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"Fake Chinese income" mortgages fuel Toronto real estate bubble: HSBC bank leaks

ilrwbwrkhv
87 replies
22h49m

I have said this over and over again: Canada is the most overrated of all the developed countries.

The whole country is a gigantic house of cards propped up by real estate, with horrible service quality, terrible healthcare, no jobs, ZERO innovation, risk taking and entrepreneurship.

Having lived and travelled extensively, most Canadians want a house somewhere in the woods instead of doing something meaningful with their lives or try and innovate to build something.

All of this is propped up by rampant levels of immigration from China and India. Where US got the best talent from India, Canada got the worst, the ones who scam their way here and take the lowest level jobs.

Now all of this is coming home to roost. The next decade will be Canada's worst and if they do not learn that risk taking and entrepreneurship is the only way out of the mess they find themselves in, they will become a third world country in another decade.

guidedlight
12 replies
22h33m

Everything you write is also true if you replace Canada with Australia.

robocat
11 replies
21h55m

New Zealander here: much the same.

New Zealanders definitely hate entrepreneurship - one political party wanted to introduce a wealth tax if you had more than $1 million equity. Median house price in Auckland is just over $1 million! Auckland has about 30% of the population, and house affordability (price compared to income) is similar as bad as Sydney or San Francisco.

I have done okay for myself founding a software business and I notice the tall poppy syndrome from friends. Plus the relentless attack on my hard earned savings by a grifter government. And shit support for businesses to start-up or function (government incentives are mostly negative, and the positive incentives are incredibly badly run).

Fortunately we are building more houses in New Zealand (low single digit percentage growth) but unfortunately immigration is exceeding supply. We need the immigrants because we aren't breeding enough New Zealanders.

My experience of our government healthcare system is mostly positive.

I don't understand it: we should want people to save for their retirement but all the incentives to save are negative. The main taxation incentive is to gear up and borrow money for property. Then that blows up of course.

Even our right leaning government seems to want to consider a capital-gains-tax. The existing taxes screw any reason to invest in the stock market.

I'm whinging: I think it is a good place to live but I feel a comfortable retirement is becoming an unacheivable dream.

quink
10 replies
21h34m

Guardian, December 2023:

The wealth tax contemplated by New Zealand Labour would have required couples to pay an annual levy of 1.5% on any assets they held over a $10m threshold. The estimated $3.8bn in revenue would have funded income-tax cuts for the vast majority of Kiwis. Labour’s potential coalition partners, the Greens and the indigenous-led Te Pāti Māori, ran on similar platforms.

Plus the relentless attack on my hard earned savings by a grifter government.

$150,000 a year if you own $20 million, $0 if they somehow attacked you all the way to a pitiful $10 million, and in return tax cuts for those doing worse than you, and they did not get elected.

I’m not seeing the problem.

robocat
6 replies
20h36m

I’m not seeing the problem.

The problem is what is the incentive to keep working once you've earned a house and bach? Why bother save for retirement if your savings are to be taken from you at a significant percentage per year? A few percent is a huge penalty (see index funds versus mutual funds), and the wealth tax is on top of taxation of salary and dividends.

  assets over $1m - a threshold the party thought would hit the wealthiest 6 per cent of New Zealanders. The higher [$2m] threshold means only the wealthiest 0.7 per cent of households will be targeted. The $2m threshold is a net figure, meaning people with mortgages and other debts would need $2m of equity before they began paying the tax.
I'm not talking about Labour, I'm talking about the Green's 2.5% wealth tax 2023: https://www.nzherald.co.nz/nz/politics/wealth-tax-hikes-will...

And incentive is to borrow money on property which is whacko, and then next thing CGT will also be added.

Houses should be for living in, not financial instruments.

xcrunner529
4 replies
20h29m

lol what? That’s the same old tax argument over again. I thought you all were motivated by things other than money? You know, that entrepreneurial spirit?

The incentive is it’s still a fuckton more money. You’re not taxed at 100% and in turn you live in a country with better services. The amount of money wasted by the rich is hilarious when combined with this take.

robocat
2 replies
19h59m

The whole point of a business is to make a profit: I worked hard because I am middle aged and had no retirement savings - my other choice was FIRE or to suck on the government's teat. Running a "business" for status is defined as a hobby.

1 in 10 businesses survive. Why bother starting one if you don't get your 10x return? If you've got one, why bother trying to be a serial entrepreneur if it's all gonna be taxed? Do you think New Zealand should leave the entrepreneurship to the USA and we can just buy what we need from US multinationals?

The incentive is it’s still a fuckton more money.

It just isn't. The people I know earning way more than I don't have anything significantly better. Mostly a nice house and a nice car and if they're lucky a bach.

Marginal incentives matter. Over 50% of my personal income goes on taxes including GST.

My life is similar to most any professional worker. I have never owned a new car. I know solo-mums that didn't work for over a decade with more equity in their home than me. My biggest expense is tax, my second biggest is my mortgage.

The amount of money wasted by the rich

Just the rich eh? Everybody else is so much more careful! Watch out with your stereotypes - I'm guessing you don't like them applied to yourself?

xcrunner529
1 replies
19h45m

Because your business doesn’t just start earning 20m and that’s still only 150000. Are you arguing against fake numbers?

robocat
0 replies
18h4m

fake numbers

no: - I'm using the numbers in the quote in my comment, and from the link I gave you.

Taxation rules create incentives and disincentives. If you earn a salary you are usually ignorant of those incentives because you don't experience them. From what I see the attitude is "fuck everyone who is better off than me".

Our rules need to encourage people to make NZ better off. Not have the incentive to stop once you have gotten a $20m home: https://www.trademe.co.nz/a/property/residential/lifestyle-p...

Anyone that owns businesses worth $20m is already taxed on income. Giving a big middle finger to people that build businesses is silly.

Disclosure: I am not anywhere near the big salary or wealth numbers we've mentioned.

robocat
0 replies
18h40m

The amount of money wasted by the rich is hilarious

You're repeating bullshit - The majority of spending in New Zealand is not by the wealthy but by the rest of the majority of kiwis[1].

If people earning less than $100k waste 5% of their income, and people earning more than $300k waste 50% of their income, then the people earning less than $100k are wasting more.

We're not in the USA with Jeff Bezos, so your point just makes no sense.

The majority of earners I know blow more than single digit percentages on unnecessary crap and luxury. For example my working class friends that spend more than 10% per week on booze and drugs - plenty of people spending more than $150 with a weekly income <$1500.

Look around you and there are obviously not a lot of superyacht stores. Plenty of booze shops doing a roaring trade and it isn't the $300k+ earners in them.

The wealthy people I know invest. If those investments are bringing foreign income into New Zealand, we already tax that and all New Zealanders win!

The government needs to get rid of the bad property investment incentives - those are where the wealthy are fucking over the non-wealthy. We have enough land and resources in New Zealand for everyone to have their own home.

Don't discourage people from investing in things that make New Zealand better off. Our taxation system discourages founding internationally competitive businesses, and it discourages owning more than $50k in overseas shares. And the majority of New Zealanders don't give a shit because the majority don't begin such businesses and they are ignorant about where their income to buy imports ultimately comes from.

Negative incentives matter, probably more than positive incentives. We all want to slowly tax the well off until they leave or until they are no longer well off.

[1] Data based on: https://www.ird.govt.nz/about-us/tax-statistics/revenue-refu...

quink
0 replies
18h23m

Help I’m being oppressed by needing to pay some tax on assets.

That sounds like a terrible thing the government is doing to you.

No, not the government.

That sounds like a terrible thing the opposition might do to you.

No, not the opposition.

OK… did you at least accurately describe what was happening originally?

Well, there’s these asterisks. But I am oppressed.
christkv
2 replies
21h9m

What leads to is no willingness to invest in anything other than bonds to ensure you have enough money to pay the tax.

xcrunner529
1 replies
20h28m

150k from 20m of assets? Really? Lmao

robocat
0 replies
15h47m

Every bugger sees a number like 2% and then says '$150000' whoop-de-shit like its some trivial amount. $150k is a lot of money. Its easy to tell other peoples what to do with their money huh?

You've never had a bill you couldn't pay? Major assets are usually tied up in long term investments with breaking costs due to illiquidity or taxation (e.g. sell a house before the bright-line period is up and you may pay a lot extra tax). You are showing your ignorance of the issues. Have you saved enough for your retirement or are you going to live off the backs of other New Zealanders? Good luck to you.

Paying the tax bill can mean selling an investment at a loss or borrowing. Not much different from someone poorer pawning what they own or selling their car because they need the money. It costs me 8.8% at present to borrow on my mortgage - (due to bank conditions I can't borrow cheaper). The same thing can easily occur to wealthy people (managing investment risks sucks).

Many people have already paid tax - their savings are what they have left over after tax. A wealth tax can be a double taxation - another taxes on top of money that was already taxed. Plus the wealthy still often get to pay income tax on any dividends or other gains.

There's a lot of people out there that blow all their money on shit and then put their hand out to the government. I watch friends on low incomes absolutely waste money and don't give a shit about saving. Not all of them, but enough. I've seen friends get big ACC payouts - and a few weeks later its all burnt on nothing. Or inheritances and lose it all. Luckily they live in New Zealand where they can get money from family or get some living expenses from other NZers (the government). Certainly not flash living, but better than most places in the world. Some of those millions come from my tough job earning export income. I get fuck all of the money I bring into the country (after expenses, salaries risk and taxes).

I bet if we met you would have a lot of complaints about how hard done you have been with taxation. It's the same issue.

JumpCrisscross
9 replies
21h55m

Canada is the most overrated of all the developed countries

You're also a politically stable energy and resource exporter bang next to a global economic superpower and security guarantor. Oh, and access to two oceans and soon a third.

Canada has plenty of problems. But it's also tremendously blessed.

gspetr
7 replies
21h39m

What's funny is that if we substitute Canada with Russia in your comment, every word of it still holds true.

I suppose "stable" and "stagnant" are two sides of the same coin.

edgyquant
2 replies
21h24m

Yeah, Russia is Chinas Canada

_Parfait_
1 replies
21h6m

What an insane take

throwawaymaths
0 replies
20h7m

The US does not make a cultural claim to any part of Canada, except possibly jokingly Alberta, which might actually be "Alberta jokingly makes a threat to secede to the US" (the US does not really want alberta and its disgustingly sulfurous oil).

China is constantly threatening to invade the Russian far east and retake haishenwai

csdreamer7
1 replies
20h59m

Calling China Russia's security guarantor is a stretch at best. The military difference between the two, while growing, is no where near the difference between the USA and Canada.

I would argue Russia's nuclear arsenal is a far more reliable guarantor of their security then China would ever be.

unsupp0rted
0 replies
20h12m

Also has China ever claimed to be Russia’s security guarantor?

The US and Canada, if nothing else, are both in NATO.

seanmcdirmid
0 replies
19h58m

Russia are frenemies at best. They are allies today, but they have fought border skirmishes in recent times, and they are worried about Chinese moving to and eventually taking over the Russian Far East

dgfitz
0 replies
21h1m

That is the tragic part about Russia. They don't need to be Chinas Canada. They have all the protentional in the world play nice in the world sandbox and prosper.

acchow
0 replies
21h51m

Likely the reason it doesn't need to accomplish much more to be a good place to live

nimbius
8 replies
22h36m

most Canadians want a house somewhere in the woods instead of doing something meaningful with their lives or try and innovate to build something.

to be fair most Canadians were promised this as part of their countries stratospheric growth under neoliberalist policies. that they are not capable of it is no fault of their own. that they want this is at all is not a bane.

Where US got the best talent from India, Canada got the worst, the ones who scam their way here and take the lowest level jobs.

dividing immigrants into "good ones" and "bad ones" is pretty vile, but as an american i must acquiesce we've played that game for a long time. before hispanics it was asians, before asians it was europeans (the irish particularly.) turns out blaming immigration is a fools errand to distract from domestic class warfare.

the real question for Canada now is not "how do we punish the immigrant" but what do elected leaders in the political class do to affect meaningful restitution and corrective action in the face of what is a national crisis. Either they see clearly and will reform their own cash cow, or they will blindly ride it off a cliff in the hopes that through their own profit they can weather the coming storm.

dxbydt
1 replies
21h38m

> Where US got the best talent from India, Canada got the worst,

In India when we graduated our professors would say - you are really good, you should go to the usa. you are quite mediocre, go try your luck in canada. and you, you are a C student, even canada won't take you in. go get married to some indian lady, get a nice fat dowry, raise two kids and send them to college here, maybe they will get better grades than you.

It was perhaps said in jest, but like everything else, there was an element of truth to it. For quite a while, the word canada itself became a pejorative. Many south indian films have a scene where the hero returns after studying abroad & wants to get married, & the heroine's father generally wants to make sure he is a good student & not a scamster from canada.

ncann
0 replies
21h7m

the heroine's father generally wants to make sure he is a good student & not a scamster from canada.

That sounds hilarious, do you have some example films that I can check out?

Archelaos
1 replies
22h24m

dividing immigrants into "good ones" and "bad ones" is pretty vile

Isn't that the case everywhere where immigration is restricted?

throwaway894345
0 replies
21h24m

It seems the parent is trying to imply that the grandparent is arguing that some immigrant races are good and others bad (hence his reference to US hispanics, asians, europeans, etc) even though the grandparent is very explicitly arguing that the best immigrants from India and China respectively go to the USA while the mediocre immigrants from those countries go to Canada (I'm not arguing for or against that claim, but I can understand how it is different than what the parent alleges).

nyolfen
0 replies
21h45m

turns out blaming immigration is a fools errand to distract from domestic class warfare

our post-hart-cellar immigration policy is a tool of class warfare via wage suppression. real wages have remained flat while productivity gains have steadily persisted, due to several systemic changes since the crisis of 1973, among them flinging the doors open to dilute the cost of american labor; this and outsourcing and globalizing supply chains also go hand-in-hand with breaking union power

maxglute
0 replies
22h1m

dividing immigrants into "good ones" and "bad ones" is pretty vile

TBF that's the inherent insinuation in points / skill based immigration. The goal of immigration driven growth to is to maximize return potential via brain drain and wealth drain from other countries who foot the bill for talent development, or to extract wealth via foreign elites who accumulated wealth in host countries. When crisis reach critcal levels when it obviously becomes a class warfare issue, the solution is going to be punish the immigrants, before them become PRs or citizens. It's not the immigrants fault for policy failures, but until they get right to vote they are escape goats for bad politics.

filoleg
0 replies
20h32m

dividing immigrants into "good ones" and "bad ones" is pretty vile, but as an american i must acquiesce we've played that game for a long time. before hispanics it was asians, before asians it was europeans (the irish particularly.)

This is just an entirely incorrect reading of what the grandparent comment said.

They are not saying that immigrants from some places are good, and immigrants from some other places are bad (or immigrants of one ethnicity vs. another). Regardless of whether you agree with them or not (which is a very valid thing to disagree with, if that’s how you feel), they explicitly said that the US gets “good” immigrants from those groups, while Canada gets more “mediocre” immigrants from those exact same groups.

There is no classification or separation by nationality/ethnicity going on in the grandparent comment, despite you treating it like there is.

evilfred
0 replies
20h24m

the US divides immigrants into good and bad due to its racist Green Card country queues

diego_moita
8 replies
21h54m

As an immigrant into Canada: even if that description were true, it still would make it a lot better than the majority of other countries in the world.

Luckily, Canada is a lot better than your description.

ashconnor
5 replies
20h57m

The comment is complete hyperbole and isn't even correct. Real estate is bigger in the US than Canada.

Every developed country is running into immigration and housing issues. Canada isn't alone and isn't even the worst case.

xcrunner529
2 replies
20h33m

Isn’t allowing everyone and essentially recruiting immigrants a major cause of the housing crisis and expenses in Toronto?

ashconnor
1 replies
20h22m

Sure and immigration should be stemmed, short-term, until housing reforms can be implemented.

They've already announced measures to reduce student visas which were uncapped previously.

https://www.ft.com/content/085cda38-9060-4da1-8532-1a3af9cd7...

Still. This isn't going to solve the issue. They need to build far more than they currently are doing. They need to strip local government of its veto over housing. They need to definancialize real estate.

xcrunner529
0 replies
20h15m

Yep. It’s such a cancer in the US too. So many NIMBY’s. Toronto when I went was so odd like a mix of dense and then houses.

tharmas
1 replies
20h36m

Yes, but there's Canada's climate. If you try to live in a tent outdoors in Canada you will likely die.

seanmcdirmid
0 replies
19h55m

You can do it Vancouver. Seattle and Vancouver’s homelessness problem are remarkably similar, only differing in how Canada handles it better than the Americans do.

swat535
1 replies
20h1m

OP is comparing Canada to other developed nations. Canada is pretty subpar compared to most places in EU or US on all fronts: weather, housing, quality of life, innovation and salaries.

We have people renting a single bed in the same room for 600$/mo in Toronto.

I suppose that however if you are an immigrant from a war torn country or a developing country, Canada would look like heaven.

yibg
0 replies
19h39m

Weather: Canada's weather certainly isn't the best, but not really worse than other northern climate countries.

Housing: Large cities like Toronto and Vancouver are unaffordable, but so are other large cities like London, New York etc. Just like most other countries, if you want to pay less for housing, go to a smaller city

Quality of life: how are you measuring this? By most measures (life expectancy, crime etc) Canada is well ahead of the US.

Innovation and salaries: Innovation is a bit hard to define, but salaries are definitely lower than the US. But here the US is also an outlier (at least for high earners) compared to most other countries. Tech salaries in Canada for example aren't lower than most European countries.

m3kw9
6 replies
22h24m

Despite what you have “heard” the heath care system is quite nice

raydev
1 replies
20h47m

How quickly can you book an appointment with your family doctor? How did you acquire your family doctor?

m3kw9
0 replies
20h29m

Most times you can do walk ins same day, but finding a family doctor depends on location so my experience can be different

canadiantim
1 replies
21h17m

I’d like to strongly disagree with you. Parts of the health care system are quite nice, but other parts have completely collapsed causing multi year delays for basic healthcare services or even finding a family doctor, which is not quite so nice.

m3kw9
0 replies
20h28m

What is your experience in finding a doc?

evilfred
0 replies
20h25m

1 million British Columbians who can't find a family doctor, and thousands who have to wait 6+ months for cancer treatment , disagree with you

adamomada
0 replies
19h17m

Which one? Canadians I find are pretty ignorant about the health care in Canada and think it’s the same thing across the board, while it’s actually the individual provinces that each have their own setup (with pros and cons)

It’s easy to spot when people speak of healthcare in general without being specific.

hnarn
6 replies
22h38m

The whole country is a gigantic house of cards propped up by real estate

That’s quite the statement, I assume you have quite the source for it.

The price-to-rent ratio isn’t that far off from the US, for example.

ysofunny
2 replies
22h2m

there's a tiktoker that compares real states prices in Canada and in various parts of Europe

it's funny to see dozens of examples of european castles (buildings with tens of rooms and bathrooms, plus huge gardens) whose cost is in the same ballpark as 2 or 3 bedroom houses in random (but well [sub]urbanized) parts of Canada

cycrutchfield
0 replies
21h25m

Wait until you see the maintenance and heating costs for those castles, or any old building in general. The sticker price isn’t the whole story.

JumpCrisscross
0 replies
21h54m

dozens of examples of european castles (buildings with tens of rooms and bathrooms, plus huge gardens) whose cost is in the same ballpark as 2 or 3 bedroom houses

Castles are a bit of a scam. The old aristocratic families that still own them, e.g. in Germany, tend to have a state subsidy for maintainance. If you didn't have the luck of being born into those families, you get all of the joys of Medieval engineering twinned to modern historic preservation bureuacracy.

hnav
1 replies
22h34m

but incomes are generally much lower

lifeisgood99
0 replies
22h12m

That's tech bias. The pay for random office jobs or trade jobs are similar.

raydev
0 replies
20h53m

The price-to-rent ratio isn’t that far off from the US, for example.

I'd love to see the numbers that back this up that also don't include SF, LA, NYC, Miami, or Seattle.

cbsmith
4 replies
21h45m

The whole country is a gigantic house of cards propped up by real estate, with horrible service quality, terrible healthcare, no jobs, ZERO innovation, risk taking and entrepreneurship.

Canada has generally had a more conservative financial industry, which is a large part of why they were able to escape the 2008 mortgage crisis, and that, in turn, has lead to a stronger real estate market. Additionally, the recent post COVID-19 influx of immigrants has driven up demand for housing like crazy. There's not a lot of question that the real estate market is hot. But...

...I'd point out that considering it's population, Canada has had an impressive number of innovative companies just in the tech sector over the years. Alias & Softimage in 3D rendering. Shopify in e-commerce. Research in Motion in mobile phones. Ecobee in the smart homes/IOT space. Certicom in cryptography. Going farther back, Corel was a software giant. There's relative newcomers to with Hopper, Imagia, etc. I don't think it's fair to say there's no innovation, risk taking, or entrepreneurship.

All of this is propped up by rampant levels of immigration from China and India. Where US got the best talent from India, Canada got the worst, the ones who scam their way here and take the lowest level jobs.

I'm not sure where you get that from. Canada's immigration policies have historically been more oriented towards merit/highly skilled immigrants than the US.

Now all of this is coming home to roost. The next decade will be Canada's worst and if they do not learn that risk taking and entrepreneurship is the only way out of the mess they find themselves in, they will become a third world country in another decade.

I'm not sure what is fueling your perspective, but there is a lot of concern about Canada's economic policy coming out of COVID-19, in particular, the big deficits and explosive immigration are putting a strain on the economy. However, there's a very credible possibility that these will prove to be effective "investments" that pay off in the long run. Ironically, given your criticisms, Canada is taking on a lot of risk!

faeriechangling
1 replies
20h23m

I think the conservatism of Canada is overstated and in fact Canada is one of the most leveraged countries in the world.

cbsmith
0 replies
17h56m

The "conservatism" is of the banks, not the country. The Canadian government is quite leveraged.

But as leveraged as Canada is, Canada is well below the average for debt-to-GDP ratio of the G7 (admittedly skewed by Japan's monster debt, but still well below US debt). https://www.visualcapitalist.com/government-debt-by-country-...

canucker2016
1 replies
19h48m

It's also hard when you're spending money educating your citizens for those high paying tech jobs and over half of them go to the USA [1] [2] [3] [4].

That and lack of venture capital/funding and, I've heard, increased government barriers compared to the USA, reduce the number of local tech companies.

The one bright spot in the past decade are the AI hubs in Toronto and Montreal - but they seem to be mainly satellite offices for USA companies.

[1] https://sexxis.github.io/classprofile/ , 2021 UWaterloo SWEng profile

[2] https://uw-se-2020-class-profile.github.io/profile.pdf , 2020 UWaterloo SWEng profile

[3] https://krishn.me/syde-2018-profile.pdf, 2018 UWaterloo SysDesEng profile

[4] https://joeyloi.com/SYDE2017classprofile.pdf, 2017 UWaterloo SysDesEng profile

cbsmith
0 replies
17h28m

It's also hard when you're spending money educating your citizens for those high paying tech jobs and over half of them go to the USA [1] [2] [3] [4].

Yes, you are correct that the USA is bigger and has more money than Canada. If you think about it globally (as one should), but it's worth noting that they're not so much moving to the USA as they are specifically the Seattle & Bay Area, and they're doing so at lower rates than for comparable Americans living outside those areas. Also worth noting, for the most part, they aren't founding companies in the US. The pattern is to go to the US, work for large tech companies, and about half return to Canada within 5-10 years, which is when they're more likely to engage in entrepreneurial pursuits.

Just looking at the financial might of Seattle & the Bay Area, it's amazing that 90% of Canada's innovators and entrepreneurs aren't in the US. It suggests that the country is perhaps more supportive of innovation than this narrative being presented.

That and lack of venture capital/funding and, I've heard, increased government barriers compared to the USA, reduce the number of local tech companies.

The conservative financial system and comparative size of Canada does mean there is much less "free money" flowing around, though as demonstrated from the examples I provided, companies do procure foreign investment, particularly from the US, with comparative ease.

...and while you'll always here entrepreneurs complain about government barriers, having started up companies on both sides of the border, I can tell you that in many ways Canada has comparatively smaller government barriers. In particular, the universal health care and generally more significant social safety net also means that it's a lot easier for prospective entrepreneurs to leave jobs at stable businesses and take on greater risk. It's just one of many ways that while it is harder to get capital in Canada, you don't need as much to get going. This is probably part of the reason that a larger percentage of Canada's labour force (67.7%) [1] is employed by small businesses than the US (46.4%). [2]

AI hubs in Toronto & Montreal are more than just satellite offices for USA companies. You may recall that Geoffrey Hinton, "Godfather of AI", was in Toronto, teaching at U of T, when Google bought the startup he founded with Alex Krizhevsky & Ilya Sutskever... in Toronto. The modern AI revolution traces back to innovative work in... Toronto!

1. https://ised-isde.canada.ca/site/sme-research-statistics/en/...

2. https://advocacy.sba.gov/2023/03/07/frequently-asked-questio....

ysofunny
2 replies
22h4m

at least now that the king of england has cancer they can somehow negotiate their way out of having to reprint all their money? that should be more cost effective than exiting the commonwealth? ahahah

vizzier
1 replies
21h14m

Why would they need to reprint money, old monarch's faces are still perfectly valid currency.

ysofunny
0 replies
20h46m

hmmm, so if the current king wants to see their face on money they gotta pay for it themselves? I guess this isn't that important given that governments want to push a cashless economy now

speg
2 replies
22h24m

As a Canadian who has ideas of building an off grid cabin in the woods, what would be a more meaningful life?

The stereotypical poor American working menial jobs into their senior years without affordable healthcare doesn’t sound much better…

yieldcrv
0 replies
22h9m

its a discussion about the economy, not the quality of life and the accuracy of the aspirations

randomdata
0 replies
22h10m

Also as a Canadian currently living in an urban area, I want to move to the woods so I have the room to build things and innovate regularly. I don't have enough land for a workshop here. Outside of maybe software that you can pack onto a personal computer, you're not going to be able to do much innovating without much space.

thisisnico
1 replies
21h53m

As a Canadian, living in Southern Ontario, I couldn't agree more with your assessment. Somehow we are ranking #1 on so many charts for quality of life etc. I'm starting to believe these sites and reviews of Canada are paid for.

We were an incredible country before Trudeau took office. His aggressive immigration policy, no economic policy or plan, and creation of infighting on social issues, not tackling any of the core issues we face as a country, until absolutely forced to do so (in this case unlikely re-election).

We need to stop fighting over social issues and start being productive towards a stronger, healthier, and happier Canada. Social issues can't fixed if people can't afford shelter and food.

onlyrealcuzzo
0 replies
21h7m

Look at sites that don't take QoL based on neoliberal metrics?

onlyrealcuzzo
1 replies
21h5m

Where US got the best talent from India, Canada got the worst, the ones who scam their way here and take the lowest level jobs.

Source?

I haven't heard this claim before.

vexna
0 replies
20h55m

Canada currently has an issue with handing out way too many student visas to students going to strip mall diploma mills. I believe the federal government has just enforced a cap for the next 2 years.

dang
1 replies
19h46m

Ok, but please don't take HN threads on generic flamewar tangents. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.

Edit: looks like we had to ask you exactly this before: https://news.ycombinator.com/item?id=34844518, about exactly the same topic. Can you please not do this on HN? It's not what this site is for, and destroys what it is for.

ilrwbwrkhv
0 replies
1h54m

Ok sorry.

__loam
1 replies
20h24m

Having lived and travelled extensively, most Canadians want a house somewhere in the woods instead of doing something meaningful with their lives or try and innovate to build something.

Do you ever think about what you're writing and think "I'm an ass hole"?

dajt
0 replies
19h0m

Well, we are on HN. We have to make allowances.

EasyMark
1 replies
20h51m

I would posit that the US is headed down a similar road with christofascism in the red states. They seem to be in a race to the bottom when it comes to freedom and prosperity. Texas once moderated that but no more, I'm due to move out of this in a couple of months and probably in a nick of time. So Canada might not be alone.

faeriechangling
0 replies
20h13m

Those christofascist states have been seeing immigration inflows, are recently leading economically, and generally aren’t as screwed up reproductively where families are treated as expendable resources to be exploited for labour until they burn out like in blue states and Canada.

The left has done many nice things to ensure human rights and hedonism (not saying that negatively) but in the process all the values and traditions they deemed unimportant in the name of progress are catching up with them and I only seeing this intensify over time unless blue states and Canada have a serious come to Jesus moment. The current reality of blue states is they can ONLY exist in a world where places even more regressive than the red states exist and supply them with a constant supply of population to burn through and oddly nobody on the left seems to be all that concerned with this even though it will collapse blue state values and economics in less than a century as global population plateaus.

The American red states don’t strike me as a paragon of morality but they do strike me as one of the most relatively sustainable and affluent and “normal” cultures in the developed world, and affluent goes a long way.

If you’re expecting Canada to be a refuge from a conservative wave you’re likely to be disappointed because it and the blue states have much of the same systemic problems and it will be pressured to reform in much the same way.

tasuki
0 replies
21h36m

I worked with an Indian migrant to Canada. He was very good at his job, a great team player, and overall an amazing guy.

Your description is unfair.

ranger_danger
0 replies
21h34m

terrible healthcare

that's funny because they sure love to rub their free healthcare in Americans' faces often

preommr
0 replies
21h37m

The whole country is a gigantic house of cards propped up by real estate, with horrible service quality, terrible healthcare, no jobs, ZERO innovation, risk taking and entrepreneurship.

This is so true it hurts.

And while there's some numbers that outsiders can look at and gasp[0] at how absurd it's become, there's a whole lot that isn't being tracked or documented. Official immigration numbers are ~0.5mn for 2023, but (and I've seen it elsewhere, but I can't find it right now) if you use a common sense definition that includes all inflow (e.g. asylum seekers, tfw, foreign students, etc) then it's 1mn+. It's insane for a country of <40mn, with highly socialized services.

The quality of life in Canada is horrid in a way that's not comparable to anywhere else other than maybe australia. Everything is silly expensive, with low salaries, and it's not like in europe where you can travel 3 hours to go somwehere with cheaper services. It's crazy. Or what about crime, the right wing, tough on crime party leader yesterday said that if someone has 3 convictions for car theft that it should mean 3 years. It's no wonder that I know some crazy personal stories about people getting their cars stolen and the police doing nothing.

Anyways, I don't want to rant even more, all I can hope is that for younger people in Canada to realize that the best thing they can do is hop to the US or something.

[0] https://www.financialsamurai.com/what-if-the-u-s-housing-mar...

penguin_booze
0 replies
22h9m

Now all of this is coming home to roost

This could be true of any country that's accepting immigrants. Inviting countries must be selecive of whom the let in, what they bring with them, and whether and how well the inbound population assimilate, thus retaining the essence of its extant values. When a country has no control of its immigration (whether by choice or otherwise), or is lax about it, all kinds of birds come home to roost. Some birds lay eggs; others just poop.

mgbmtl
0 replies
21h56m

I'm surprised that you didn't mention the role of petrol in Alberta and hydro power in Quebec. They play a key role to sustaining the economy and social services. It's not just that though.

People are definitely less risk-taking, workaholics, despite having a social safety net, or maybe because of it. It's just maybe less in our culture to "go big or go home". Having a cabin in the woods and free time to live your life is nice.

Maybe because I live in Quebec, and language is definitely a barrier (requires immigrants to be trilingual), but I haven't met many shady people from China or India, on the contrary. My ancestors came here by accident from different countries, taking a random boat in a port, worked hard and made it. I hope we can give that opportunity to others too.

maxglute
0 replies
21h47m

Canada is Australia, an relatively affluent bureaucracy that sells rocks and houses. We have too many people to be Norway, where less people, a few high tier sectors and plundering the land for other markets can sustain developed QoL. But we could do ok on that model if we keep population down and build up a few strategic sectors. Except or interests are more subsumed by US foreign policy so we can't sell all the rocks we want. See the foreign NGO meddling that repeately killed Canada fossil expansion plans. Meanwhile US gets first dibs on global English talent, and Canadian English talent. And ultimately Canadian giants get cut down to size - Nortel, Bombardier due to sheninangans. But being US neighbour/sphere is better starting condition than most, but it's still hard map to play on.

lawrenceyan
0 replies
19h39m

Nah, have you seen what comes out of Waterloo and University of Toronto? Canada will be fine.

calf
0 replies
21h41m

Canada is the way it is because it is next to the U.S. The Canadian brain drain was never entirely the fault of Canada; the gravitational pull of U.S. neoliberal capitalism (what you uncritically and a-historically call 'risk taking') is a nontrivial factor. Canadian protectionism would not go over well with its world power neighbour, which seeks to exploit intellectual and social capital.

boringg
0 replies
20h54m

It's annoying that the top comment isn't related to the article but just a self-hating Canadian ranting about the current woes of the country. It's also classic Canadian behavior.

LegitShady
0 replies
22h43m

as a canadian, you're not wrong.

98codes
0 replies
22h12m

most Canadians want a house somewhere in the woods

As opposed to most Americans, at least those that have been in the industry for a decade or more, who would rather be as far from tech as possible, in whatever direction.

See also: https://imgur.com/vbFNbON

SunlightEdge
54 replies
23h2m

To maybe offer a different perspective: I think the Canadian mortgages linked to Chinese accounts will likely all be paid. What may be happening is that there is a lot of underground chinese financial activity that is not recorded in Canada and part of this 'network' is utilized to get money out of china.

silent_cal
22 replies
23h0m

It's still fraud

jabbany
19 replies
22h53m

You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening.

Like mentioned in the article, often times the material is very obviously suspicious and banks probably know this and still turn a blind eye to it because these borrowers are low risk and much less sensitive to the high/rising interest rates of today...

topspin
6 replies
22h2m

if both the lender and borrower are willing participants

Eventually this behavior goes overboard and everything crashes. In the meantime, law-abiding people are screwed by the bubble. Then they are made to pay for the clean up.

Fraud is costly, and rationalizing it contributes to the problem.

maxglute
2 replies
21h18m

But the "fraud" is slowing the bubble. Without capita controls, PRC buyers would operate like any other international buyer, except there would be a shit load more of them who would do more cash purchases and outbit everyone else. This fraud to circumvent capital controls is why wealthy PRC buyers who liquidated their extra multi million dollar tier1 units only bought 1 house in Canada instead of 3.

FireBeyond
1 replies
14h44m

The article discusses how they're not just buying one home outright. Far more profitable to put downpayments on 3 or 4 homes and just push that money to pay those mortgages while AirBnBing and renting a couple of them.

maxglute
0 replies
12h15m

The article discusses one incident of person with Canadian tax residency with multiple mortgages, where the leaker allege is typical, when number of net worth assessments in low double digit per year suggest it's not typical. Not with 30k new Chinese Canadian immigrants per year, or 150k home sales in Ontario. From my experience (I know many people who facilitate this process in ON/BC) PRC buyers typically are not renters / airbnbers, they either live in their units part time / full time (or their kids) or leave it empty. Renting/slumlording/airbnbing is largely Chinese _Canadian_ affair, emphasis on Canadian, i.e. not wealthy, middle class who needs to make their capital work to cover costs. They speak mandarin and can insert themselves into the machine. Generally PRC buyers / big bidders aren't playing the RE game in Canada to play landlord. They just want to hide some of their assets abroad. The allegation kind of skips over that distinction, are these "diaspora" PRC individuals or Chinese-Canadians with access to PRC RE networks doing ponzi mortgages to try to get wealthy off Canadian RE. In my experience, it's the Chinese Canadians, because the PRC buyers were busy speculating off much more profitable (at the time) PRC RE, especially if whistleblower is talking about 2015-now time period.

jabbany
2 replies
21h48m

this behavior goes overboard and everything crashes

Maybe... but you need to keep in mind most of these people are not really building a bubble. Unlike the subprime mortgage crisis, where things were built on inflated valuations, many borrowers in this "scheme" do have more than enough funds to cover the entire mortgage. It's just that their capital is relatively illiquid. This is also why the high interest rates have not significantly affected this.

The effects on housing cost is because of natural market merging where chinese properties are "overvalued" domestically. This is actually not new, and happened with Japan at some point as well.

That being said, the main risk for this is actually geopolitical... Should capital controls tighten (or, like, if war were to occur etc.) then there is a much bigger risk, but many are banking on the fact that, at least given the signs today, that is still unlikely.

topspin
0 replies
12h30m

Maybe... but you need to keep in mind most of these people are not really building a bubble.

No, I'd don't need to keep anything of the sort in mind. I've lived through multiple real-estate and speculation bubbles and crashes now. The arguments you make are the same sort heard before each one, and I can easily anticipate the rationales and excuses that will be offered after the next one.

You don't know how widespread this is. You don't know how many other banks are leaning on this latest house of cards, or how much of this is going on in the US and Europe as well. As far as the banks are concerned it's just one big world of suckers and they play these games everywhere, simultaneously.

And there is no "should." Capital controls will tighten. Wars will happen. Eventually, inevitably, the overhang destabilizes and this heinous crap will blow up.

Again.

themaninthedark
0 replies
23m

No single snowflake triggers the avalanche.

JumpCrisscross
6 replies
21h43m

You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening

These aren't purely private transactions. If HSBC Canada fails, Ottawa is on the hook. The defrauded party here is the public. (And possibly the bank's lenders and shareholders.)

jabbany
5 replies
21h27m

This is somewhat counterintuitive but... the fraudulent mortgages are not more risky, they are often times more stable than other local borrowers.

I think what many people are imagining is the subprime mortgage situation of yore. But in this case, a lot of the "fraud" is the result of knock on effects from capital controls in the PRC. Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly. They have to do it in $50k/year chunks.

Usually a loan or mortgage is the solution for this, but those depend on _income_ rather than _wealth_, so normally these people can't take out as much as they need to, even though they could easily back actual value of the mortgage. So there's a little collusion between banks and mortgage brokers to get in on this market gap (probably more so now that interest rates are high, which these borrowers are much less sensitive to).

Of course, there are risks, but those risks are tied to more geopolitical circumstances and less market-driven, and apparently banks are more willing to take their chances on that.

JumpCrisscross
3 replies
20h18m

the fraudulent mortgages are not more risky, they are often times more stable than other local borrowers

You don't know. The paperwork's fraudulent.

Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly

The Chinese property market is in freefall. And capital controls can get tightened. Either condition will result in default.

jabbany
2 replies
17h38m

You don't know. The paperwork's fraudulent.

They don't offer these services to anyone. Because the paperwork is fraudulent, a lot of people involved are/will be personally implicated (could easily lose their job and/or face legal challenges on top) in the scheme. It's not like banks are not monitoring delinquency/default rates already, and if the stats are start indicating problems they will certainly investigate...

So while outside observers can't verify anything, those perpetrating the scheme do have to balance their own personal risk and many will in exchange request invasive details around the clients' assets in China to cover their own ass. Not admissible evidence to the bank, of course, but they're not handing these out like candy.

The Chinese property market is in freefall.

Realistically, people involved have already sold so this doesn't affect them. At least in the Vancouver area, the brokers (who are the usual point-of-contact to the clients) won't even proceed unless you've already sold and have the cash.

And capital controls can get tightened.

This is the main real risk that those in the scheme look out for, but it's a geopolitical risk rather than a market-based one. Which makes more sense when rates are high, like now. When rates were low, this didn't happen as much since there are plenty of clients to go around.

---

Also, in the grand scheme of things, even if the bubble bursts, the broader economy is still not worse off. Each cent paid into these mortgages is real "new money" being introduced into the economy. This is not the subprime mortgage days where at the end it became just a transfer of wealth to the banking industry. For the most part "the public" is not the one being defrauded, it's China...

JumpCrisscross
1 replies
17h12m

while outside observers can't verify anything, those perpetrating the scheme do have to balance their own personal risk

Everyone in every corrupt scheme says this. The rule of law wins, in the long run, because these structures aren’t robust. They get perverted and subverted, and while it’s nice to imagine a bunch of competent crooks keeping up their shop, the reality is we have rules for a reason.

it's a geopolitical risk rather than a market-based one

Capital controls aren’t geopolitical. Neither is an offshore property market bursting.

The borrowers are borrowing against an doubly-illiquid asset. Buy long, borrow short—this has been a widowmaker since antiquity.

even if the bubble bursts, the broader economy is still not worse off

Canadian banking would collapse. You’d see the equivalent of America’s 2008 crisis, except while the rest of the world has high rates. If allowed to fester, or if it already has, that’s a generation’s quality-of-life gains going down the tube.

jabbany
0 replies
16h18m

I agree with all the points on top. The proper instrument to do this would be banks setting up a system that lets people borrow against an illiquid asset, in this case would be CNY, but it's not anything new... (and is one proposal for how to work with cryptocurrencies). That would price in the political and market risks.

---

The last one I don't agree with. This is different from the 2008 crisis in that the 2008 crisis was primarily "internal" and for the most part zero sum --- some people gained, some people lost (kind of loosely like a long-horizon pump-and-dump scheme), and at the end things revert to the original non-inflated value.

This situation is more of an encouragement of external injection _into_ the economy. Rising prices are due to external capital flowing in (and the anticipation of more to come). Even if it were to pop, things would be no worse than a hypothetical alternative timeline where there was no bubble. And that's assuming no external capital actually flowed in, that not a single person wired money into the country. Clearly this is not true, and the money coming in is still net positive. So _in aggregate_, the economy is still improved due to the injection. Again, these gains are not spread evenly, and it may be the case again that some individuals will be hurt while others reap large returns.

a generation’s quality-of-life gains going down the tube

If anything, that just means the previous quality-of-life gains were achieved by overdrawing against the future... nothing new here.

kasey_junk
0 replies
14h39m

The issue here is that the geopolitical risks are hard to separate from the market risks.

If BC property is being fraudulently leveraged against Chinese real estate, opaque decisions by the ccp can dramatically impact default rate for Canadian loans.

No market actor would expect that in a non-fraud based market. Instead a transparent pricing of Chinese assets would show them as much less valuable on a risk adjusted basis than their book wealth value. Especially compared to western income or equivalent wealth.

fennecbutt
3 replies
15h51m

Willing participants huh. Was the taxpayer a willing participant when we had to pay for the monumentous fuck up of 2008? Did the banks and investors pay for it, go to prison? Pretty sure it was just one scapegoat and that's it.

PeterisP
2 replies
15h8m

The 2008 bailouts were all loans and taxpayers made a profit on them as they got repaid - see https://money.usnews.com/investing/articles/2017-01-19/finan...

FireBeyond
1 replies
14h47m

Where do you think the banks got the money that enabled them to repay the loans?

PeterisP
0 replies
14h44m

From the mortgages, just as they should, and just as the borrowers (i.e. "the willing participants") deserved to pay - it's not a burden on some unrelated taxpayers.

ak217
0 replies
22h9m

It's not that difficult. You just appoint an auditor and make the bank pay progressively higher fines until they figure it out.

American banks learned to be much better at it after 2008. And given 2008 and the MBS balance sheets at central banks and the municipal budgets propped up by property values and national mortgage programs intended to encourage homeownership, this is by no means just a matter between the bank and its clients, even if you put aside the money laundering angle. Mortgage fraud destabilizes economies.

logicchains
0 replies
22h34m

It's a small wrong to right the much bigger wrong of the tyrannical Chinese government preventing people from taking their money out of the country.

cm2187
0 replies
21h13m

I won't throw a stone at anyone trying to circumvent chinese capital controls. Though Canada isn't the place I would go to escape financial repression.

uLogMicheal
14 replies
22h14m

It's not a matter of if they get paid, it's the unfair advantage this gives in an already competitive market. 2/3 of these properties are probably rented out at inflated prices and the two probably pay the mortgage of the third owners live in. This is a free money glitch, aka fraud.

jeffbee
13 replies
22h3m

If the market will bear the rent, why does changing the nationality of the owner improve anything?

rybosworld
7 replies
20h33m

The market's not bearing rent so much as existing property owners are colluding to prevent new construction.

If new construction wasn't so aggressively blocked in some major cities (San Francisco, Boston, all of Canada it seems), then the rents would not be nearly as high as they are.

Wealthy property owners are behaving a lot like a cartel in many places.

jeffbee
6 replies
20h18m

Exactly. The discourse about foreign buyers of homes in Canada is centered on the morally bankrupt notion that it is only wrong if that race exploits the system. If a good old white guy exploits the same system it is not worth mentioning. What I am saying, and you seem to concur, is that the system itself is the problem. The identity of the person exploiting it is irrelevant unless you are a racist.

shutupnerd0000
4 replies
19h12m

You're the only one fixated on race here. The distinction between foreign and local buyers is important to the discussion.

jeffbee
3 replies
18h58m

In what way?

NBJack
1 replies
17h14m

It is a legal distinction that has a huge number of implications in most countries. As is the focus of discussion on other threads, it necessarily changes approaches to income validation, the laws that apply, the presence or absence of credit history, etc.

jeffbee
0 replies
16h47m

You're just arguing about whether the foreigner is qualified, bonafide enough to operate the grift.

gruez
0 replies
18h50m

racism might be canceled these days, but nativism is alive and well.

rybosworld
0 replies
2h32m

I don't know how/why you even thought to interject race into this discussion.

uLogMicheal
2 replies
21h22m

This has nothing to do with nationality and everything to do with fraud. If other nations are doing this, it should stop too. Telling lies to acquire loans is illegal and inflates prices for everyone working legitimately.

jeffbee
0 replies
21h15m

Yeah but you seem to be suggested that without this yellow peril, the tenants would be, for some reason, getting a better deal. As if the problem is actually that Chinese people are better at price finding.

VK538FY
0 replies
2h19m

Good point. Well I know Canadians, Chinese, immigrants and banking.

I'm not surprised that some Chinese (or any) immigrants in Canada try to take advantage of the linguistic barrier to obtain credit. And since important Canadian documents are often less standardized than in other countries, one can surely employ a bit of artistic creativity with a stamp here and a stamp there to put through a false document.

I've personally dealt with fraudulent credit applications, submitted and approved, because the bank employee (Canadian, no relation to the client) wanted to improve his numbers. At least when I was involved in credit, because of the workflow, the middle office made decisions first based on the numbers provided to them by the front office. Of course they were supposed to control all supporting documents but they weren't exactly zealous and if you knew their work habits, you could probably deduce the best time and language for the submission of a questionable application.

fennecbutt
0 replies
15h54m

Nationality doesn't matter, but a high % of profits gained leaving the local economy does.

This is why trade with known tax havens should be banned, because no tax havens have large markets to capitalise. It's such a racket.

cscurmudgeon
0 replies
17h13m

Why does nationality matter here? The core issue is fraud due to nationality not nationality itself.

avidiax
7 replies
21h32m

I think the Canadian mortgages linked to Chinese accounts will likely all be paid.

This is a "heads, I win", "tails, you lose" type of scam. The mortgage holders are all judgement proof. They have no income or assets to go after. So if the housing market crashes, the banks have no recourse.

It's the same as taking out a mortgage and instead of buying a house, you go to the casino and bet double or nothing. Sure, the intention to pay back is there. But it is contingent on the investment performing, and the bank is taking on unknown risks.

joshuabaker2
3 replies
13h16m

Mortgages in Canada are different than mortgages in the US in that they are full recourse. If the sale price during foreclosure doesn’t cover the costs, the banks can go after you personally for the balance. So you’d have to either a) leave the country, or b) declare bankruptcy. So, not exactly a risk-free option.

avidiax
2 replies
6h37m

It is a risk free option. The Chinese income isn't real. You can't meaningfully garnish the wages of a part time casino dealer. They have no other assets to cover the potential shortfall.

rokkitmensch
1 replies
2h46m

You assume these are poor people, other assume they're quite wealthy and laundering untaxed income into assets in .ca. If the latter, they may even have a proportionate pile of assets to seize locally. I betcha you could restate your point to come across a little less jingoistic.

rybosworld
0 replies
2h22m

"You assume these are poor people"

The OP is right, the income isn't real. It's right there in the article: "Aurora branch had direct knowledge of faked Chinese income mortgages"

You assumed that the OP assumed something. Then you assumed that the OP's (non)assumption was motivated by jingoism.

Comments like yours are the worst.

raydev
1 replies
20h39m

So if the housing market crashes, the banks have no recourse

The housing market must first crash before the problem is tangible, and there's no sign of that happening.

shutupnerd0000
0 replies
19h18m

Yes that's exactly what the person you're replying to said

gscott
0 replies
20h55m

There is probably an unlimited number of people in China would would like to own Canada real estate. As long as you don't block those sales it can continue forever.

JumpCrisscross
5 replies
21h44m

think the Canadian mortgages linked to Chinese accounts will likely all be paid

Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.

cbsmith
4 replies
21h39m

Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.

The whole point of the money laundering operation is to get the money out of the country. China going to pot only accelerates it.

JumpCrisscross
3 replies
20h16m

China going to pot only accelerates it

You have to have money to launder it. Also, if the currency keeps getting hammered, Beijing will crack down on the exit channels.

alephnerd
2 replies
17h4m

Most Chinese don't invest in their stock market. The accredited investor qualification is much harder to get than in the US.

Most investment is in real estate, which has remained fairly stable in Tier 1 cities (which is where most of the post-2008 Chinese Canadians are from)

To get more than the $50k limit out, people would use a hawala type system where you'd use assets in China as collateral and get guaranteed cash from a broker abroad.

JumpCrisscross
1 replies
17h0m

Most Chinese don't invest in their stock market

Most Chinese aren’t buying British Columbian property.

accredited investor qualification is much harder to get than in the US

On a relative basis, right? In absolute terms, it’s still very low. Similar to the practical requirements for opening an American brokerage account.

Most investment is in real estate, which has remained fairly stable in Tier 1 cities

Do you have data for this? My impression was sales are being discouraged.

alephnerd
0 replies
7h41m

Most Chinese aren’t buying British Columbian property.

Yep. They don't buy Chinese stocks either. They would invest in property within China.

The kind of Chinese moving to Canada (and Australia) after 2008 aren't "most Chinese".

They tend to be from much more affluent and connected backgrounds. Think businesspeople, large property owners, or middle level party members.

Upwardly mobile Chinese (eg. Those in the tech industry or finance) will target the US or Singapore if they emigrate because they can keep their careers - something which Canada absolutely sucks at (eg. Most foreign degrees aren't recognized, white collar salaries have largely stagnated since the 2000s, blue collar work like oil drilling pays much more)

Blue collar/middle class Chinese tend to target Malaysia, Thailand, or Singapore because it's easy for Chinese to emigrate and average salaries are higher and they can blend in as the Chinese diaspora is massive in all those countries

On a relative basis, right? In absolute terms, it’s still very low. Similar to the practical requirements for opening an American brokerage account

But faith in it is low for most Chinese. The 2015-16 market crash was extremely volatile.

Also, stock investing is a new concept for a lot of Chinese - stock markets started unofficially in the 1987-1991 period, didn't formalize until 1997, and most companies preferred listing in Hong Kong or Singapore until the 2010s.

Also, if you have a finite amount of cash, you would be chasing the highest stable returns, and for most of the post-Mao era, that was in real estate.

Do you have data for this

I'm using Shanghai as my example, but it's the same story for Shenzhen, Beijing, and Guangzhou - the Tier 1 cities.

The real estate bust happened in cities outside of those, but specifically, in property located outside the "Inner Ring"

Chinese cities are planned with 3 rings - an Inner Ring with all the businesses, government offices, and residential property of people working for both, a middle ring that would often be industrial but increasingly converted into residential, and an outer ring that was farmland until 10-15 years ago when it was converted to residential.

It's that expansion of outer ring construction in all cities across China that caused the property bust.

Inner Ring residential property is basically VIP. Those are the kinds of people buying property in Canada.

From 1995-2021 [0] From 2022 [1]

[0] - https://www.statista.com/statistics/1325915/china-average-pr...

[1] - https://www.statista.com/statistics/243404/sale-price-of-res...

mtalantikite
0 replies
22h31m

Tangentially related, there was an undercover Vice News report on the connections between Chinese Triads and the Mexico/US fentanyl trade a couple months ago [1]. I also wouldn't be surprised if there were underground networks of capital in Canada that were related to these mortgages.

[1] https://www.youtube.com/watch?v=E8wEGVIPJ_4

dddddaviddddd
0 replies
19h24m

I think the Canadian mortgages linked to Chinese accounts will likely all be paid.

If Canadian banks agree with this risk assessment, they have little incentive to actually verify income in these cases.

causi
52 replies
1d

It's quite bizarre any jurisdiction would allow someone to buy housing there when they can't legally live in it.

alchemist1e9
34 replies
1d

Why? Should we restrict other investments with similar logic? For example should non-residents not be allowed to purchase vacation properties and lease them?

The impulse to enlist the government to regulate private property and investments is not productive and results in endless encroachment of individual liberties and rights to governments.

stormfather
16 replies
1d

Something drastic has to be done about the cost of housing if we're to leave a functional society to the next generation.

alchemist1e9
10 replies
23h48m

Blaming foreign investors for a housing crisis is a smokescreen. It's not the demand from investors that's the issue; it's the government's stifling regulations that choke new construction. The mess is because of state failure, not market failure. When sellers freely sell their homes to foreign buyers, they're making choices that benefit them. Why should we deny them that right? The real absurdity is ignoring the elephant in the room: a bureaucratic quagmire that prevents building enough homes to meet demand. Instead of scapegoating investors, slash the red tape and let the market work.

ericmcer
5 replies
23h20m

USA population has increased ~10% in the last 20 years. Why has that small increase in population caused a humongous lack of housing? It feels like something else is going on other than "we need to increase supply by 10% but can't"

seanmcdirmid
3 replies
23h17m

Housing supply and demand isn’t uniformly distributed across the United States. When we say “housing shortage” we only mean in popular places to live.

stormfather
2 replies
21h10m

So where have housing prices fallen?

seanmcdirmid
0 replies
20h38m

Places you don’t care about, like Jackson Ms, Detroit, Toledo, Gary. Recently, we see falling housing prices in Las Vegas and Phoenix, although they are probably ahead of where they were before the pandemic.

mistrial9
0 replies
16h47m

in the asset bubble leading to the 2008 credit collapse, the only area in the continental USA that had decreasing housing prices in large areas was .. the Ohio Valley. (likely plenty of niche areas too but that is what stuck out)

vel0city
0 replies
20h37m

As Sean mentioned, not only have we increased in total population we have also changed where we are living. Lots of small towns have seen their populations decrease, with some completely disappearing. Large neighborhoods of cities like Detroit and elsewhere essentially emptied. We need more housing and we need to shift housing resources to where the demand is.

There are loads of cheap houses in the USA. They're just in places where most people don't want to live.

Here's a cheap house:

https://www.zillow.com/homedetails/420-Tyler-St-Gary-IN-4640...

The commute to Southern California is pretty killer though.

function_seven
3 replies
23h33m

Yup.

The Power of Pricing is a thing that exists whether you want it to or not. Smart policy uses it to great advantage. Dumb policy redirects this to hurt those it intends to help. Rent control, restrictions on production, byzantine zoning and construction rules... all contribute to distorting the market in ways that push back on the original (or at least, stated) intentions.

You want housing to be cheaper? Increase supply. That's it. You don't want foreign investment in your properties? Don't make them so damn attractive as pure investment vehicles. How? Increase supply.

There's always a boogeyman to be blamed when markets are so broken like this.

seanmcdirmid
0 replies
19h35m

China doesn’t allow non-residents to buy property at all. You have to be working in the city you want to buy in for a few years with documentation if you don’t have hukou there.

Maybe the USA and Canada could do something similar? I find it ironic that it’s primarily Chinese investors who want us to keep our property markets open.

denton-scratch
0 replies
22h47m

You want housing to be cheaper? Increase supply.

The USA (and maybe Canada) has large stocks of government land. In my country, most land is privately-owned; interfering with landowners' property rights is seriously destabilising. Property law is the basis of most law.

alchemist1e9
0 replies
23h29m

Absolutely correct. Unfortunately and surprisingly the supposedly educated users of HN are overwhelmingly anti-capitalists somehow, your opinion and mine are decidedly in the minority recently, and that is itself fascinating to me, as I can only conclude the education system is completely broken and failing to teach both basic economics which consists of facts and is scientific and also history. I liken it to teaching creationism over evolution, preferring fantasy over reality.

gsk22
2 replies
23h53m

Sure, but the high cost of housing has little to do with non-resident investors, and everything to do with lack of supply.

bdcravens
1 replies
23h50m

Resident investors are a big part of the problem, however.

alchemist1e9
0 replies
17h25m

Off with their heads! /s

inglor_cz
0 replies
23h15m

"Something drastic has to be done about the cost of housing if we're to leave a functional society to the next generation."

Drastic? Well, then: kill NIMBYism. Just off with its head. We know the 18th century in England as the "Gin Craze", future generations will look at our period as the "NIMBY Craze".

Large-scale construction is absolutely possible. There were periods of massive construction booms all around the globe, especially after wars (when a lot of housing had to be rebuilt immediately). You can absolutely build a lot of comfortable middle-class housing in a fairly short time. Most German cities were rubble in 1945 and fine again in 1960.

But you need density and straightforward approval processes. No artificial scarcity caused by one-family home zoning and endless environmental reviews that are abused to stall developments for decades.

Fauntleroy
0 replies
23h58m

Or if we don't want to watch it collapse during ours.

tslocum
11 replies
23h52m

Yes. Restricting foreigners from owning domestic assets is the beginning. Next comes restricting / heavily taxing domestic owners that own more than one home. Sooner or later, housing gets closer to being what it's supposed to be (shelter and space for people who need it) rather than a financial vehicle.

alchemist1e9
10 replies
23h37m

This proposal is a slippery slope to economic disaster. First, restricting ownership rights—foreign or domestic—distorts the market, disincentivizes investment, and ultimately harms those it claims to help by reducing the supply of housing. Second, treating homes purely as shelter ignores the reality that property is also an investment and a key component of individual wealth and economic freedom. Imposing heavy taxes on those owning more than one home would not only penalize success but also discourage rental market contributions, exacerbating the housing shortage. The real solution lies in encouraging development and reducing bureaucratic barriers to increase housing supply, not in draconian measures that trample on property rights and stifle economic growth. Let’s not replace a market-driven approach with a command economy that history has repeatedly shown to fail.

denton-scratch
8 replies
22h42m

treating homes purely as shelter ignores the reality that property is also an investment

But that's the problem, isn't it? The basic necessities of life shouldn't become a vehicle for speculation.

FTR, all of my wealth is in two homes.

alchemist1e9
7 replies
21h45m

Asserting that housing—or any basic necessity—shouldn’t be an investment is a dangerously naive stance that flies in the face of economic reality and human history. Consider food, water, healthcare—all necessities, yet all benefit from private investment and innovation. The collectivist dream to strip away the investment aspect of housing is a recipe for disaster, leading to shortages, degradation, and inefficiency. Your stance isn’t just misguided; it’s empirically proven to fail, fostering misery under the guise of equality. Housing, like any resource, flourishes under conditions of freedom, not under the heavy hand of state control. To suggest otherwise is to ignore the lessons of history and to jeopardize the very foundations of prosperity and freedom.

denton-scratch
3 replies
21h5m

Consider food, water, healthcare—all necessities, yet all benefit from private investment and innovation.

I live beside the river Thames, which private "investment" has transformed into a sewer. My access to food has shrunk; I used to have access to butchers, greengrocers and so on. Now all my food comes from supermarkets. The health system I depend on has been gradually privatized, and it is now at breaking point.

the lessons of history

History is squishy stuff; we mould it to support the conclusions we want to draw.

[Edit] I'm interested that you didn't challenge my equating of investment with speculation, because I didn't mention investment. Obviously, without capital investment, you don't get capital assets like houses. But my neighbourhood is blighted by absentee landlords; one neighbour is an AirBnB, the other has been empty for 5 years. Both are owned by absentee landlords, one living 2,000Km away. That's not investment; that's speculation.

alchemist1e9
2 replies
19h44m

Blaming private investment for pollution and housing issues ignores the core role of government in regulating externalities and protecting property rights. The Thames’ state isn’t due to market failure but government inaction, a prime example of state failure. Moreover, the economic decline witnessed in the UK isn’t caused by capitalism but by anti-market policies stifling competitiveness. The real issue is the collectivist delusion that more state control is the solution, ignoring that such approaches have consistently led to further decline. Misplacing blame on capitalism and pining for socialism only exacerbates the problems, diverting us from the proven path to prosperity: free markets and effective, limited government intervention.

Lamenting the rise of supermarkets as a death knell for local butchers and greengrocers is a misplaced nostalgia that ignores consumer choice and market efficiency. Supermarkets thrive because they offer what consumers demand: variety, convenience, and affordability. To decry this as a market failure is to advocate for a return to less efficient, more costly ways of living, under the guise of preserving tradition. It’s an affront to consumer sovereignty and a free market that naturally evolves to meet changing societal needs. Yearning for a past that restricts choice and elevates prices is a backward step, not progress.

Criticizing absentee landlords as mere speculators ignores the benefits they bring: paying property taxes and injecting capital into the economy. This isn’t about speculation; it’s about fulfilling market demand and facilitating economic activity. The real issue lies in state-imposed barriers that prevent adequate housing supply, not in the actions of individual investors. Blaming investors for taking advantage of market opportunities is misguided and diverts attention from necessary reforms to increase housing availability and affordability.

The collectivist dismissal of history as "squishy" is a deliberate evasion of undeniable truths. History is replete with the failures of socialism and the triumphs of capitalism. To mold it to fit a narrative that justifies state control and collectivism is intellectually dishonest and dangerously naive. The empirical evidence is clear: wherever socialism has been tried, it has led to economic stagnation, misery, and the erosion of freedoms. Capitalism has lifted billions out of poverty and spurred innovation and prosperity unmatched by any collectivist scheme. Ignoring these facts is not just an error in judgment; it's a willful blindness to the lessons that history has painstakingly taught us about the superiority of market freedom over state control.

Whenever the cry of "market failure" echoes, a closer inspection often reveals the true culprit: state failure. "If someone considers that there is a market failure, I would suggest that they check to see if there is state intervention involved. And if they find that that’s not the case, I would suggest that they check again, because obviously there’s a mistake." This wisdom holds true across the spectrum of economic grievances. Time and again, what is hastily labeled as a failure of capitalism turns out to be the unintended consequences of excessive regulation, misguided policies, or government overreach. The path to prosperity is not paved by increasing state control but by unleashing the creative and productive powers of the free market.

montjoy
0 replies
1h58m

I think in an ideal world you’re right. Ideally if housing costs were too expensive I would just move somewhere else. However we live in a world where there are borders and immigration policies and violence and relationships and jobs and climates that make moving around hard. Housing is a hard problem because there are limited resources for where people want to/can live. It’s a type of natural monopoly. I’m pretty sure history has abundant examples of what happens when you allow natural monopolies to run unchecked. Personally I’d rather have a mismanaged democratic government in charge of the monopoly than any private entity.

denton-scratch
0 replies
10h52m

The Thames’ state isn’t due to market failure but government inaction

The real issue is the collectivist delusion that more state control is the solution

My head hurts.

The collectivist dismissal of history as "squishy"

Firstly, I am not a collectivist. Secondly, I don't dismiss history; I think it's very important and illuminating. Thirdly, Karl Marx, the arch-collectivist, hardly dismissed history; his entire theory was based on historical analysis. History is not a list of facts; what real historians do is largely interpretation. History is almost completely unlike maths. Expressions like "history tells us that ..." are rather stultifying; history tends to tell us what we want to hear.

Your comment seems to be a catalogue of free-marketeer articles of faith, expressed as bald assertions, as if only a fool could fail to see their obvious truth. Well, we've had free-marketeers in charge here for 15 years now; everyone knows that things have got worse.

lxgr
2 replies
18h45m

Ah yes, who would want to trade the flourishing real estate utopia of, say, San Francisco for the collectivist hellscapes of New York (some rent stabilization and public housing), Vienna (>50% public housing, consistently scores top in overall quality of life globally), or Singapore (>70% public housing)?

Free markets are great, until they start incentivizing weird behaviors (NIMBYism, bubbles) instead of investments (construction, renovations) and efficient allocation.

Successful cities have walked the balance successfully and stepped in (only) when necessary.

alchemist1e9
1 replies
17h47m

This argument mistakenly credits collectivist policies for successes but ignoring the profound negative impacts of state overreach in places like San Francisco. This isn’t about choosing between so-called utopias and hellscapes but recognizing the failure of excessive regulation that stifles supply and inflates costs. Vienna and Singapore are outliers that succeed due to unique governance, cultural attitudes towards public housing, and centralized planning that meticulously balances supply and demand—conditions that are not easily replicated elsewhere. The real issue is state intervention distorting market incentives, leading to inefficiencies like NIMBYism and housing bubbles. A truly efficient housing market thrives under free market principles, minimally but effectively regulated to encourage development and affordability. Mentioning New York as a paragon of housing policy overlooks its glaring issues with affordability and efficiency—hardly a model of success. In comparison, cities like Chicago, with a different regulatory approach, demonstrate that a more balanced policy framework can indeed foster better housing outcomes. New York’s situation, far from an example to follow, actually underscores the pitfalls of overregulation and the necessity of rethinking housing strategies.

lxgr
0 replies
17h29m

I agree in that the right amount of regulation probably heavily varies between places and over time, but I'd just like to challenge the idea that anything other than complete liberalization of housing investments will inevitably lead to inefficiencies.

Vienna and Singapore are outliers [...]

A model that has to explain away two historically, culturally, and geographically distinct cities as outliers is not very compelling to me.

Again, I'm not proposing that more regulation is always good, but as soon as e.g. long-term residents are massively getting priced out by outside investors or homeowners start opposing new construction exclusively because of the impact on their property value due to an increase in supply (rather than for actual decreased quality of life), the incentives of the free market start drifting apart from those of the people actually living there.

IncreasePosts
0 replies
23h15m

How about an ultimatum? Either people can only own one house without huge tax consequences, OR we open up restrictions on building so we can build a lot more housing stock than we currently do.

soggybread
3 replies
23h58m

For example should non-residents not be allowed to purchase vacation properties and lease them?

AirB&B has been a terrible experience, so many people buying up houses just to lease them out for a weekend has definitely contributed to rising housing costs and over-all cost of living

bdcravens
2 replies
23h51m

That's an issue absolutely, but it doesn't answer the question of whether non-residents should be allowed to do what residents can.

JumpCrisscross
1 replies
23h45m

it doesn't answer the question of whether non-residents should be allowed to do what residents can

Raise that fence too high and you turn landlords into the community's gatekeepers. (How else could a non-resident become a resident?)

alchemist1e9
0 replies
23h39m

Don’t worry the HN crowd seems to be so far gone from reality and understanding free markets that I’ve encountered numerous discussions where landlords are categorically evil, which is overwhelmingly empirically understood to be extremely beneficial to housing and communities to have landlords invest in them! Of course given the trend has been to remove all education of market fundamentals and inject eduction systems with endless collectivist propaganda we should not be surprised.

Fauntleroy
0 replies
23h58m

There's a little too much "housing is way too incredibly expensive for the citizens of the country" going on here for us to really care about "fairness of the open market"

JumpCrisscross
6 replies
23h57m

bizarre any jurisdiction would allow someone to buy housing there when they can't legally live in it

Foreign-owned homes are a problem for asset acquirers. Vacant homes are a problem for anyone who needs housing. The former seems to get a lot of visibilty when concerns around the latter get raised.

alchemist1e9
5 replies
23h43m

Vacant homes are a problem for anyone who needs housing.

But they pay taxes without demanding any services and the seller assessed they had better use of the capital, they could buy or build a more suitable home.

If I lived in a location with 50% vacant homes all paying property taxes then wouldn’t my schools and streets and all local government services be extremely well funded?

causi
2 replies
22h9m

Kind of by definition you can't pay more in taxes than you contribute to the economy, therefore unoccupied housing is a drain on the local economy.

alchemist1e9
1 replies
21h28m

Your assertion flips economic principles on their head. Vacant homes paying taxes without drawing on local services represent a net gain, not a drain. Taxes paid on these properties directly fund public services, enhancing the community’s infrastructure without additional burden. Furthermore, the investment in property contributes to the economy through construction, maintenance, and property management industries. To claim that unoccupied housing harms the local economy is not logical.

Austrian economics teaches us that restricting foreign investment misinterprets how markets work. Vacant homes signal opportunities for builders, not losses for workers. Investment flows where it’s valued, stimulating demand and construction, not stifling growth. Misallocating housing due to artificial constraints only distorts the market, harming those you aim to help. Let’s not forget, economic growth comes from creating value, not redistributing scarcity.

FireBeyond
0 replies
14h31m

To claim that unoccupied housing harms the local economy is not logical.

Sure, property taxes are paid on the house.

But unoccupied homes don't buy groceries and clothes, don't go to restaurants in the local economy.

So they do harm the economy, in the sense that they don't contribute as much to the economy as an occupied home.

JumpCrisscross
1 replies
23h33m

If I lived in a location with 50% vacant homes all paying property taxes then wouldn’t my schools and streets and all local government services be extremely well funded

If the polity is smart, yes.

It looks like British Columbia gets about 15% of its revenue from property taxes and transfers [1]. So you'd need adjustments to make up for the personal, corporate, sales, fuel, carbon, tobacco and insurance premium (?) revenues the vacant homeowner isn't paying.

[1] https://www2.gov.bc.ca/assets/gov/british-columbians-our-gov... Table 2.3

wasimanitoba
0 replies
13h35m

Assuming the drop in social program expenditure doesn't already compensate for the drop in tax revenue.

mytailorisrich
2 replies
23h49m

Most governments would do anything for foreign direct investment.

From many points of view, having foreign investors buy property without immigrating is a best case scenario for governments.

ericmcer
1 replies
23h22m

In the long run (30+ years from now)? Or just for the few years they are in office?

mytailorisrich
0 replies
22h39m

I think probably in the long run because, all in all, net inbound capital into the economy is positive in the long run. What can cause problems is bubbles and 'over-heating', meaning too much over a too short period, which is when 'less' inbound capital may be sought. But overall best to keep the flow positive.

slavboj
1 replies
1d

Approximately anyone can buy a US-based REIT, even if they're ineligible to enter the country.

bdcravens
0 replies
23h52m

This is less of an issue than owning the home, since in an REIT, you aren't controlling tenant access.

toast0
0 replies
23h25m

It seems like a waste of limited government ability to act to try to deny this when it's quite simple for an interested foreign investor to form or invest in a domestic corporation that buys housing it doesn't live in, or find a domestic partner to make straw purchases of housing the partner doesn't live in.

michael1999
0 replies
23h3m

The historical Canadian project, like all anglo settler projects, is structurally about early arrivals to the frontier making money selling to later arrivals. The idea that housing is primarily for locals is a newer idea.

ericmcer
0 replies
23h24m

It feels like selling the next generations future for cash now.

caseysoftware
0 replies
23h51m

In the US, banks issue mortgages to illegal immigrants all the time. Last fall, the Biden Administration went as far as threatening banks who had refused.

“This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.”

Ref: https://www.justice.gov/opa/pr/justice-department-and-consum...

asah
0 replies
22h36m

There's "housing" and then there's $5+MM manhattan apartments, which are so inflated above their value as functional housing as to effectively be NFTs. People whine about the pencil shaped buildings but they shutup fast when they see that it causes zero inflation to lower-end housing prices and a big help to city budgets.

Also, strategically, having powerful people own expensive real estate influences them to visit and maybe not bomb it... at least, it's better than them never having stepped foot there. The famous example is Kyoto not being nuked because an American leader had seen it firsthand[1]. The Nazis spared Paris was apparently spared for similar reasons[2].

The counterexample is NYC which everybody loves to crap on (Gerald Ford "drop dead", 1993 bombing, 9/11, and lots of failed terrorist attacks since), presumably as a symbol of American greed and excess, but also as a symbol of urban chaos, rot and violence.

[1] https://collider.com/oppenheimer-improvised-line-kyoto/

[2] https://www.google.com/search?q=Nazis+spared+Paris

ThisIsMyAltAcct
43 replies
23h54m

The whistleblower, whom The Bureau is calling D.M., immigrated to Canada as an international student from India, making him a minority among mostly Chinese-Canadian co-workers at the Aurora branch.

“I am going to reveal potential mortgage fraud at HSBC Bank Canada and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime.”

FINTRAC’s study doesn’t say that Canadian banks knowingly issued fake-income mortgages to Chinese diaspora buyers in Toronto. But in an interview, D.M. said banking staff are trained to guard against fraud, and the loan application packages he reviewed in Aurora beggared belief.

The Bureau’s review of HSBC Canada emails and D.M.’s text messages, shows he came to believe numerous employees at the Aurora branch had direct knowledge of faked Chinese income mortgages, and a veteran manager with oversight of more than 10 Greater Toronto branches knew about broad and questionable mortgage lending for Chinese diaspora clients.

Pointing to specific examples, D.M. claimed that another branch colleague had admitted processing numerous loan applications without meeting his clients, because a branch manager delivered her subordinates foreign income client applications so “they did not have to get sales themselves.”

“She said yes, she knows specially in Mainland China there is a team who would even answer emails and phone calls verifying [Chinese income] but it’s a sophisticated and well organised scam,” D.M. 's email to HSBC Canada managers says. [...] “When I asked for such a serious issue if she raised a HSBC confidential [complaint] or not she evaded my question,” D.M. wrote. “Now we all love numbers, but I don't think the bank will like these kinds of numbers achieved through this way.”

Sounds like that branch is compromised

topspin
19 replies
21h37m

Sounds like that branch is compromised

"Since 2015, the whistleblower concluded, more than 10 Toronto-area HSBC branches had issued at least $500-million"

It's not a branch. It's the whole bank. And you can safely infer it's not the only bank.

bonestamp2
17 replies
21h1m

Don't get me wrong, it's definitely a problem, and something needs to be done, but lets also try to keep it in perspective... $500 million could well be 500 mortgages in Toronto. That would be about 0.02% of the private dwellings in Toronto.

simmerup
14 replies
18h41m

Remember this is $500 million awarded to people out competing honest Canadians looking for housing who aren't lying about their incomes.

If 10 people bid for a house, it's the guy in China lying about their income setting the house price when they win, by what HSBC is doing. This will have an outsized effect on the market.

cyanydeez
5 replies
18h6m

yes, remember it's capitalism doing this, not Chinese, Indian, Canadian or American.

hail free market.

techbro92
2 replies
17h51m

This is not an inherent feature of capitalism. This is a failure of the government to create a fair market. This is caused by people that are subverting the rules to out compete the people playing by the rules.

yukkuri
0 replies
17h13m

Tell that to the capitalists always protesting that there's no need for regulations

porknubbins
0 replies
13h34m

I have seen a lot that smaller, high trust places where people worry about long term reputation, status etc are not good at competing with large immigrant populations who do not have any stake in maintaining a reputation in the community.

vineyardmike
0 replies
16h29m

Capitalism doesn’t have to mean an unregulated free market. That’s one flavor of capitalism.

AllegedAlec
0 replies
9h20m

capitalism is whatever I feel is bad about it > bad actors define capitalism

Sure thing bud.

PeterisP
5 replies
16h23m

It's $500m that went to "honest Canadians" selling their real estate. The house isn't gone, it's still there, and will probably get sold to Canadians when the bubble pops, possibly much cheaper.

fennecbutt
4 replies
15h57m

Ahaha, the bubble popping. That'll be the day. All they're doing is increasing house prices for no reason. Houses are now just casino chips for rich people.

PeterisP
3 replies
15h34m

On the other hand if it doesn't pop, then it literally doesn't matter if the income documents were fake, as the bank has good collateral and giving the loan turned out not to be a mistake.

xyzzy_plugh
0 replies
15h22m

Now you're thinking like a bank.

medvezhenok
0 replies
12h45m

Fraud is fraud, so it does matter. Same way that SBF is still going to jail even if the people with money in FTX get their money back (via crypto rising again / the AI investment).

The real people harmed were the Canadians trying to start a family who got outbid on the house.

antisthenes
0 replies
13h32m

Oh, and think of the tax revenue! ;)

maxglute
0 replies
16h48m

Except HSBC knows 99/100 of the time, those bidders in PRC are actually wealthier bidders and that the irregular paperwork is perfunctory to the fact that the system has spend decades building loopholes for said wealthy PRC buyers with developed methods of capital flight, which has always made them better candidates than "honest" Canadians. Occasional fraud doesn't have outsized effect to the very real fact that there are simply more wealthy PRC buyers than Canadian ones, and sellers/bankers/ everyone who gains in the transactions wants it that way. Honest Canadians with 200k household income and 10% down can't compete against PRC buyer with millions of slightly illiquid assets. These PRC buyers are the same as rich Indian/Iranian/insert elite from other country buyers, there's just a shit load more of them and they have to jump through more hoops due to capital controls on PRC's end which Canada RE system is all too happy to ignore.

fennecbutt
0 replies
15h58m

NZ has this problem but with real buyers regardless. Chinese citizens evading laws as much as they can to buy houses and flip them, sometimes hours later.

Laws like "you must live in the house for 1 year before selling" meant they just sent a relative to live there free before selling for higher price.

Like investors and companies chasing ever higher profits, there's a bunch of people that think the house they own should be worth 100000% more by the time they sell it.

Even had a gen x friend be like "Well I pay rates (council services fees) while I own the property so it should be worth more!"

Bruh, getting your rubbish taken away while you live there doesn't add value to the fucking house. Otherwise I could claim paying my electricity bill while I live there does too.

Rehanzo
1 replies
19h11m

It says "at least". It's also looking at specific branches of one single bank. Who knows the true extent if all banks and branches are considered.

bonestamp2
0 replies
18h29m

Ya, fair enough, and some Toronto mortgages are more than a million too.

throwaway907628
0 replies
17h56m

Witnessed this first hand at RBC when my brother from Hong Kong was inquiring about getting a mortgage in Toronto since he wants to move back to Canada with his two young kids.

We found a random mortgage specialist (a Chinese lady) at RBC. Without knowing the full picture of my brother's income situation, she immediately suggested that she could get the mortgage approved regardless, just needed to fake some documents.

It was astonishing how she went straight to the point so quickly to someone she met the first time.

She also said a lot of people has non-taxed income and needed a way to get a mortgage before the real estate price becomes out of reach.

So definitely not just HSBC.

radicaldreamer
18 replies
22h33m

Are US banks just a lot more strict about source of income than Canadian banks?

dghlsakjg
10 replies
21h33m

Total conjecture: 1. US banks do not face nearly as diverse a set of applicants, and 2. are only required to hold the loan for 5 years.

1. It is very common in Canada for a person with wealth acquired outside the country to apply for a home loan. At the time I was approved as a guarantor for a home loan for over half a million CAD, I had only been in the country for 2 years, and had no credit history with any Canadian institution (out of laziness I just was added to my wife's accounts as a signer and cardholder when I moved). They accepted copies of my American credit history and bank statements, but had no real way to verify their truth. In the US, I don't think that (relatively) wealthy immigrants wanting a home loan are nearly as common. Richmond, BC is a great example of this: avg home price is 1.5mm and 60% of the residents are immigrants.

2. Canadian mortgages are refinanced every five years, traditionally (it is possible to get a longer term, but very uncommon). Combine this with the fact that Canadian real estate has ALWAYS gone up (until now), and financing a home really wasn't a risky thing. If a bank didn't like a customer, they could refuse to refinance after 5 years. If a bank foreclosed, they were basically guaranteed to be made whole.

seanmcdirmid
4 replies
19h46m

I got the feeling that the HSBC in Bellevue Washington catered primarily to overseas Chinese clients looking to buy homes in the Seattle area. Most of the employees spoke some dialect of Chinese. I have no idea about the loan officers, however.

pchristensen
3 replies
19h20m

Bellevue's population is ~14% Chinese, over 21,000 people, and mostly high income tech salaries. It would be bad business not to have Chinese speakers on staff.

FireBeyond
2 replies
14h51m

14% Chinese, over 21,000 people, and mostly high income tech salaries. It would be bad business not to have Chinese speakers on staff.

What language do these Chinese tech workers speak at their jobs?

pchristensen
0 replies
14h41m

It depends on the composition of their teams, but probably something different than their most comfortable, native language.

danielscrubs
0 replies
12h11m

You can have a tech vocabulary but not know what a secured property is for example. Maybe a non native would know the word secure and the word property and make an erroneous assumption.

It’s probably the biggest purchase in your life so it makes sense you want to know all details.

raydev
3 replies
20h43m

They accepted copies of my American credit history and bank statements, but had no real way to verify their truth

I'm skeptical here, given how closely the US and Canada work together, both US and Canadian banks share an incredible amount of info with each other and not solely because of cross-border commerce. There is also a non-trivial number of US citizens living and working in Canada so there are services available to them given their special tax requirements.

dghlsakjg
2 replies
20h15m

If you have information that contradicts what multiple banks have told me I would love to know it, since it would be very nice to have that information available to my Canadian bankers.

In the 3 banks I've worked with in Canada, all were completely unable to access my American credit history.

The governments do share tax data, but AFAIK the banks have no way to link "John Smith SSN:123-45-6789" to "John Smith SIN:098-76-54321". They even have my US SSN number since Canadian banks report to the IRS.

Edit: here's experian explaining it: https://www.experian.com/blogs/ask-experian/u-s-credit-histo...

joshuabaker2
1 replies
13h18m

Yes this is accurate. I work at a lender that operated in both Canada and the US and the credit bureau integrations were with totally different companies and had different APIs (even for Equifax on both sides of the border)

VK538FY
0 replies
2h42m

It's been a while but I don't even think that a credit score in Canada is comparable to a credit score in the US. Sure, an Equifax terminal in either country spits out a number in the same range but the formula and calculation are probably different, with different legal frameworks regarding the information contained therein.

randomdata
0 replies
12h19m

> Canadian real estate has ALWAYS gone up (until now)

Have always gone up expect for when they haven't. Nationally, real estate prices dropped precipitously in the early 1980s. And the Toronto housing crash of 1989 was a complete meltdown. It took until the 2010s for prices to finally return to where they were in 1989!

rconti
1 replies
18h40m

TFA says: "The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada."

I don't know if it's a legal requirement, but I sure know I had to hand over all of _our_tax information to the bank to validate income when getting a mortgage in the US. You have to sign a form saying the bank is allowed to pul your data from the IRS; you're not just handing over paperwork and promising that it's legit.

pxmpxm
0 replies
18h26m

This - not sure where the sentiment in this thread is coming from, but you have to disclose your tax filings for the last 2/3 years along with all your bank accounts and recent statements.

mistrial9
0 replies
22h7m

a non-trivial portion of residential real estate transactions across the USA never apply for a loan. In certain areas it is more so. When real estate retail value rises fast, money appears from everywhere -- hint, not from first time home buyers.

The USA Federal system of mortgage loan gurantees has been gamed seriously, over and over since the 80s. It is a whack-a-mole for enforcement. All the parties close to the transactions have exactly the wrong incentives, most of the time. One of the defendants in a recent "pay cash to get your kid into elite school via fake sports" scandal was a mortgage broker in San Diego County. The Judge after reviewing evidence, reportedly told the man on the record "you are a thief." etc

joshuabaker2
0 replies
13h24m

Yes, but it’s partly the government’s fault. There’s literally no way for mortgage lenders to pull your tax records in order to verify income. There used to be some third party services to connect to the CRA but they got shut down and replaced with… nothing.

cbsmith
0 replies
21h41m

Short answer: no.

bonestamp2
0 replies
20h59m

No. I've purchased homes in both countries and from what I've seen, US banks are far less strict. Policies, procedures, and operations are very undisciplined at many US banks (compared to Canadian banks). I have noticed some are starting to become more strict in the past 5 years though.

JumpCrisscross
0 replies
21h51m

Are US banks just a lot more strict about source of income than Canadian banks?

American financial regulators are much more comfortable letting banks fail than their Canadian or European counterparts. (In part this is because of the sheer diversity of banks we have.) Being fined out of existence is a real possibility for an American bank. That shapes behavior.

rokkitmensch
0 replies
2h49m

HSBC is rotten to the core. Regular judgements against them for facilitating outlawed behavior, zero systemic reform.

hoseja
0 replies
9h29m

Sounds like that branch is compromised

By all accounts it seems the whole country is.

cyanydeez
0 replies
18h7m

upstream, the problem is _still_ the commoditization of housing markets.

it's not like they're claiming these people are unable to pay.

ajkjk
0 replies
14h19m

Your first thought is to.. assume the bank is probably misunderstood?

user3939382
17 replies
23h42m

HSBC funneled $1B (that we know about) for cartels, it came out as 100% knowingly committed, and no one went to jail. Basically the government asked for their cut. Why wouldn't do they this again and again? They are above the law, they are the law.

mikeyouse
10 replies
23h32m

"The government asked for their cut" actually means that for laundering that $881 million in cartel money - they were fined $1.9 billion and then had to pay an additional $665 million in other civil penalties.

They wouldn't do it again and again because they don't earn $880 million when accepting $880 million in dirty money - remember that bank deposits are liabilities to the bank - they only earn money from interest on that -- and it cost them billions in fines to do so...

user3939382
3 replies
23h17m

I'd be very surprised if the $880M was the extent of the crime. The government not jailing anyone involved in the scheme is completely inexcusable and in my view makes the government complicit in the crime, in which case my trust that the public information about this case is accurate is 0.

mikeyouse
1 replies
22h42m

The "scheme" was bank tellers in Mexico, working for a recently acquired local bank, accepting boxes full of cash and lying about the origin. HSBC was fined for looking the other way and having shitty controls about suspect funds -- their AML teams were understaffed and they didn't do any real due diligence on the Mexican banking firm they had purchased. The entire executive team was forced out, they clawed back bonuses for everyone in the chain who profited off the shitty controls.

So who would you jail in this case? The bank tellers interfacing with cartel? They're in Mexico anyway. Some overworked compliance manager in the US who ignored the suspicious transactions? Some C-Level exec person who didn't know about the suspicious origin of a billion dollars into a bank with something like 2.5 trillion in assets?

What specific crime do you think they committed?

Nobody likes these global banks, they're run by absolute psychopaths but remember, the optimal amount of fraud is non-zero. All of the mirror image complaints about banks not wanting to touch Crypto or proceeds from gambling/porn sites is downstream from settlements like these.

https://www.bitsaboutmoney.com/archive/optimal-amount-of-fra...

user3939382
0 replies
21h18m

This isn’t accurate. HSBC management trained their employees on how to encode transfers for the cartel organizations to evade the government’s detection mechanisms (by inserting punctuation). So there was more to this scheme than you’re describing.

creato
0 replies
22h26m

HSBC probably got a few percent of that $880M in fees/interest/whatever. So unless they were laundering ~100x more than that, the fines absolutely did make all of that crime (even if it wasn't the full extent of it) net negative for the bank, and probably by a lot.

godelski
2 replies
23h13m

That comes out of the company's wallet, but does it come out of a person's? Persons responsible for committing crimes, not customers or other third party members. HSBC has trillions in holding, so those numbers might not be as big as they appear.

mikeyouse
1 replies
22h39m

They literally clawed back bonuses from all of the executives involved in the compliance failures.

user3939382
0 replies
19h15m

Oh no their bonuses. I’m sure it was tough not being able to spend the summer in Martha’s Vineyard that year.

jszymborski
1 replies
23h28m

Also, HSBC is selling off all of its consumer banking in Canada largely as a result of the gov't fines and tattered reputation among Canadians.

denton-scratch
0 replies
23h17m

tattered reputation among Canadians

Hardly just Canadians; I first started hearing tales of huge HSBC corruption 20 years ago.

FTR: I bank with First Direct, which is an online banking service of HSBC in the UK.

Teever
0 replies
23h23m

Is that enough though?

It seems pretty clear that putting people who commit crimes in jail definitely reduces their chances of commuting crime at least while they're in jail.

White collar crime is the root of all evil in our society and we should be putting white collar criminals in jail.

realusername
4 replies
23h41m

It's HSBC being HSBC, I can't say that I'm surprised. Drug cartels and money laundering are at the core of their brand value.

opportune
1 replies
23h34m

Ignorant American here. Isn’t Hong Kong supposed to be the HQ/money exit point for Chinese organized crime? And HSBC is the main bank there, but headquartered in the UK?

If I had to guess they are heavily involved with spooks and foreign assets operating in China (and if so, why not use them for non-Chinese intelligence-financial shenanigans?) and a lot of their “illegal” activity is unofficially blessed by foreign intelligence.

realusername
0 replies
20h22m

From their past history I'd say they are in global organized crime, regardless of the country.

thriftwy
0 replies
23h36m

"The reason we can say space pirates does not exist is that HSBC does not have a subdivision dedicated to catering to such clients"

eYrKEC2
0 replies
23h40m

Hopefully Canadian citizens are the "lender of last resort", just like we Americans are the "lender of last resort".

The bankers must be made whole -- nothing else matters.

soco
0 replies
23h32m

Credit Suisse finally sunk because of such business and more, so there is (very very little, I know) hope.

maxglute
15 replies
23h57m

The whistleblower, whomThe Bureau is calling D.M., immigrated to Canada as an international student from India, making him a minority among mostly Chinese-Canadian co-workers at the Aurora branch.

I mean it's real Chinese income backed by fake paperwork. There's PRC capital controls, rich PRC national who buy RE abroad are going to do it via laundering services and has been for decade+. Banks are fine with this and have dedicated branches in diasphora area to handle because the money is good and reliable. Sometimes rich Chinese immigrants also do odd jobs to fill time, bored aunties with multi million dollar mansions in Richmond working shifts at River Rock Casino. It's a bizarre world.

seanmcdirmid
13 replies
23h49m

It could be real Chinese income backed by fake paper work (money laundering) or fake income backed by fake paper work (fraud). You can take out $50k per year, a lot more via exemptions, so you don’t need money laundering to get money out of china into the USA (I had to move a few hundred K before, all the paper work was legit).

maxglute
9 replies
23h37m

I presume you were foreign national with more options. Options for diasphora Chinese, many who illegally hold dual citizenship and relies on PRC nationality to do transactions/capital flight in PRC is different.

I highlighted the original quote where branch is mostly Chinese-Canadian for context. Aurora is 20% Chinese, it's a big diasphora neighbourhood. There isn't some big "fake chinese income" conspiracy, it's the entire (proven) business plan (money laundering) with occasional fraud. I think pretty much everyone knew Chinese are buying million+ propertiers with laundered money, and it fuels the bubble as much as any other foreign buyer.

seanmcdirmid
8 replies
23h27m

Ya, foreign nationals are allowed to export their earnings. But even Chinese citizens can also pool those $50k yearly allocations, it doesn’t take a lot of friends and family to do that.

I’m not really sure what is happening among the rich, but among the middle class, it isn’t so much money laundering but having lots of savings with no good investment options, or just wanting to make money while someone else takes on the risk. They don’t have access to money that needs laundering.

jabbany
6 replies
23h2m

But even Chinese citizens can also pool those $50k yearly allocations, it doesn’t take a lot of friends and family to do that.

So as an observer of this, you will see money coming out of one place, spread to many accounts, wired overseas to different recipients, then re-aggregated...

What do you think that looks like...? Surely not money laundering?

maxglute
5 replies
23h0m

Not on Canada's end, it's a bunch of people using legal capital controls to get money into Canada. On PRC end, it's evading capital controls, which depending on your geopolitical alignment, can be illegal activity. But if you're in the west, you want that Chinese money. Free money from competitotrs as good as brain drain from competitors.

seanmcdirmid
2 replies
22h27m

Capital controls have bad intentions anyways, I have no qualm with PRC citizens trying to avoid them. Not everyone in the west wants or likes Chinese money. It does lead to them basically exporting their bubble abroad, but Japan did the same in the 80s before their big bust.

maxglute
0 replies
16h10m

Yes, PRC citizens avoiding capital controls end up playing on the same field as other global wealth. I think PRC exporting their bubble is over stated - 10s of millions of tier1 buyers got into the speculation/RE game early in 90s that they'd be millionaires with wealth to enter western RE game regardless where PRC RE market stablizes. And there are just millions of millionaires in China, independant of wealth from RE bubble. Many buyers are simply independantly wealthy from other business ventures ontop of having multiple tier1 units to liquidate to buy western RE. The folks buying million+ dollar properties and 100k cars in the last few years didn't liquidate everything they have in PRC to start new life in Canada. Canada is a retirement plan they bought with change. Sure not everyone wants PRC money, but the sellers certainly do, as do the intermediates who benefits from PRC capital flight.

jabbany
0 replies
21h41m

Yup. Hence the capital control (less money leaking out means an easier recovery after the bust).

Of course, as is rational in capitalism, this just makes it even more urgent to skirt the capital control, lest you be caught with the burden of the bust. This was also why crypto was even an option for doing this, for a short while at least.

fennecbutt
1 replies
15h42m

It's not free money if house prices are pumped and sold, profits then returned to China.

They used to try to overbuy milk powder in NZ, ignoring supermarket limits imposed bc NZ mothers couldn't find enough formula for their kids. Chinese buyers would sell it back to China to make a tidy profit, after their baby formula scandal drove demand for foreign baby formula (which still exists today). Worked at a supermarket at start of uni, got so fucking sick of being screamed at in mandarin bc I refuse to sell them 30 tins when the limit was 2. Over and over, every damn shift.

Source that isn't me: https://www.nzherald.co.nz/nz/china-buys-up-big-in-nz-baby-m...

maxglute
0 replies
11h52m

profits then returned to China

Are those profits returning to China? If they wanted profit they would invest in Chine RE which (until recently) was much more profitable and speculative than western RE. Western RE investment was for capital flight to bring wealth abroad. Very few want to bring money INTO PRC.

Baby formula actually great example, at least from what I know in AU market. Yeah you had the occasional tourists bringing back a few cans to savec money, but the sellers getting 30 tins and doing weekly shippments to regular customers in PRC were getting paid in AUD. $60 per tin into AU economy flipping milk powder. It's a good gig, it's no real estate money though. You can argue it's net bad for society because some gain at society loss, but that's how it be in capitalism. Some interests profit at the cost of others. And the interests who profit from PRC money, arguably the establishment, wants to keep profitting.

maxglute
0 replies
23h2m

It happens, it can be more annoying than one thinks since people with wealth to exfiltrate correlated with other family members who also have wealth to exfiltrate, graft is family business. Nephew/niece studying abroad? That's 100k gone per year for next 4-5 years. Meanwhile living well is expensive, annoying to be dependant on personal capital flight group. And post crackdown, it's more risky to drag family/friends into pooling. Especially if they're public sector/public sector adjacent. Frequently, it's easier to pay someone commission to move money for you.

In my experience, middle class aren't buying million+ RE, they pool together savings to send kids abroad, and maybe put a down payment on a condo that the kid pays off once they get decent job in west. And by middle class we really mean upper flat out highincome top %5-10 relative to all PRC house holds who are middle class tier1/2 regions.

But agreed, domestic non gov investment ecosystem pretty trash, hard to beat investing in your kid(s) and saving for retirement until a mature system develops. Which IMO hard goal since focus isn't to further wide wealth disparity by giving that 5-10% more consumption/investment abilities but to bring up the next quantiles of households - the actual middle class. This is where my assessment departs from most, I think "common prosperity" for PRC is getting more households richer, but at PRC development levels, that diminishes the households with enough savings to retire and surplus to invest. And this has all sorts of implications on inflation/FX rate.

jabbany
2 replies
23h5m

You can take out $50k per year

Try buying a house with 50k a year... This is exactly what the "scheme" solves. You have new immigrants who have (in many cases) legitimate money (e.g. by selling property back in china) but cannot move it out of the country quickly due to capital controls on the chinese side.

Since mortgages are meant to spread out costs over time, it's the perfect solution. However, banks (understandably) care about income rather than existing capital. So you have a lot of "safe" customers who are unlikely to default and less sensitive to interest rates (compared to the local borrower pool), and banks looking for customers amidst high interest rates... You can see how something like this can easily arise from these conditions...

you don’t need money laundering to get money out of china into the USA

I cannot comment on what your situation was (maybe through a business?), but AFAIK it is very hard to move capital out for regular individuals. Your realistic options to wire out capital are just "education" and "tourism". While technically you can claim "investment", it will almost always not be approved and cause a watch to be put on all your accounts.

That being said, usually documentation of the funds outside of china is completely legitimate and above board. There is no need to fake this. The only paperwork magic that needs to happen is towards the chines government... However, it still _looks_ like money laundering because you can only wire $50k a year, so many need to resort to wiring from accounts of different individuals (friends and family) to different individuals, despite the funds already being fully documented and reported outside china.

seanmcdirmid
1 replies
22h24m

Foreigners on Z visas can wire out whatever they earn, so for me it wasn’t an issue. There are even foreigners who rent out some of their allocations since you always have PRC expenses, but this is of course illegal.

I used my wife’s $50k allocation once because I was held up by some paper work (you need a lot of paper work, notarized, etc…). They didn’t ask any questions about what it would be used for, but this was 2016, and they changed the rules a few months later.

jabbany
0 replies
21h55m

Foreigners are not fully exposed to the local market though, so there's no need to do capital controls. _Income_ is never an issue, as there are taxes to cover that. The main thing being cracked down on is people moving accumulated _wealth_ out.

Also, things have changed _considerably_ since 2016 (as these things tend to do). Indeed, nobody --- foreign or domestic --- needed to document use as long as you stayed within the $50k (you would be asked to if you went above that). Later it became a mandatory question, but wasn't enforced. These days it is enforced rather strictly. If you claim education, you need to provide statements of tuition and housing etc. For tourism there's similar requirements, and usually they limit discretionary spending budgets to ~$10k.

huhtenberg
0 replies
23h0m

has been for decade+

Try 25 years. Started right after the Hong Kong transition from under the British rule.

beiller
14 replies
23h29m

All sounds very plausible, but where are the effects of this? We should be seeing many people holding mortgages at HSBC not able to pay. Are there no public stats showing how many lack of payments being made to HSBC? Is HSBC going to hold on to these properties taking massive losses? For how long? It has definitely helped the run up of prices here. It will also help the collapse of prices as well, either that or the collapse of HSBC. Maybe the effects take a very long time to manifest. Lets hope it's not too long :)

timr
3 replies
23h18m

The article suggests this is money laundering. It would make sense to have fake borrowers with fake incomes as part of a layering operation.

Someone wants to get $large_sum out of China. They can't do this without raising lots of flags in both countries. So they set up an army of fake borrowers, have them take out fraudulent mortgages on real properties in Canada, pay down the mortgages, and sell the property to obtain clean money on the other end.

All the better if the property rises in value in the meantime due to enormous fraud.

avidiax
1 replies
21h29m

The article doesn't seem to suggest that the mortgage holders are actually straw purchasers, but the facts seem to suggest this is at least sometimes true. How can a hairdresser service several mortgages without "income" from China?

timr
0 replies
21h16m

The article doesn't seem to suggest that the mortgage holders are actually straw purchasers, but the facts seem to suggest this is at least sometimes true. How can a hairdresser service several mortgages without "income" from China?

The article explicitly says that the purpose is laundering via professional operators -- see the flowchart diagram toward the bottom of the piece.

stevenwoo
0 replies
23h5m

Not Canada, but before the pandemic caused rural housing prices to go up, there was a crime syndicate buying houses for marijuana grow operations and having the house pay for itself essentially until they got caught. https://www.cbsnews.com/losangeles/news/doj-raid-marijuana-g...

ABCLAW
3 replies
23h15m

We should be seeing many people holding mortgages at HSBC not able to pay.

Not really. Lying about the source of cashflow doesn't mean the cashflow isn't real.

The end objective for a lot of these frauds isn't to sink the bank with fake loans. It's to launder money.

beiller
2 replies
22h57m

Makes sense I wasn't thinking about the full on laundering aspects. But even so, if the real estate is used in laundering, it will eventually have to be sold to get back clean money. This should still run up prices at the start, and run them down in the end. So I think the majority of the point still stands: there should be an uptick in sales (which there is not). They could be speculating on top of laundering, in which case they are taking some losses. We are -20% from peak. The time will come when they (the launderers) will need liquidity and sell which has not come. Will it ever come?

bostonsre
0 replies
22h5m

I think they want to get their money out of china and parked into a safe place. If they pay off their mortgage, they don't want to find a new place to park their money, they can just keep the house as an asset. I think a lot of investing in china is real estate based and is part of the reason that market is struggling over there so much now. It would make sense for them to continue to follow that investing model when exporting their wealth to other countries.

avidiax
0 replies
21h22m

They can get clean money from the start if they structure things right.

Have other mules or partners purchase crappy properties at a low price. "Flip" the properties, having another mule purchase at a greatly increased price and service the mortgage with more laundered money.

So you get the capital gains immediately, and they are apparently completely clean. If the crappy house continues to appreciate naturally, that's also a bonus, but if not, you can eventually default the mortgage or short-sale.

faluzure
1 replies
23h14m

Assuming these mortgages are insured through CMHC, would HSBC be on the hook or the insurance system when some of these mortgages fail?

Canadians are certainly paying for social services used by folks who earn income abroad and pay little to no income tax in Canada, and folks who want to buy their first house are harmed by inflated housing prices.

My currently overseas landlord for some reason needed to travel to Canada to give birth, and was very eager to get their health card / banking documents sent to our rental despite it being rented out for several years prior to us arriving...

crustaceansoup
0 replies
23h11m

CMHC doesn't insure mortgages where the property value is equal to greater than $1 million, which in the Greater Toronto Area essentially limits it to condo purchases.

cm2187
1 replies
23h24m

I think that's what a lot of people here are not realising (or perhaps they haven't read the article). In this case the main victim is HSBC if these loans were made to individuals who are speculating on foreign real estate without the income to cover the loan. This doesn't look like originate and distribute, i.e. HSBC shareholders will bear the losses.

empath-nirvana
0 replies
22h40m

No, they won't. It's money laundering. They'll pay the mortgages.

oldgradstudent
0 replies
23h18m

- "A rolling loan gathers no loss."

As long as real estate prices continue to rise, you won't see large scale missed payments because they will be able to sell the assets, refinance the loan, or even successfully rent it out.

We've seen this dynamic in 2008 and in the S&L crisis before. Bad loans drive the bubble, the expanding bubble hides the bad loans, but when the bubble stops, there is a massive large scale loan failure.

flamedoge
0 replies
23h7m

HSBC Canada is sold to RBC

Terr_
11 replies
1d

IANAFinancialInvestigator, but skimming through it sounds like:

1. Fraudulent applicants come to the bank with crazy stories to ask for enormous loans/mortgages toward a Toronto house, allegedly to turn hyper-suspicious big piles of cash into a more reputable-looking asset.

2. HSBC goes along with that because they want to suckle on the sweet regular payments of suspicious cash, even though they ought to damn well know that these customers are just a front for an organized crime ring.

3. As a bonus, this locally-concentrated money-laundering/speculative-investment thing screws up the property market for Torontonians. The local multimillionaire babysitter is willing to buy at almost any price because their secret financial goals are very different than yours.

While looking for other articles, I notice it's been ~16 months after the end of HSBC 10-year tangle with US regulators over their business with Mexican and Columbian drug cartels. [0]

[0] https://www.reuters.com/business/finance/us-fed-terminates-e...

seanmcdirmid
6 replies
23h52m

A lot of it doesn’t even sound like money laundering, just fraud. You say you have a job paying you lots of money from China, verification is loose, you get the loans, and then try to make mortgage payments via Airbnb. The risk is mostly with the bank, and if it doesn’t blow up you make all the money.

opportune
1 replies
23h28m

Banks these days often don’t hold on to those mortgages though. They can repackage them as securities like MBS and sell them to entities like pension funds. This type of thing is exactly how the GFC started

cm2187
0 replies
23h21m

Except that the losses are rarely passed on to investors. The issuer (the bank) typically retains first loss (that changed after the 2008 crisis). So it's typically more a tool to get cheap funding than selling mortgages.

Terr_
1 replies
23h44m

While that may happen too, the article alleges the mortgage payments are being made with funds wired from China.

If the borrowers are making the mortgage via rent/Airbnb of the properties... then they are somehow keeping it secret within Canada and also sending it on an international round-trip, which seems like a strange stretch for any small-time "lie on the loan application" crook.

seanmcdirmid
0 replies
23h37m

The article states more cases than that. One of the examples the mortgage payments aren’t being made via Chinese wires, they are being paid locally and the Chinese income doesn’t exist at all.

They could be making round trips with Chinese banks but I don’t see why. You can transfer funds from China into your account before your monthly mortgage was due, the mortgage provider would never know. You can also put dollars into a Chinese bank account and do wires in demand, since it isn’t R!B there are no controls on it.

kurthr
0 replies
23h35m

How could you lose money? RE prices only go up... as long as there's a greater fool... oh, wait?!

koolba
0 replies
23h43m

There used to be a thing called a “down payment” that was supposed to cover things like this. It would force you to have a modicum of equity in the house and give the bank a 20% buffer on the price to break even after a short sale.

DeRock
1 replies
18h49m

This doesn't necessarily even need to have a laundering angle. I have a different take:

1. They come with some money, enough for whatever minimum down payment is required (but notably, the issuing bank will also lower down payment requirements for clients with high income or assets, which are faked anyway)

2. HSBC is incentivized to issue mortgages, yes, that's their business. But the actual fraud here sounds more like cash kickbacks from the fraud buyer to the issuing agent themselves.

3. Home prices are made on the marginal sale, so a small amount of this activity can have a large upward pressure on prices. This leads to typical bubble scenarios, and you can keep rolling over or refinancing mortgages as prices keep rising (or even just sell). To get a sense of this, over the past few years, the average Canadian house gained in price something like double the average Canadian income.

So in summary, a lot of this could be explain by plain fraud, enabling foreign buyers to both perpetuate, and participate, in a giant housing bubble. If that's true, and it all comes crashing down, then god help us all.

smashed
0 replies
14h58m

People have been waiting for decades for the Canadian housing market to tumble.

There are so many Canadians waiting on the sidelines with their down payment ready to be deployed and are out competed year after year.

The pent up demand for housing is enormous. Even with the high interest rates.

Hell, with the rumors of interest rates going down, there is a frenzy to BUY now, suck up the high interest and get a relief in a few years, because people are afraid that if the rates go down, more people will qualify for a mortgage and it will bring more pressure, so better to buy now if you can.

I am convinced it will not go down in my life time ever. Too much demand, not enough supply.

vondur
0 replies
23h41m

How many fraud issues has HSBC had over the years? Why are they allowed to still do business in the US and Canada?

raverbashing
0 replies
23h41m

This is not really news, this is certainly not exclusive to one bank or another

I remember some years ago I saw a comment somewhere that, for real estate purchases "proceeds from a certain country were subject to AML regulations... but not from China"

Really. I can imagine a Canadian banker saying that with a straight face.

neilv
10 replies
1d

But more than a year later, D.M. was so dissatisfied with the bank’s response that

I only recognize the HSBC name from scandals in the news: https://en.wikipedia.org/wiki/HSBC#Controversies

saiya-jin
9 replies
1d

Look at any wiki article on any major global bank, the chapter about 'controversies and legal issues' is always a thick list, HSBC ain't worse or better than others.

There are no good guys there, that's not why the business was set up and corresponding folks were/are hired. If you want more controls, enforce more regulations, they do work if well defined.

jacquesm
4 replies
23h53m

HSBC seems worse than many others. When I moved to Canada my immigration lawyer explicitly advised to stay away from HSBC, this was in 2000 or so and they already had a pretty bad rep. The various scandals since then haven't improved that reputation. TD, CT and RB have their own problems but none of them have received even close to the total fines that HSBC has (to the best of my knowledge).

I agree there are no good guys here, but there are shades.

neom
2 replies
23h4m

I've been using HSBC in Canada and the USA for 15 years, they're great for exactly the reasons they shouldn't be. Their tooling basically lets you do whatever you want with no oversight. It's kinda weird, but I liked it. Sad they sold their Canadian business to RBC (even though they sold their USA business to Citizen Bank, they allowed high net worths to stay but the Canadian arm did not, wondering if this news is the reason for their exit)

hiatus
1 replies
20h13m

Their tooling basically lets you do whatever you want with no oversight

What do you mean by this? Maybe some examples would help to clarify.

jacquesm
0 replies
10h0m

I can give you one: one guy I met while I lived in Canada had a scheme going where they got people to sign up for a service using a credit card and then they also signed them up for a bunch of unrelated very low monthly fee services that automatically renewed and/or unrelated one time charges marked as 'donation to some charity'. HSBC was happy to shield the company from VISA and MC for the longest time because they made money on it. This was pretty much a clear case of theft and without HSBC cooperating I really doubt it would have worked.

radicaldreamer
0 replies
22h33m

They started off as an opium bank, that heritage and culture still pervades their business practices.

If you want to read more about this: https://philebersole.com/2013/02/15/hsbcs-history-and-the-or...

JumpCrisscross
3 replies
23h58m

HSBC ain't worse or better than others

Money laundering does seem to be their choice in poisons.

emmanuel_1234
2 replies
22h38m

That's because they are one of the most global bank, therefore a prime choice when it comes to moving money from countries to countries. Most bank have a much smaller global footprint and can't be used as such.

Banks don't benefit from their customer laundering money just like landlords don't benefit from drug trafficking in their building: it's a hindrance and it costs a lot to do anything about it.

Source: I work on AML in a global bank.

xurbax
0 replies
19h14m

Don't they? Surely they make some interest on the money if it is parked for any length of time? Plus transaction fees and such? And individuals probably get bonuses etc. based on volume in some way? (IANAB(anker), just wild guesses here.)

JumpCrisscross
0 replies
22h36m

they are one of the most global bank

By what metric? I’d argue the driving factor is their proximity to dirty money. Same with Russian banks. Then other people notice you’re used to looking the other way and you get word-of-mouth network effects. With money launderers.

cloudedcordial
6 replies
21h31m

The issue is not new. I am of East Asian heritage and live in Canada. Several people asked me causally why I went to school and had a regular job. They explained that with the "Chinese money" I should not compete for jobs with folks who really needed the money.

Smh...

billy99k
2 replies
17h5m

I get that they shouldn't be stereotyping, but I frequently travel to Markham, and see lots of young Chinese kids with expensive cars. I think the last time I was there, I counted 40 Teslas.

khzw8yyy
1 replies
5h31m

A Tesla is not an expensive car anymore, it's the new Toyota Camry.

cloudedcordial
0 replies
1h19m

I'd drive a more humble car than a Toyota Camry to dodge the annoying questions on "Chinese money". I made serious efforts to do well at school and to have a reputable career in tech.

al_borland
2 replies
17h48m

Can you explain what they are implying? Is there a belief that China hands out blank checks to anyone who happens to be Asian? This sounds insane to me.

noobermin
1 replies
14h33m

Read the article. It's not china giving blank checks, it is the set of rich folks China's stellar rise has created who are property rich and have capital from China they can live off of. There's no blank checks.

The stereotyping is lumping the parent post with this group on the basis of North American racial categories ("Asian" as a group, as if that's a thing.)

cloudedcordial
0 replies
1h4m

Lumping together "Asian" as a group is definitely annoying. The different nations and countries from East Asia alone could be unique culturally and politically. In addition, many ethnic Chinese have been living around the world for generations.

inSenCite
5 replies
1d

HSBC soon to be RBC. This is not very surprising, a lot of this also gets facilitated by the independent mortgage brokers who get ppl through the system with some 'creative coaching'.

fakedang
4 replies
23h32m

Lol no. HSBC has always had a much worse reputation than RBC, or any other bank for that matter. HSBC and Standard Chartered are amongst the worst international offenders when it comes to fraud and money laundering.

wisemang
2 replies
23h26m

Probably referring to the fact RBC is set to acquire HSBC’s Canadian business.

fallat
1 replies
22h59m

Brings to question: did RBC know? How did they not know?

emmanuel_1234
0 replies
22h29m

RBC probably indulges in this as well. HSBC just has way more ties to Hong Kong and China than RBC does.

peterleiser
0 replies
22h49m

Exactly. HSBC was laundering money for Mexican and Colombian drug cartels and fined $1.9 billion by the US government, which is one of the largest penalties ever imposed on a bank for breaking U.S. law.

Deutsche Bank fires pretty high on the fraud meter as well.

Ericson2314
4 replies
21h43m

Canada needs more housing supply. Blaming foreigners' mortgage applications, sketchy or otherwise, is just cope.

cbsmith
1 replies
21h37m

Canada does need more housing supply, and ironically an influx of fraudulent real estate money like this helps to fuel more growth in the supply.

Still, fraud is fraud. Stopping it won't fix Canada's housing problems, but that's not a reason to stand idly by.

Ericson2314
0 replies
20h45m

I would say land value tax makes mortgage fraud a lot less enticing ;)

Sapping demand for the crime is the most effective enforcement! (Like Semaglutide is probably the best silver bullet yet to "win the drug war"...)

AllegedAlec
1 replies
9h17m

If you disallow foreigners to buy up whatever little housing there is on the market you solve part of the issue though.

Ericson2314
0 replies
3h48m

Foreigners that don't live their will probably rent it out, no? If so, they are not contributing to housing scarcity.

msie
2 replies
19h30m

Sam Cooper makes a living with China xenophobia. He was fired from his stint at Global for accusing a Canadian MP of colluding with China according to “sources”. That MP sued Global who fired Cooper. So I take his articles with a huge grain of salt.

noobermin
0 replies
14h31m

Are there more details here? Accusing one of "colluding with China" which is a state does not imply xenophobia.

canadiantim
0 replies
19h25m

Well atleast we know where you stand tho

hnthrowaway0328
2 replies
23h44m

I think I know a bit about these stuffs, just a bit.

These loans are fraudulent probably, but they are safer than most other mortgage loans.

ugh123
1 replies
23h42m

Such is money laundering

hnthrowaway0328
0 replies
23h28m

Yep, greedy bank managers are willing to take any business they can grab. Many loan officers earn like 500k and up.

downrightmike
2 replies
1d

HSBC DOING SHADY SHIT? Business as usual, remember when they took in all that drug cartel money? They shouldn't exist.

cjbgkagh
1 replies
1d

HSBC was created to deal with opium money following the opium wars because other banks would not.

hef19898
0 replies
23h32m

At least they value tradition, values and mission. Sounds like a stable bank in more than one sense.

Agree so, there shoupd have been a bunch of jail sentences for laundering cartel money. But then financial crimes at that scale rarely get punished.

forinti
1 replies
23h27m

Just the other day I read that "to shanghai" is to kidnap or trick someone into working for you. I immediately thought of HSBC.

denton-scratch
0 replies
23h9m

kidnap or trick

I thought it meant kidnap, specifically to kidnap a sailor in port and make him work aboard ship; as in "press gang", "pressed man".

darth_avocado
1 replies
1d

making him a minority among mostly Chinese-Canadian co-workers at the Aurora branch.

Not trying to point fingers on whether the branch workers were in on the whole thing, but maybe it was easier to perpetuate the fraud because of cultural familiarity?

readthenotes1
0 replies
23h58m

Your fingers aren't required, only the whistleblower's:

"and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime."

dade_
1 replies
23h56m

HSBC Canada is in the process of being sold to RBC. As employees will no longer work for HSBC in March and possibly unemployed through the new found efficiencies by RBC, this creates an interesting situation for virtually no risk whistle-blowing.

I hadn't thought of this possibility when the exit was announced.

eswat
0 replies
23h34m

this creates an interesting situation for virtually no risk whistle-blowing

Not so risk-free unfortunately

A June 2023 email from the bank’s personnel department says “we hereby demand that you [the whistleblower] immediately and permanently delete any and all HSBC information on any personal email accounts.”

“If you do not comply with these obligations,” the email warns, “HSBC also reserves the right to bring this matter to the attention of relevant law enforcement agencies.”
contingencies
1 replies
1d

Not only Canada.

In Australia this became pervasive across all banks for the last 25 years. It got to the point where, around 5-10 years ago, new national rules were mandated that foreign income could only be assessed at some minor percentage of its evidenced volume under the epithet "loan serviceability criteria". At the face of it, these rules appear to have the public's best interests at heart. But in reality, they simply lock out anyone that isn't a locally registered card-carrying commuter wageslave (eg. cross-border entrepreneurs, immigrants, etc.).

So the new scam - from multiple independent sources - is apparently people from Singapore taking out loans in Chinese Yuan Reminbi denominations for Australian property against Singapore or Hong Kong banks, then coming to the Australian banks and having them "transferred" (internationally, and across currencies!) which allegedly sidesteps the local restrictions. The fact that I know this simply from talking to bank staff as a stranger shows how extremely pervasive these sorts of things are.

donavanm
0 replies
11h17m

A “fun fact” for another Australian. As of this month at least one if the big four is doing serviceability assessments based on the PAYG gross income.

WRT your other foreign income/asset comments its much less nefarious. The local banks are focused on AU income and assets because it is directly tied to serviceability and recovery. You can do loans based on foreign income/assets but youll pay a few percentage points for the risk and conversion problems. The international loan outfits are usually smaller, though HSBC is a big one IIRC.

bonestamp2
1 replies
20h47m

during the Covid-19 pandemic, because Canadian casinos were closed, Chinese underground banking schemes evolved

Hang on, what... I want to hear more about the Chinese underground casino stuff.

dddddaviddddd
0 replies
19h16m
whoswho
0 replies
23h12m

Yes. Downtown Toronto is full of store-fronts.

stainablesteel
0 replies
21h34m

real estate in canada is so expensive that i think it will ironically cause the jobs to become worthless, and this is the only comeuppance that will bring the housing prices back down is when people give up on living there

secondcoming
0 replies
1d

“Bank statements can be verified directly with the foreign banks or use a reputable third party to verify,” he suggested.

Is that even possible with Chinese bank accounts?

Anyway, the presence of Chinese Funny Money in property has been known about for years, not just in Canada either.

rafaelero
0 replies
22h17m

If only there was a better store-of-value asset in the world than real-estate. The pressure over rents and houses would be much improved.

nojvek
0 replies
5h1m

Could someone explain why Canada with their 40M population (almost 10x smaller than US) is running into highly overpriced homes?

Canada is one of the largest countries on the planet.

Why can’t Canada build more homes?

Also why can’t we ban foreigners from owning homes?

Same issue applies to US as well.

mass_and_energy
0 replies
19h12m

How many of our financial system's rules are we willing to let the Hong-Kong Shanghai Banking Corporation walk all over before we stand up for ourselves and expel them from the western financial markets?

m3kw9
0 replies
22h26m

All you need to know “ The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada.”

jacquesm
0 replies
23h57m

HSBC has been part of plenty of scandals. Here is one example:

https://www.investopedia.com/stock-analysis/2013/investing-n...

heldrida
0 replies
9h49m

Could this happen in other parts of the world like London or Lisbon?

What’s the point of working hard and playing by the rules…

gnatman
0 replies
22h29m
frozenport
0 replies
22h6m

Those banks effectively issued sub-prime mortgages, in part due to obvious fraud.

Will Canadians let them fail?

catchnear4321
0 replies
19h19m

The Hongkong and Shanghai Banking Corporation Limited opened in Hong Kong on 3 March 1865 and in Shanghai one month later.

pesky acronyms.

Jemm
0 replies
6h15m

Canada has bee fuelled by money laundering and asset hiding for decades.

Finnucane
0 replies
22h46m

"HSBC is at the forefront of efforts to identify, prevent and deter financial crime … We will not do business with individuals or entities we believe are engaged in illicit conduct.”

Much Lol.

29athrowaway
0 replies
22h41m

Thanks to fractional reserve banking, most money is already fake anyways.