we flock to, where we gorge ourselves on cheap booze and food and then leave, not caring much about the locals who are paid a pittance to wait on us and clean up after us.

Like I said in a previous post, friends, who have blue-collar jobs here, bought prime Ocean-front beachfront in Central America that the local doctors and lawyers could not afford. How could they afford that? Because our Canadian dollar is so high- due partly to the inflows of money for purchases like RE by the Chinese!

So it is all relative. We feel plundered while others feel plundered by us.

This post is just meant to start the conversation on this thorny subject and to show how complicated it is.


  1. The "ugly" in my view is the racism that accompanies "HAM". A lot of anger abounds surrounding the norms of other cultures, including the concept of satellite families.

    There are some large economic issues that need to be addressed but don't blame the player, blame the game.

  2. Fish- the numbers are big. There is no way they will legislate against outside ownership and kill the golden goose. A few of these big sales probably add up a film and look how much we do for the film industry, tax-breaks and inconvenience for the locals- this is much bigger.

  3. The Vancouver Sun says recreational property is coming back. Where? Not in the Sunshine Coast. Sales have dried up in the last two weeks and the MOI has swelled to well over a year.

    By the way there isn't much HAM beyond the well known hot areas, though there is some creeping into Burnaby I hear.

  4. "Making loans at less than inflation is like giving free booze to drunks, and then Carney tells the drunks not to drink too much." - a quote from VCI.

    Anon @May 21, 2011 6:11 PM
    Big corporations, banks & HAM have their first priorities. Good for them. To each his own.

  5. You know that something is seriously wrong when everyone backed down to kiss the hand of a RETalker who called them "stupid bastards" and challenged them to turn down the immigrants' money that Canada cannot refuse to accept.
    This is just one example of how the newcomers abuse our legal system and feast on our largesse. Why? Cause they know they will win with the help from activists.

  6. Townhouses in Richmond are not moving. New townhouses are asking over half-a-million to 3/4 of a million. Active listing is currently around 400 units.

    Average SFHs selling around a million a couple of years ago, are now listed at >$3M. When I have more details, I'll post them. It seems that some of these houses, each has as much as 3 - 5 mortgages. If a buyer cannot secure one single mortgage loan from one lender, does it mean that CMHC is on the hook for all the lenders to that one specific house?

  7. Core inflation is low. Really!
    By the time Carney wakes up in his ivory tower, It isn't too late still to join Greenspan in his posh exclusive club.

  8. If the market corrects the way I think it may - we may be wishing the HAMs were back.

    At present the Re market outside of Vancouver is pulseless, just saw an ad on craigslist for 10 acres of lake waterfront in Osoyoos with a vineyard and house- down from $3.5 M to asking $2.1 after a collapsed sale.

    Victoria should be the next one to correct with their burgeoning inventory.

  9. Anon- did you even read the Maclean's link you posted? Maclean's BTW has IMO become the new rag of the far right, Conrad-Black loving, big money supporting, opinion-passing as fact.

    The article basically exonerates the wealthy Chinese and the students who whined about having a hospice nearby. As if we are not all going to die. The same whiners will be the first to complain if their grandmother cannot get into one of our over-crowded hospices to end her life in dignity.

    About the only thing I agree with is that UBC has sold it's soul for money, and big money at that. The rest is crap, please don't sully this blog with Maclean's links again :)

  10. @Fish10, that is the only article exonerating the HAMs. One of the posters is a lawyer-activist came here in his early teen from HK, and one other kept posters away from RET with his halitosis from cunninglingus encounter of single mums.

    Remember this story where a "Gay college student kills himself after being secretly videotaped" by a Chinese girl in US. Here in the LML, we have "Parents to picket school board's anti-homophobia policy".
    Another example why multi-culturalism does not work with certain groups.

  11. " does it mean that CMHC is on the hook for all the lenders"

    AFAIK CMHC primarily insures primary loans and is first in line to recoup repayment, with subordinate lenders getting whatever is left over after CMHC's loans are made whole. The problem is subordinate lenders have some say in how the property is liquidated so it makes things fugly when a complex multi-lender default occurs, meaning a quick sale may be met with resistance in the name of maximizing the sales price.

    I believe Canadian foreclosure law is more straightforward than some of the horror stories out of the US but it's certainly not straightforward!

  12. Bloomberg
    Savers May Be Hobbled for 15 Years: Gross

    Get ready and implement your plans B,C&D, even if it means moving your liquidity offshore.
    Bulls are pimping for the real estate industry, and "loud bears" are salaried through the chain that feeds Goldman Sachs & co. You have already lost a decade. 25 years is one generation lost.

  13. Anyone remember the films Armageddon or The day the Earth Stopped where the aliens come to harvest the earthlings and their resources.

  14. @Patiently Waiting: "Something strange is going on when SFH prices are skyrocketing while condo prices are the same as three years ago."

    In the case of Richmond, old houses with large lots were bulldozed to build townhouses asking over 1/2 to 3/4 of a million per unit. Currently, mls listed for sale 400+ townhouses, 900+ SHFs, and 800+ apartments. Per city of Richmond website, its 2007 estimated population was at 185,400.

    Burnaby with a population of 202,799 (2006 Census) has much less inventory - 280+ townhouses, 450+ SFHs, 1200+ apartments.

  15. Hey! I know this is kinda off topic but I was wondering which blog platform are you using for this website?
    I'm getting sick and tired of Wordpress because I've had issues with hackers and I'm looking at alternatives for another platform. I would be fantastic if you could point me in the direction of a good platform.

    Feel free to surf to my homepage: Viagra Online 100mg

  16. Ever questioned exactly how those entrants in bodybuilding competitions make their physiques look
    so defined? At very first you could believe it's since they normally look that method or perhaps due to how the phase lights hit them however believe it or not, body builders utilize sunless tanning or tanning creams in order to obtain that "tough as granite" appeal, to display sharply-defined shoulders, biceps and abdominals that the judges and audience admire a lot.

    Feel free to surf to my webpage: Sporten & Fitness

  17. I am known as Stephaine and I hail from Virginia in the USA - I am a fresher
    majoring in Public Relations and I manage a quality domain about Buy Viagra UK, and other
    related subjects like cheese allergy in babies, how to
    cure blackheads, and conceiving tips trying to conceive. This problem is manageable via the use of
    medicines including phosphodiesterase- 5 preventions (PDE-5).
    Common labels for drugs in this classification are Viagra,
    Cialis, and Levitra, and all need a prescription to purchase.
    There are no effects from this treatment in the lack of sex-related excitement.

  18. Hello Everybody,
    My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of $250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of $250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:( Thank you.

  19. Hello Everybody,
    My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of $250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of $250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:( Thank you.