By Bill Mann, MarketWatch
VANCOUVER, B.C. (MarketWatch) — As investment clubs go, it’s one of the more unusual ones around — the money you spend to join isn’t really an investment and it’s not really a club. But more and more people are trying to join and it could soon become one of the more expensive memberships to have.
The Canadian government has had an Immigrant Investor Program for years. Not that long ago, when my wife and I checked into it, it would have cost a C$250,000 interest-free investment to get a permanent-residence card from the Canadian government. The government would use your money for five years, then give it back. A pretty good deal. Plus, it would save months of waiting and a lot of the Canadian government paperwork.
But Ottawa has kept raising the bar. It’s now up to an C$800,000 investment and about to get higher — perhaps a LOT higher.
Thanks to the immutable law of artificial scarcity, when Canada announced last year that it would only issue 700 of the Investor Class visas (talk about a small class size) from the thousands it had previously accepted to help manage demand, some deep-pocketed foreigners (most Chinese) chartered jets to Canada to get their applications in first. Good thing: The program was closed to new applicants after 30 minutes.
Some non-investor immigrants currently wait years to get into Canada, but now the wealthy are going to have to pay more for fast-tracking their way in.
Immigration Minister Jason Kenney says the current C$800,000 cost in the investor program is too low, and he’s going to revamp it, perhaps even rescinding giving the money back to applicants altogether. Ottawa doubled the requirement from C$400,000 to C$800,000 in 2010, which didn’t slow applications much. So it decided to cap openings because of application overload.
Time for change?
In a recent interview, Kenney said making the money a permanent contribution to Canada rather than just a loan might make more sense. He’s right. One national Canadian publication recently suggested a cool C$5 million might be more like it. After all, right now, C$800,000 will buy an average family home in Vancouver, where many of the immigrants — largely from China — are landing. For many wealthy immigrants, C$1 million (or even C$5 million) is chump change.
Today, C$800,000 for permanent residency isn’t a bad deal to get into a place hundreds of thousands have waited years to enter, says one prominent Canadian columnist. It’s hard to disagree with that. It’s a good place to live with a stable economy and government.
Two of the Canadian provinces that have opted into the federal program are Ontario and British Columbia. Ontario, incredibly, has been sitting on nearly C$1 billion of that immigrant money — despite having over C$15 billion in debt, and has come under fire for it. (Maybe it’s worried about making the interest payments?).
Kenney says the new program and new financial requirements will be in place by the end of the year.
Both Australia and the U.S. have similar programs, with the buy-in at $1 million, another reason many are saying Canada’s C$800K is way too low, too good a deal. Plus, the U.S., program requires actual investment, not just a deposit. The U.K. requires immigrant investors to cough up the equivalent of about C$1.6 million CDN, another reason Kenney says Canada needs to raise its “price point” for permanent-resident visas.
“To be honest,” he said in a recent interview, “it’s not an investor program, it’s a permanent residency for a loan.” He added that what Canada really needs is a real investor program, one that brings in actual capital to help create jobs in Canada.
Chinese favro U.S., Canada
Meanwhile, the China Daily is reporting that a “wealth exodus” is ongoing in that country. It says the top two immigration destinations for Chinese are the U.S (40 % of all immigrants) and Canada (27%). Wealthy Chinese investors are often cited as the cause for Vancouver’s skyrocketing real-estate prices the past 10 years. Reading the home prices listed here in the Vancouver dailies reminds me of how I cringed when I saw the exorbitant home rices listed when I was a renter living in San Francisco. Call it real-estate listings deja vu.
One Beijing-based immigration lawyer told the paper she expects that when Kenney re-opens the program later this year, 2,000 more wealthy Chinese will get permanent residency in Canada.
By the way, of those 700 applications that were accepted before the window closed last year, 697 were from China. So it’s little wonder the Canadian immigration minister is raising the price. Because China’s where the big money is these days.
Kenney says Canada needs to get more bang for its buck on its wealthy-immigrant program, that it’s been “underselling itself.” True enough.
I can’t blame Canada, which has been a magnet for immigrants the past few years — most of them low-income earners — for wanting to squeeze a few more bucks out of those at the high end. After all, they’re not the ones who’ll be waiting on tables or driving trucks in Toronto and Vancouver. A few hundred thou is pocket change for many of them.
To say nothing of what all this new wealth in Canada has done to the price of hockey tickets.A lofty $125 to see the lowly Columbus Blue Jackets play in Vancouver’s Rogers Arena? Not a good investment. I passed.