Chinese nationals are bringing illicit cash into the country by the briefcase, and at least some of it is ending up in Canada’s real estate market, according to a news report.
Canada Border Services Agency data obtained by the Wall Street Journal shows cash seizures from Chinese citizens accounted for 59 per cent of all the currency seized at Canada’s two busiest airports, in Toronto and Vancouver, from April 2011 to June 2012.
Nearly $13 million in cash was seized during that period, according to the WSJ. In one incident at the Vancouver airport, a Chinese man was found with $177,500 in the lining of his suitcase and stuffed into his pockets. But the average cash seizure amounts to around $16,000, according the CBSA documents.
The total number of cash confiscations, however, appears to be declining. The CBSA stated in a 2011 audit that the number of cash seizures at the border had declined by a third between 2009 and 2011.
Anyone entering Canada with more than $10,000 in cash must declare the currency to customs. Failure to do so results in a $500 to $5,000 fine. In most cases, the cash seized by customs from Chinese citizens was returned after they had paid the fine.
Some of that cash is ending up in Canada’s real estate markets, particularly the Toronto and Vancouver condo markets, the WSJ reports. Real estate analysts in recent years have raised questions about the extent of foreign investment in Canadian real estate, and have suggested foreign cash may be driving up home prices and making housing less affordable for Canadians.
(STORY CONTINUES BELOW SLIDESHOW)
Canada's Best and Worst Housing Markets
"They're arriving with fortunes intact, especially in the [British Columbia] Lower Mainland, eagerly buying their own bits of the good life and helping buoy up real estate prices," Landcor Data Corporation president Rudy Nielsen told the Globe and Mail.
Vancouver real estate agent Tony Savino told the Wall Street Journal he had one Chinese customer who wired the money to buy a condo in $10,000 increments from various family members.
It’s difficult to say how much Chinese money, illicit or otherwise, is making its way into Canada’s real estate market, because the government doesn’t keep track of this data.
But not all housing experts agree Chinese money is inflating the market. Cameron Muir, chief economist at the British Columbia Real Estate Association, said only two per cent of home sales in greater Vancouver are to non-resident buyers.
The sneaking around that is taking place has to do with restrictions China places on its citizens taking cash out of the country. With wealthy investors looking for better earnings outside China, and many Chinese frustrated with the country’s banking system, the amount of cash flowing out of China illegally is growing, news reports indicate. A study found that $600 billion left China in 2011.