Analysts from National Bank Financial, the fourth largest investment firm in Canada, have crunched the numbers on foreign investment in Vancouver residential real estate and come up with some staggering dollar amounts.
The findings were released in the NBF Daily Bulletin on Wednesday and suggest up to 33 per cent of the total investment in Metro Vancouver homes in 2015 can be traced to off-shore Chinese buyers.
The bulletin estimates the total dollar value of the purchases by that group last year at $12.7-billion.
Tom Davidoff, an associate professor at UBC’s Sauder School of Business, says an injection of foreign capital like that can quickly push prices out of range for the average Vancouver family.
"A house with a yard in Vancouver will never, ever again be a middle-class property,” said Davidoff.
David Setton of TRG Realty works on the west side of the city and he recently sold a townhouse on West 15th Avenue for $150,000 more than the asking price.
"It's very hard as a realtor right now to even establish the market value of a home because the market is moving so quickly,” said Setton.
There is little concrete data surrounding foreign ownership in Canadian real estate and the analysts acknowledge their methods produced rudimentary estimates.
To arrive at their figures the analysts broke down foreign ownership numbers in the United States from the National Association of Realtors and then cross-referenced those with a survey of 77 wealthy Chinese investors conducted by the Financial Times.
By combining data from those two sources, the analysts came up with estimates for foreign investment in Toronto and Vancouver, Canada’s two largest real estate markets.
“The estimated share of purchase volume seems high and we stress this methodology is truly a back-of-the-envelope attempt at gauging the significance of capital inflows from mainland China on the local residential real estate markets in Toronto and Vancouver,” NBF’s Peter Routledge wrote in the bulletin. “The surveys upon which we base our hypotheses could have built in biases that overstate (or understate) the amount of capital inflows into Canadian and U.S. residential real estate markets.”
According to the Real Estate Board of Greater Vancouver, a total of $38.5-billion changed hands in residential real estate transactions in Metro Vancouver in 2015.
"Whether it's a third, or a half, or a quarter, I don't think anybody doubts that outside capital is driving up prices, certainly on the west side of Vancouver and probably throughout the region,” said Davidoff.
