There’s plenty of anxiety out there concerning whether or not Canada is in a housing bubble. An important distinction to note is that “Canada” is too far spread out to consider that a unified Canadian housing market even exists. Housing in Toronto is no substitute for housing in Saskatoon if your job is in Saskatoon. Thus, housing is highly regional in nature, something Gary Lamphier understands.
But that isn’t to say that housing market convergence is impossible. In fact, I think convergence between China and Vancouver is what’s causing the China Property Bubble to spill over into Vancouver. It may indicate that Chinese speculators are dumping out of the Chinese market and sending money to Vancouver.
You’re from Hong Kong, aka the World’s Least Affordable City, and you want to live elsewhere. You want to live in a coastal city with a temperate, rainy climate and a large population of people from your home country. Where do you look? Sydney and Vancouver, of course. Hong Kong is the world’s least affordable city, followed by Vancouver at #2 and Sydney at #3. This convergence is no coincidence given the long-standing histories these three cities share. Of course it can be broadened to examine China’s impact on Sydney and Vancouver.
The Hong Kong Dollar shaped Vancouver, and there’s no reason to suspect this trend is over just because Hong Kong was called back under China’s wing in 1997.
The Hong Kong Dollar is an underlying factor that skews the data. Whenever analysts examine the median household income of Vancouverites in relation to property values, they are astounded at the disparity. Data from the 2005 census pegs Vancouver’s household income levels at just under $60,000, leaving analysts to scratch their heads when contemplating Vancouver’s million-dollar house prices. A better comparison might be to examine median household incomes in Hong Kong, or better yet, the actual incomes of people buying property. Are residents of Vancouver buying 2 million dollar condos?
I doubt it. As this article from the China People’s Daily suggests, some buyers may just want to spend more time in Vancouver:
“When people watch the Winter Olympics, I don’t think they say ‘I want to buy a house in Turin’ or ‘I want to work from Lillehammer’,” said Rennie, referring to the Italy and Norway cities, respectively, that hosted the Games in 2006 and 1994. “But they do for Vancouver. This is one of the most amazing cities on the planet to work from.”
“That’s the danger of the Olympics. As the world sees it, they go from ‘I want to spend two weeks in Vancouver’, to ‘ spending two to five months in Vancouver’, to ‘I want to send my children to school here’.”
Vancouver is tied to China is so many ways, so if there’s a property bubble in China’s major centres, it stands to reason there would be one in Vancouver as well. It is possible that people are getting rich in the Chinese real estate market, then moving their wealth to Vancouver.
In fact: Mainland Chinese buyers driving up luxury home prices
As I was writing this, the Vancouver Real Estate Anecdote Archive published:
If you really want to go down the rabbit hole, check out Dian Francis’ “Sucker Nation” series of blog posts, summed up by Flaggman HERE.
There’s no single cause for the property insanity in Vancouver, but I believe the bulk of it is from rich jetset types exiting the Chinese property bubble and moving cash to Vancouver. It could be an indication that China’s bubble is about to pop.
Elsewhere . . .
Calgary Herald: Canadians should be wary of potential housing bubble: Edward Jones report
The Tyee: Why Canada’s Housing Bubble Will Burst
FP Magazine: Canada’s Housing Bubble: It’s Not Different This Time
FP: Jarislowsky says he’s ‘convinced’ Canada has housing bubble
Trader’s Narrative: David Rosenberg: Canadian Real Estate Near Bubble
Canada.com: Canada’s housing bubble could soon burst: Merrill Lynch
Gary Lamphier, Edmonton Journal: Yes, there’s a housing bubble in Canada — but only in three cities
Alexander Pestov: The Elusive Canadian Housing Bubble
Vancouver Focus:
Maclean’s: Vancouver housing market: no logic
Vancouver Real Estate Anecdote Archive
Canada.com (Flashback) 100 grow-op houses unearthed in mortgage-scam probe: Mortgage broker, realtors alleged to have fabricated records to obtain homes
Straight.com (Flashback): Grow-ops contributing to the rental crunch
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Another interesting way to look at the Vancouver housing bubble:
35 years of home prices as a roller coaster.
Vancouver is really lucky because Chinese investors are flooding in their place. Maybe someday, Vancouver will be own mostly by Chinese investors.