There’s an article in the Globe and Mail that asks that classic question “Is Vancouver in a real estate bubble?“. Well.. actually it doesn’t really ask that, it’s just titled that. What it really explores is Realtor anecdotes about wealthy foreign buyers.
If “buyers from China” answers the “who” question about Vancouver’s unique real-estate market, the follow-up question—“Where is this leading?”—is harder to answer. The torrid affair between eastern Asia and Vancouver real estate, now in its third decade, is actually a love triangle from which each party derives very different things. When wealthy Chinese immigrants buy property in Vancouver—and they utterly dominate the top end of the market—they’re actually buying a form of insurance. What the federal and provincial governments get out of these newly minted Canadians turns out to be a modern form of the infamous head tax that was imposed on Chinese migrants in the 19th century. And what Vancouver gets is an economy that boasts a lot of froth, and not much substance. From all three angles, it feels like a relationship that is built not so much on Commitment as on enjoying the good times while they last.
Ah yes, the wealthy foreign buyer and their almighty impact on the market. I guess we’ll just have to trust the Realtor anecdotes, since that’s all journalists seem to rely on when writing these articles.
.. Gosh, wouldn’t it be nice if there was some actual data on foreign buyers? Wouldn’t it be really great if someone sat down and put those numbers into perspective?
Oh! Look! Somebody has.
The article outlines a typical scenario in which, “one of the parents, usually the wife, moves to Canada with the children while the husband stays in Asia, coming for visits when he can.” So the number of total investor immigrants represents 2500 households at best! When this number is compared against the total annual sales volume for the Greater Vancouver area, we find that it accounts for at best 7% of total sales! That puts things in a whole different light, doesn’t it? As it turns out, rich Asian investors undoubtedly account for less than 10% of the total sales volume, and I would suggest that it is likely significantly less than that given the propensity of many Asian cultures to live in extended family (multigenerational) households.
Now given that the entire article is premised on the argument that there are lots of rich Chinese investors coming to Vancouver to buy extremely expensive houses, the above data calls this foundational assertion into question. In fact it leaves it in a smoldering pile.
Go read the full post over at the Financial Insights blog.