Foreign Investment in the City: Myth or Fact?

Condos for Sale VancouverSpeculation has been driving a slew of articles about the effect mainland Chinese buyers are having on the housing market in Vancouver.  As many real estate and housing experts are quick to point out however, Canada doesn’t actually track these sales with any reliable statistics.

As such, very little hard data is available.  Private research is being done, but the methods used to gather this data vary widely and as such the results can definitely be skewed.  Depending on the kind of analytics used to measure the level of foreign investment in the city, varying reports can give radically diverse pictures.

According to Colliers International, whatever the true numbers at present, this real estate service firm reported that the proportion of Chinese buyers in the city is rising.  Overall, the first quarter of this year saw a twenty-nine percent rise in the proportion of Chinese buyers.

However, while the proportion of Chinese buyers is on the rise, not only are the actual numbers still shrouded in mystery, but the extent to which these buyers are foreign or local is also up for grabs.  While many experts are worrying about the state of the industry in the city, very little hard data is available with regards to these issues.

What is known is that Vancouver is now by many accounts listed as the third most expensive place to buy in North America.  For market watchers, this could spell trouble.

Some people are therefore hoping that Canada will put the brakes on foreign investment in the city.  However, making a policy decision of this magnitude out of speculative claims about foreign Chinese investors is not a great way to go about regulating the market–even if one agrees that regulations are needed.

Even the Colliers president was reported to have said that when it comes to Chinese investment in the city, there seemed to be more “myth than fact.”

Although the actual numbers are still unknown, there is the very real fact that housing prices in the Vancouver region are higher than ever.  With prices averaging at eleven plus times the average Canadian family’s income, many Vancouverites are legitimately worried that they will never be able to buy their own homes in the region.

There does certainly seem to be a great deal of speculative evidence about Chinese buyers snapping up new homes and Vancouver condos for sale.  Stories abound about foreign investors showing up at homes with suitcases full of cash or condominiums selling out in two hours.

Anecdotal evidence aside, many experts say that the majority of sales are being completed by local residents rather than foreign investors.  As such, there is no reason to be so worried or defensive about foreign investment in the city.

According to the Chinese newspaper, China Daily, Chinese buyers have been moving their money into three major markets, including London, Vancouver and Australia as a whole.  According to this source, about 200 million has been spent through the international department of Collier’s real estate.

Although Vancouver has seen a share of this, there is no reason necessarily to believe that it has amounted even to a third of this 200 million.  Moreover, because foreign investment in the city tends to be pegged at the upper end of the market, this monetary value might actually translate to very few homes (and thus very few buyers), at least comparatively speaking.

Vancouver is a very desirable location for Chinese investors because it has a relatively stable political atmosphere, strong property laws, good schools, a vibrant and well established Chinese community, not to mention a beautiful, scenic environment.  With all of this going for it, Vancouver is certainly one of the most sought after places to live for anyone in the world.

Although the actual numbers of foreign investors might be smaller than the sometimes mythical proportions suggested by some articles, the desire for property in the area is without doubt pushing the average price of homes higher.  According to a one report, the push from China accounts for much of this drive upwards.

Prices in Vancouver rose about twelve percent from last year and are expected to rise between three and fourteen percent this year alone.  Despite such predictions, BMO Nesbitt Burns said that a correction was likely.

Just when such a correction might take place however is anyone’s guess as is the true extent of foreign investment in the city.  Until such time as hard data exists, the Chinese foreign investment in Vancouver will remain based largely on myth rather than fact–and this itself is responsible for driving a great deal of the real estate market speculation.

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