Amid concerns of steadily increasing prices of housing in Vancouver, prominent economist Robin Wiebe says that this trend is directly linked to the purchases made by wealthy foreign – mostly Chinese – investors.
Last week the Conference Board of Canada announced that the property prices in Vancouver will not be seeing any downward trend anytime soon, adding to the frustration of people who want to purchase a house but cannot afford to do so on their current incomes. According to Wiebe’s explanation, it is because “individuals are buying houses from wealth, as opposed to earnings.”
Wiebe has highlighted the direct link between the price escalation in Vancouver to growth patterns in China. Having studied Vancouver’s real estate market between 1991 and 1013, Wiebe’s findings show that “periods of faster growth in China coincide with growth in Vancouver’s house prices.” His research also shows that there is a strong connection between the volume of house sales and GDP growth in China.
The work of David Ley, professor of geography at University of B.C., backs up Wiebe’s research. Ley’s book Millionaire Migrants (2010) shows the link between Vancouver’s real estate prices and the rates of international immigration into the city in the period 1972 to 2002.
According to Wiebe, Vancouver’s rising property prices can be stalled or reversed only when China’s economic growth slows down or if the Chinese government places stricter restrictions on transfer of money outside of China. It is estimated that in 2015 China’s economic growth rate will slow down from 7.4% to 7.1%. “If China’s economy slows, that has the potential to cool Vancouver’s housing demand, stall sales and price growth,” says Wiebe.
Wiebe believes that demand for housing in Vancouver will continue to grow. Up until now 70% of new houses in Vancouver have been designed as multi-family units, but this is going to increase to 80% due to geographical and economic constraints. And since Vancouver’s population is also growing at a healthy pace, Wiebe feels that it will help meet the increasing supply of housing. “The Vancouver market is in good shape now, the market is balanced and housing starts are steady,” says Wiebe.
Single-family units’ prices have been following a different price trend compared to other types of housing units since 2010, according to Wiebe. Since 2012, the trend has also been seen in semi-detached units, prices of which are now increasing at a higher rate. On the other hand, prices of condos have recorded relatively moderate increases.