A column that only Ian Young could write:
The realisation that something is grotesquely awry with Vancouver’s housing market has reached a tipping point.
Fuelled by the special sauce of Chinese wealth – and good old Fear of Missing Out – prices have decoupled from the local economy, with an average detached price of about C$1.4 million (HK$8.9 million). So far, so normal for Vancouver.
But the past couple of months have witnessed a kind of awakening. …
Foreign money might be a factor, concede some, but it must similarly influence other markets, right? Not really – since immigration data demonstrates that the influx of rich immigrants to Vancouver (80 per cent of them Chinese) is unmatched by any other city in the world, at least in terms of wealth-migration schemes that clearly define asset benchmarks.
Others seek to frame unaffordability as inevitable, since Vancouver is a city of limited land supply. But plenty of other cities are in the same boat: New York and Singapore spring to mind. Both are expensive cities, but Vancouver has left them in the dust in terms of unaffordability. …
Surely Vancouver has always been unaffordable? A quick check of the stats will show that as recently at 10 years ago, Vancouver’s price/income ratio was in dancing territory, at 5.3.
As for the perennial low-rates argument, pretty much everywhere has low rates. It tells us nothing about what makes Vancouver’s market special.
An exceptional cause must be found for an exceptional situation, and for Vancouver, that can be found quite easily in wealth migration, which exploded in the past decade.
Vancouverites still struggle to grasp the scale of this influx to their modestly-sized city. From 2005-2012, about 45,000 millionaire migrants arrived in Vancouver under just two wealth-determined schemes, the now-defunct Immigrant Investor Programme and the still-running Quebec Immigrant Investor Programme. Let’s put that in perspective. The entire United States only accepted 9,450 wealth migration applications in the same period under its famous EB-5 scheme, likely representing fewer than 30,000 individuals.
So, Vancouver has recently received more wealth-determined migration than any other city in the world, by a long stretch. This, in a city with some of the lowest incomes in Canada. …
Foreign buyers probably aren’t to blame for Vancouver’s unaffordability. But foreign money probably is. And cracking down on the foreignness of funds will prove much harder than dealing with the foreignness of buyers, even if the will to do so exists. …
Another factor often neglected is that a successful “fix” for unaffordability would crush a great many people, probably as many as it helps. In peril would be a real estate and development industry that employs thousands. Anyone who already owns a home would also be at risk. Thousands of elders banking on their homes as a retirement nest egg. Thousands of recent buyers facing the terrifying prospect of negative equity, with mortgages far exceeding the value of their homes.
It’s no surprise the politicians are treading carefully. …
Wherever you stand on the matter, the time for denialism is over. At the very least, Vancouver deserves its long-overdue debate about the root causes of the unaffordability crisis, and what to do about it.