Foreign investors coming to Canada must be either oblivious to the relative valuations of Vancouver vs US real estate or are as dumb as a post. The chart below demonstrates just how much of a spread has developed between Vancouver home prices and US home prices in Canadian dollars. For a rational foreign investor buying investment property the decision should be a no-brainer: World class US cities priced at distressed multiples and in “cheap” greenbacks ,or an over inflated Vancouver market which is priced at unsustainable income multiples and in a currency that has seen strong appreciation. As you can see from the chart the relative valuations have gone from pillar to post – with US home prices at one time valued at approximately 2X Vancouver to now being valued at roughly 1/2 of Vancouver prices.
What is it then that makes foreign investors ignore the fire sales across the border? Is it our free health care system that they are coming for??? If the rich immigrants are as rich as we hear, why would they need a free health care system especially when an affluent individual can set themselves up to receive better health care in the US. Are there massive tax differentials on foreign owned property to justify the spread? It is most likely the “buy in” to Canadian citizenship which is the draw for many. As well, the herd mentality must also be a contributing factor.
In any event – I doubt that these relative valuations can be maintained – What do you think?