Douglas Todd: Why has Ottawa downplayed ‘China shock’ on housing?
It’s not only the looming collapse of China’s largest house-builder, Evergrande Group, that has caused a shock to North America’s real estate and financial markets.
The U.S. Federal Reserve, a pillar of the American establishment, has also published a report that zeros in on how wealthy buyers from the People’s Republic caused a “China shock” on U.S. housing prices.
The Federal Reserve study, by board members Sheng Shen, Calvin Zhang and Zhimin Li of Peking University’s HSBC Business School, found that “residential real estate capital inflows from China significantly induce higher house prices and employment in the local economy” in certain U.S. cities, especially those with ethnic Chinese neighbourhoods.
The report found an influx of buyers from China contributed to gentrification of neighbourhoods and caused lower-income people to move away. Why don’t Canadian officials produce something similar for this country, where cities like Vancouver, Toronto and Calgary have also been impacted?
Extremely indebted Evergrande is in the news this week because it’s the biggest player in China’s explosive real estate sector, which accounts for 25 per cent of the country’s GDP, a more exaggerated portion than even that in Canada. China’s housing bubble has been fuelled by massive housing speculation through companies like Evergrande. It’s contributed to oversupply and an estimated 65 million empty homes in China.
The company’s crisis resonates worldwide. The media has reported Evergrande, financed in part by the Royal Bank of Canada, owns many properties outside China, including Quebec’s ritzy Château Montebello resort . But beyond that Ottawa doesn’t offer much information on how much corporations or investors from China — or any country — own property in Canada. In an era of global free trade, federal politicians don’t want to know. Many also don’t want to rile China.