[topspin]

> 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]

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]

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]

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]

> 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]

> 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]

No single snowflake triggers the avalanche.