Ian Young, a real estate expert from Hong Kong, says cancellation of Canada’s Immigrant Investor Program may spark the departure of Chinese money from the Vancouver market. Photograph By Wayne Leidenfrost
This summer, the enormous flow of Chinese money into Vancouver real estate could quickly reverse with wealthy investors rushing to sell, according to the controversial analysis of an expert from Hong Kong.
Ian Young — former international editor of the South China Morning Post — has raised eyebrows both with his views on the impact of “Chinese money” on Vancouver’s real estate market, and his deconstructing of the common method of tracking prices for homes in Vancouver.
In a recent analysis, Young noted that in March 2014, just weeks after the federal government announced cancellation of the Immigrant Investor Program (IIP), average prices for detached homes in Greater Vancouver dropped by a monthly record of 11 per cent from February 2014.
Young says the IIP was “the most popular scheme in the world for millionaire migrants” from China to protect their wealth against fears of social and political upheaval at home.
It provided a cheap, risk-free, and almost guaranteed path to citizenship. But the backlogged list of 45,800 Chinese who applied to live in B.C. through the IIP contains a number of people that have already purchased in Vancouver, according to Young’s research.
“The fear among Chinese realtors is that people will just liquidate their assets,” Young said. “Last year one of the top real estate agents in the city, who is Chinese, told me when this program ends she won’t be selling homes in Vancouver anymore.”
The one-month plunge in March 2014, which was followed up by a small price drop in April according to Young’s data, came amid the most volatile three years of price swings in Vancouver’s history.
But this would be a shock to anyone outside the industry, Young says, because “raw” monthly price data aren’t reflected in the benchmark index that the Real Estate Board of Greater Vancouver publishes.
Sales of detached homes in Vancouver’s westside dropped over 14 per cent in March from February, real estate board stats show, although the smoothed metric of the board’s benchmark index shows prices rose slightly. The board says its “alternative measure of real estate prices,” adopted in 1996, gives a less volatile indication of price trends in “typical” homes.
But Young says short-term volatility is precisely what market watchers should be scrutinizing over the next three months.
Young’s view is not popular in the real estate industry.
Cameron Muir, chief economist of the B.C. Real Estate Association, says the impact of offshore investment in Vancouver’s market is grossly exaggerated.
Muir told The Province he has reviewed Young’s work and is “disappointed at such a naive use of statistics and how it forced-fit some fantastically unfounded conclusion … the connection (of the ending of the IIP) to a single month’s average price change is ridiculous.”
Young, who is ethnic Chinese, was raised in Australia and covered the Hong Kong real estate market for much of his journalism career before moving to Vancouver in 2010 to write the Hongcouver blog.
He says he’s surprised that Canadians seem uncomfortable discussing the impact of offshore investment in Vancouver. He says Chinese investment is the obvious connection between Hong Kong and Vancouver, two of the world’s least affordable real estate markets.
“The sheer volume of applications in the IIP is overwhelming, and I don’t think the people from Vancouver really understand the fact that Vancouver had become the absolute world favourite destination for millionaire migrants,” Young said. “In Hong Kong, where most of my readers are, they just accept (the impact of Chinese investment) but in Vancouver I think a number of people see the analysis as racist.”
Young sees the impact of Vancouver’s unaffordabilty as the city’s “most pressing social justice issue.”
“My impression is the stuff the city is doing with affordability is just fiddling around the edges, when the issue is Chinese money,” Young said. “You’ve seen one generation hugely enriched by this phenomena, and on the other end, for people under 35, probably they are looking at renting forever, or the only way they can ever hope to have a home is if their parents have one, and die.”
Brent Toderian, Vancouver’s former top planner, says the city should be gathering data and “asking the right questions” about real estate investment.
“I have had (condo) developers say to me frequently that projects are as high as 90 per cent purchased by investors, but there is a disconnect with what (the city and developers) tell the public,” Toderian said. “It’s a mistake to get fixated on whether the investment is foreign or not.”
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