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What a difference four years make, and some apologies need to be made by several people to the Duke of Data and Director of Simon Fraser University’s City Program Andy Yan. It was the Fall of 2015 when Andy first crunched the numbers and in his very straight forward way told the CBC that his review of 172 property sales on Vancouver’s west side found 66 percent of owners had “non-anglicized Chinese names” suggesting they were recent arrivals. At that time 18 percent of these residences were purchased without a mortgage which is a pretty jaw dropping feat for many local residents. That was potentially a significant group of people entering the local housing market, and could represent the commodification of housing as a holding, not a place to live in.

Despite the fact Andy was basing his analysis on real data,  real estate pundits were quick to fingerpoint about “intolerance, racism, singling out certain groups of people …to blame” and even the past Mayor of Vancouver fell into the rhetoric stating “This can’t be about race, it can’t be about dividing people. It needs to get to the core issue about addressing affordability and making sure it’s fair.”

Well we all know where that logic took us in terms of housing affordability and it revealed an interesting cultural trait of Canadians about not wanting to offend, even when data suggested there was a trend that should be examined.

A new report from CMHC (Canada Mortgage and Housing Corporation) suggests that 11 percent of Metro condos are owned by people who don’t live in Canada. Reviewing the data Andy Yan found that in Richmond 25 percent of recently constructed condominium units were owned by a non-resident owner.

In total of $965 billion dollars worth of housing in greater Vancouver $75 billion had at least one  non-resident owner. Looking at Vancouver, “non-residents of Canada are involved in the ownership of at least $34-billion worth of residential real estate, about 10 percent of the $341-billion total in the city.”

As Dan Fumano writes in the Vancouver Sun it is now “impossible to know what might have been different, if voters, bureaucrats and elected officials alike had access three years ago to this clearer picture. We don’t know what policy decisions or priorities might have looked like at the municipal, provincial or federal level.”

It was the reporter Douglas Todd who wrote an opinion piece in the Vancouver Sun in early 2016 that encapsulated the debate. Three years ago Todd quoted Vancouver immigration lawyer Samuel Hyman who stated that Andy Yan “should be thanked by politicians, many of whom have for decades displayed “cowardice” by failing to document how trans-national migration and international money transfers shape housing prices. Given that most countries closely monitor the nationalities of who is buying property, the claims of “racism” from the mouths of some Metro Vancouverites are unprecedented compared to elsewhere in the world.”

What a shame it has taken three years for us to all realize that Andy was right. What could have been done differently had this data been taken seriously at the time?

 

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Images:SFU&Shawmedia

 

Comments

  1. I still remain puzzled at how this data has apparently been so hard to come by when the people marketing these properties knew exactly who they were targeting and who was buying.

    And they were the ones strongest in denying that we were reaping the benefits of international capital seeking a safe haven

  2. I would still appreciate it if the data meisters would take an educated stab at determining the proportional influence of foreign ownership on housing prices. Even at 8% / 11% foreign ownership of the housing stock, it’s hard to fathom that the ~~500% rise in land value since 2000 is only about foreigners and corrupt money. It’s also hard to reconcile the drastic drop in sales and the rather undramatic dip in prices today. They are not in sinc to the degree one would expect if it was really all about foreign ownership.

    There are other shoes to drop too, perhaps the biggest one being a sharp rise in Bank of Canada lending rates. With record high family debt, the biggie being mortgages, one unfortunate result besides cutting demand (and therein prices) would be a rise in loan defaults and a noticeable increase in housing listings with lower listed prices meant primarily to capture the bank’s losses.

    No one is denying foreign ownership has influence on the housing market. The question remains how much when there are clearly other influences at play?

    1. I’m sure there are other factors, and I’m sure there are feedbacks.

      But: price is set on the margin. It’s musical chairs. Intuition that a small increase in demand cannot result in a huge increase in price is almost certainly wrong. The relationship between price and demand is not linear.

      For an example of non-linear price response, look at this week’s story about the sale of the Saputo site at Sperling Skytrain station. As a result of a single (large) sale, nearby businesses have seen property taxes nearly quadruple in a single year, with the effect cascading kilometers away to the Brighton Costco.

    2. The broad changes in purchasing behavior in the market maps precisely onto policies implemented by both the Canadian and Chinese government. Even if it were just 11% non-resident buyers (it’s likely more given that pre-sales and numbered companies are not included in this data set), a lower number than that could have set the prices. It only takes a small percentage willing to pay well over asking price to start benchmarking the rest of the market higher.

      As well, that offshore money that’s already sitting on (at least) tens of billions of dollars worth of Lower Mainland property. The foreign buyers tax won’t affect them, and the SVT hasn’t even kicked in yet, and anti-money laundering response is still weak – those owners aren’t yet ready to pack up and sell at a loss that would match any drastic rise in sales in preceding years.

    3. Actually Alex, the current sales slowdown with prices remaining sticky is very easy to explain in relation to foreign buyers.

      While undoubtedly the Foreign Buyers Tax deterred some offshore purchasers, a far greater deterrent was President Xi’s crackdown on capital leaving China. A buyer might be willing to risk an eventual Canadian slap on the wrist, but not an Anbang-like fate of re-education camp and property confiscation. So that choked off new buyers from China, but those who are already in the market are not in any hurry to sell. Like Huawei’s Meng Wenzhou, their multiple properties in Vancouver are a safety deposit box, not a home. They are assets largely out of reach of the Chinese government. As local media has uncovered, a large number of those properties are coming up for rent. The offshore owner wants to avoid the Speculation Tax and isn’t about to try an unload the property, especially in a down market.

  3. Nobody owes Mr. Yan anything. He made a guess based on very limited data and a hunch. It’s nothing to applaud. The significance of all these “non-anglicized names” is still very much up for debate, despite the fact that some corroborating data does exist to show that that foreign ownership is not zero.

    I realize many PT readers really, really want this narrative of the Chinese ruining Vancouver to be true. They want it very badly. But wishing something don’t make it so.

    1. I have no problem with criticising the methodology per se. That’s not what happened. Critics attacked the study itself as racist. It was not the methods that were unacceptable: it was the conclusion. And they would seize on any methodological justification for saying so.

      For years before Yan’s study, my wife, with Chinese last name, was telling me that all her friends in the Chinese community were telling me that this was happening. I was the one who was hesitant – probably in part because I was foolish enough to pay any attention to the incessant “racism!” drumbeat.

      Reckless accusations that knowledge is racist are toxic. Even if Andy’s analysis was flawed, his supposedly anti-racist critics were more wrong than he was. Of course there are racists out there. They love it when their ideological opponents make unhinged accusations of racism, because then they get to accuse them of dishonesty. And the terrible thing is (shades of Russian medling), when it comes to this, they’re right.

    2. This isn’t how this works – Yan made an educated guess, based on available evidence, which fit the facts and explained why housing prices were rising at the unsustainable rate they were. Competing theories, such as there were, offered lackluster alternative explanations.

      As additional evidence comes to light (the recent CMHC figures for instance), the information reinforces Yan’s hypothesis rather than weakens it. At this point denying that offshore money is the central factor in BC’s housing crisis is akin to denying humans’ role in climate change. It’s where the evidence is pointing, wanting for it to be true has nothing to do with it.

      1. Using climate denial as an analogy for refusing to put all your eggs in the offshore money basket doesn’t work very well. Climate research is far more extensive and deep and has over decades attained around a 97% agreement level in the climate science community. Today’s housing research is probably equivalent to the state of climate science in the mid 80s. It remains too deficient to provide reasonably accurate estimates of the level of influence of foreign ownership, just as it hasn’t been calculated and compared to the effects of record cheap money for an historically long period.

        The conclusion that offshore money is the primary cause of our still-unaffordable housing prices is premature because the research is incomplete, just as it it would be premature to conclude that low interest rates or zoning or geographical constraints are the primary causes. More research and additional data sets may well indicate results that do not fit the offshore money narrative if the evidence points to a multiplicity of forces at play instead of a single culprit. How does recognizing the shortcomings of the current research equate with climate denial?

        One can legitimately make the claim that offshore money is present and is having AN effect, just like all the other effects. But until someone can provide a well-founded estimate of the actual proportionate level of influence and compare it to the level of influence of cheap local money, geography, zoning, varying demand etc., the jury remains out.

        Is it 5% or 55%?

      1. It’s called “cherry-picking” data, Bob. That is what Mr. Yan’s assertion does. It’s not proof. I’m not saying there’s no relationship between foreign ownership; only that Andy hasn’t categorically proven anything and that he need no accolades for doing so.

    3. He didn’t make a guess, he drew conclusions from evidence which so many of us could see as plain as day. The good thing about what Yan did was bring some methodology to what so many suspected. Our suspicions were based on limited evidence, but Yan’s were not.

      Why do you suggest anyone wants the narrative to be true. I wish it wasn’t, but I felt strongly that it was and so to see it confirmed is more about reconciling the very reality we expected would be the case. We don’t want it to be true, as such, we want our views based on evidence to finally be corroborated with more evidence. Now it has, so why can’t you accept that?

  4. Andy Yan did a small study (172 houses sold in particular west side neighbourhoods over a six month period.) He was doing descriptive statistics, primarily focused whether the buyers recent Chinese immigrants based on their names.

    I don’t see a research statement of what question was being answered before he started looking, just a bunch of different measures on the data. This can be ok in a pilot study figuring out a research direction but it isn’t something to draw strong conclusions from because it leads to seeing spurious correlations.

    Then this was all presented in the media. In a city with a significant and growing Chinese population that has suffered anti-Chinese racism from its founding to today.

    Called out in reports and by Yan was that 18% of properties were held mortgage free, suggesting the owners were extremely wealthy, and that 66% of properties were purchased by people with non-anglicized Chinese names.

    He didn’t point out, though his slides did show, that people with non-anglicized Chinese names were the least likely to have purchased without a mortgage, and corporations and people without Chinese names the most likely.

    He didn’t point out that something like half of houses in Vancouver are held without a mortgage. A rate much higher than the 18% in his study, and only 12% in his target group. He didn’t look at the base rate of houses without a mortgage in that neighbourhood or across the city.

    The best his study could tell us is there seem to be quite a few wealthy Chinese people who have purchased houses out near UBC. This isn’t really a surprise.

    Yan my turn out to be right that wealthy Chinese immigrants and/or foreign money are a major or determining factor in the run up of the Vancouver housing market in the last ten years. He certainly hadn’t demonstrated it with his initial study.

    So for the mayor, in this city, with its history, in the face of a pilot study with questionable methodology, for him to say ‘hey, let’s not make this about race, and we need more and better data.’ was perfectly reasonable and an appropriate response!

    1. You ignore the fact that Andy Yan acknowledged there were gaps in data. This article is all about how the federal and provincial governments (deliberately?) were very nonchalant about even trying to collect it. We’re now starting to fill in the gaps. I can only hope that anyone who dismisses the effect of one cohort of buyers consuming up to 20% of new-build condos isn’t in the development industry!

      What you and other denialists consistently overlook is the knock-on effect of foreign buyers: “Oh, it’s just a few houses by UBC “(not). Where do you think local would-be buyers of those homes went? They went to other areas (East Van, Morgan Creek) and displaced a lower economic rung of buyers, and so-on

      1. This denialist accusation is tiresome. Moreover, it’s incorrect. To state the obvious, in your own words, that the data is still being collected, and then to conclude that the research is therefore incomplete and any resulting conclusion is premature, doesn’t put anyone in the position of denying anything.

        It’s just saying finish the research on all known things that affect housing prices.

  5. This thread points out the problem with a data-based decision system, as opposed to one based on observation and analysis. Even when the data appears conclusive, people argue about sample size and methodology. I wrote this in a book in 2011: “The last boom, the one ongoing in 2011, is dominated by buyers from Mainland China who were able to send prices further into the stratosphere. One open house in Kerrisdale was typical: [according to the realtor] 84 groups of people came through, all but six of whom were from Mainland China. Six offers came in, all from Mainland Chinese buyers…” This would be called evidence-based except the sample size is too small. Was it correct? Yes.

    1. Of course people argue about methodology, sample size etc. That is exactly what is supposed to happen.

      It is super easy to find data that looks convincing if you don’t follow proper procedures. The history of science for the last 20 years has been painfully relearning this lesson again and again. It doesn’t mean we stop doing science, we just try to do it better.

      Anecdotes about realtors can make good stories, they can trigger deeper investigation, or people can use them to confirm their pre-existing biases.

      We can tell stories that illuminate real phenomena, about all the people we know getting help from the bank of mom and dad. About the stripper who owned 5 houses during the US financial crisis. About people in the Quebec immigrant investor program living in Vancouver.

      We can tell stories that mislead, about how Vancouver is losing all the young people (it’s not) because of people we know moving away. About how condos are all empty because many windows are dark.

      Those stories mislead instead of revealing truth. I wouldn’t be comfortable making public policy decisions based on them any of the stories. I also wouldn’t want public officials to pick and choose which stories they believe without getting more information.

      1. 20% foreign ownership of newly built condos in some Metro communities is not an anecdote, it is now a data point.

        1. Developers build as many condo s that they believe will sell —– If 20 % of potential buyers are removed there would be 20 % fewer condo s built—– Own or rent ???—- Most people just want a decent place to live—— If strata s were not be able to prevent rentals there would be a lot more rentals on the market—Landlords would be whining about rents going down

  6. With the 20% foreign buyer tax AND 2% annual surcharge tax for foreigners or satellite families AND 1% vacancy tax in Vancouver that non-resident ownership is now sufficiently monetized. The only question that remains is one of ENFORCEMENT of these taxes. How many do we expect to cheat on the questionnaire ? How many state “rented” although it isn’t or state “over 50% income declared in Canada” although it’s not ? How many proxy-owners will we get?

    The big coup here is that we now know the SIN number of every owner, and therefore enforcement ought to be far FAR easier.

    3% on a $5M property (but no means a mansion) in Dunbar or Point Grey is $150,000/yr or 2% on one in W-Van or Richmond is $100,000. OUCH.

  7. 50% of housing stock is rental and never comes up for sale
    10% of non rental is foreign owned
    xx% of housing stock is passed down through family generations
    30%? of housing stock comes up for sale on average every ’7’ years?
    05%? of housing stock is available for purchase at any one time?
    Maybe Andy knows the actual numbers?

    Ownership demand forces prices upward because there is so little supply, incidentally thereby dragging rent increases along for the ride. The dynamic between ownership and rental produces ever escalating housing costs for everyone. This is why rent control is an effective tool for controlling affordability in the housing market.

    1. Rent control may work for a while, but it’s not a permanent solution. I’d suggest building 50,000 non-market (or non-profit / break even revenue) with 20% subsidized publicly-owned rentals through put the Metro would be a good start to exerting more influence over an unempathetic market, like a counterweight.

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