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Vancouver housing market fuelled by Chinese buyers

Kerry Gold, The Globe & Mail, Nov 2, 2015

A new study that puts data behind the widely held but difficult-to-prove assumption that off-shore money is driving Vancouver’s superheated housing market has concluded the vast majority of houses on the city’s affluent west side have been bought by new immigrants from China, many of whom don’t earn their living here.

The data were obtained by David Eby, the NDP MLA for Vancouver-Point Grey. He turned the data over to Andy Yan, a University of British Columbia adjunct planning professor and analyst. The resulting study looks at transactions in three neighbourhoods on Vancouver’s west side from August, 2014, to February, 2015. It amounts to 172 sales in total, priced upward of $1.25-million. Mr. Yan screened for non-anglicized Chinese names, a methodology used previously by academics in an effort to separate out names that would likely belong to recent immigrants.

The study found that two-thirds of all sales of detached houses in the University Endowment Lands, Dunbar and Point Grey neighbourhoods were purchased by buyers with non-anglicized Chinese names. That group purchased 88 per cent of houses priced at more than $5-million.

But further, the study found that on titles held by a single owner, the most common occupation was homemaker – 52 properties; 18 per cent were business people and 6 per cent of owners were students.

And 82 per cent purchased with a mortgage.

Mr. Yan acknowledged he could only deduce that buyers were purchasing with money from mainland China. But, he argued, it’s not much of a leap, considering the median income for 25- to 55-year-olds with bachelor degrees in Vancouver is $41,981. Those dependent on the local job market couldn’t compete.

“Unless somebody tells me that it’s suddenly possible to make a ton of money selling cellphones at Parker Place Mall in Richmond, this situation is problematic for locals,” Mr. Yan said.

Mr. Eby said their data are important because they support mounting evidence that foreign money has priced local incomes out of the market.

“We can soon safely say we have a sense of what is happening,” he said.

Any attempt at a solution to Vancouver’s housing crisis has long been stymied by complaints that there is a lack of data to prove that foreign capital is having any real impact on the market.

Premier Christy Clark has said there is no evidence that wealthy foreign buyers are driving unaffordability and therefore no reason to introduce measures such as a luxury tax.

Mr. Eby noted other MLAs could also collect data to determine whether the pattern repeats itself throughout the region.

“Constituents were telling me there were a lot of houses being bought and sold in their neighbourhood, and they didn’t even see the neighbours move into a house before it was sold again,” Mr. Eby said. “So it makes sense to me now that we have the data, to see this astronaut family phenomenon of mom and kids being brought over from mainland China.

“The kid goes to school and dad is at home in China working and supporting the family. Mom is only there with kids for the school year, and the house would appear to be vacant for a big chunk of year.”

The data also support an extensive Globe investigation that looked at similar numbers, as well as court cases, to conclude that wealthy foreign investors were using loopholes, such as placing a house in a relative’s name, to avoid paying taxes.

The most popular lenders for the houses examined by Mr. Yan were, in order, CIBC, HSBC and Bank of Montreal. More than 80 per cent of the mortgages on the houses in the study had been given to people with non-anglicized Chinese names. As well, 19 per cent of assessments were sent to addresses other than the house’s address, suggesting that owners did not live at the houses.

David Ley, a professor of geography at UBC and author of Millionaire Migrants: Trans-Pacific Life Lines, said the impact of foreign money at the high end trickles down into every market, with local buyers scrambling outward to find property within their reach, thereby driving prices throughout the region.

A recent Sotheby’s report said the east Vancouver neighbourhood of Grandview has seen a 30-per-cent increase in average house prices in the past year. Also, there’s extensive anecdotal evidence from the real estate industry that foreign money has entered into markets such as Burnaby, West Vancouver, Coquitlam, South Surrey and Port Moody. A Landcor report exclusive to The Globe and Mail said that those areas had all seen price increases of 25 per cent to 50 per cent for single-family homes in the past five years.

The data also support previous reports about foreign ownership. In August, MacDonald Realty reported that 70 per cent of its 2014 sales of detached houses priced at more than $3-million had been sold to buyers from China.

To obtain the new data, Mr. Eby asked a real estate agent for all multiple listing service sales in the area west of Alma Street. He then asked the legislative librarian to pull land titles for all those sales. As an MLA, he has free access to land titles. Members of the public would have to pay about $15 for a digital copy of each title.

He sent the raw data to Mr. Yan, who’s also a senior planner for Bing Thom Architects and researcher for BTAworks.

“I hear stories of families who scrape and save and borrow money and then they go out to buy a home and they are dramatically outbid,” Mr. Eby said.

“And the outbidding is happening because the market is now international – it’s no longer connected to the local realities of what people can earn from a local job in Vancouver. … I don’t think we have to be that imaginative, looking at current trends and guessing where we are heading here – which is that Vancouver will functionally become a gated community.

“What an awful vision of the future of our city.”

Prof. Ley isn’t surprised by the findings, which support his long-held argument that outside wealth is skewing the Vancouver housing market.

“There is a danger, too, in thinking that data on foreign buyers is all we need. Far more important is a strategy to build affordable housing. The issues have become bigger.”

The issues have become bigger, and clearer – and yet government has been reluctant to take action, Mr. Eby said. This summer the province played down the role of foreign money on the region’s unaffordability crisis. The Premier cited a report by the BC Real Estate Association’s economist, Cameron Muir. The report said: “Foreign investment into the Metro Vancouver housing market suggests that it represents no more than approximately 5 per cent of market demand and that housing affordability in the first-time buyer segment of the market has not been negatively affected.”

Mr. Yan asked: “What was their data set? I want to see their methodology.

“We’re neophytes to this new type of global system,” he added. “Our institutions don’t seem prepared to change with the times, compared to other countries and other cities.”

Mr. Eby cautioned that the aim of gathering the data was not to try to point fingers at one group of investors. Instead, he said, it was to bring attention to a system failure.

“There are always a few racist morons out there, but there are way more people who say B.C. was built through the efforts of immigrants and more immigrants are great,” Mr. Eby said.

“The trick is people want to ensure that all the appropriate taxes are being paid, all rules are being followed and that this investment is managed in a way that is supportive of future growth of the city. The worst outcome would be these moms and kids from China become the scapegoats for what is really a government problem.”