• Sat
  • Dec 27, 2014
  • Updated: 2:58pm
The Hongcouver
PUBLISHED : Wednesday, 05 March, 2014, 10:14am
UPDATED : Thursday, 06 March, 2014, 8:59am

Immigration, property prices and Vancouver: An expert’s view


Ian Young is the SCMP's former International Editor. A journalist for more than 20 years, he worked for Australian newspapers and the London Evening Standard before arriving in Hong Kong in 1997. There he won or shared awards for excellence in investigative reporting and human rights reporting, and the HK News Awards Scoop of the Year. He moved to Canada with his wife in 2010 and is now the SCMP's Vancouver correspondent.

No one in Vancouver better understands the impact that rich immigrants have had on the city’s property prices than Professor David Ley.

Ley, holder of the Canadian Research Chair in Geography, literally wrote the book on the subject. Millionaire Migrants, published in 2010, is the definitive account of latter-day East Asian migration to Vancouver, describing how wealthy newcomers and their migratory patterns moulded the city.

It’s no surprise that he has been closely watching the fallout from the Canadian government’s surprise decision last month to terminate the 28-year-old Immigrant Investor Programme (IIP), which has brought tens of thousands of Chinese millionaires to Vancouver.

Oxford-educated Ley has particularly noted attempts to downplay the impact of the scheme and its closure on Vancouver’s sky-high property prices, which he said represented deliberate “suppression”.

“There are interest groups who are in denial and the moment that you or I make a suggestion [about the impact of rich immigrants on property prices] we are immediately racist and this is how the discussion has been closed down,” the University of British Columbia academic said.

“We are very polite in Canada and if anyone raises the red flag of racism then everyone shuts up. To my mind that is an irrelevance. The issue is investors, wherever they are coming from, creating an issue of affordability in the market.”

Ley’s previous research revealed the exceptional correlation between international immigration to Vancouver and the city’s property prices. He charted this from 1977 to 2002, with the results presented in eye-popping clarity on page 153 of Millionaire Migrants. A graph (above) of the two factors shows them moving in near lockstep.

Ley calculated the correlation at +0.94; that’s about as close to a statistical sure thing as you can get.

By contrast, “made in Canada variables” – interest rates, employment, domestic Canadian migration and rental vacancy rates – proved rather hopeless as price predictors. Interest rates, routinely touted as the most significant factor in Vancouver’s property boom, had a negative correlation, of -0.12.

During this period, prices peaked in 1995, then fell when migration from Hong Kong all but ceased. The drops that followed were concentrated in areas favoured by rich Hongkongers, such as wealthy Shaughnessy. “The overall prices dropped, although it was concentrated. In Shaughnessy, prices went down by 25 per cent … that’s a big drop,” Ley said. “But it was not as great across the market as a whole.”

Now for the big question: is the current Vancouver market similarly tied to mainland Chinese migration? And is the cessation of the IIP analagous to the way that Hong Kong migration under the scheme halted in the mid-1990s?

Sadly, Ley isn’t sure. “There are a number of similarities. It’s not perfectly the same,” he said. He notes that the Asian financial crisis coincided with the Hong Kong handover, exacerbating the sell-off in Vancouver as immigrants repatriated their funds to the SAR.

“The combination of the exodus [back to Hong Kong] plus the repatriation of funds led to significant sales and declines in the high-price property markets here,” he said.

Nevertheless, Ley takes issue with some observers who have sought to disregard the impact of the IIP on Vancouver prices. These critics point out that arrivals in British Columbia under the scheme (recently averaging 4,600 individuals, or 1,340 households, per year) are dwarfed by greater Vancouver’s 25,000-30,000 annual residential sales.

“The problem with that argument,” said Ley, “is that if that estimate of a couple of thousand does not include secondary migration from other parts of Canada then that is an underestimate.

“The other point: are people coming in buying only one property? Undoubtedly, it has been that property is the primary form of class mobility and property is a very easy investment to manage. I would question that these folk are only buying one property.”

Ley said the investor migration scheme also fuelled Vancouver’s market in indirect ways – namely, by helping word get out among China’s rich that the city’s real estate market was a convenient, friendly and profitable place to invest. If such word-of-mouth turns in the other direction, will prices do the same? That remains to be seen.

The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by e-mail ian.young@scmp.com or on Twitter, @ianjamesyoung70


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This article is now closed to comments

Disagree. This article and the graph show that even though the level of immigration to Vancouver in any given year is only 1.5-2.0% of the overall Vancouver population (I looked up the figures), this immigration has triggered massive price increases due to limited housing supply. This has implications for other cities including London, where high overseas investment in housing rather than immigration is having a similarly large effect on house prices. I've read numerous articles showing that 90% or more of house purchases are made by UK residents. This article shows that an inflow of well less than 5%, where supply is limited, can really push up housing prices. The 'conventional view' that a relatively small increase in house buyers cannot really affect house prices is thus completely wrong.
You know the problem with reading these articles from academics?..................after you've read the whole thing, there is no conclusion and simply opens up a bunch more of questions as to "what if", I don't know and etc. etc.............theses guys are just pouring out a bunch of academic hypothesis with no true substance behind it cause they don't have the balls to tell what the real situation is.
The real situation with Vancouver is that now with the Investor Immigration Program out of the picture, the housing prices will stabilize for a little while as quite a bunch of earlier Chinese had bought properties there............while these same Chinese are gradually digesting the fact that they will not likely to ever get a Canadian passport or be able to live there, they will eventually pull out and sell their properties even at below market prices just to get the money out..........then, the chain reaction will start and the property prices, particularly in the upper-end will spiral down when this chain of Chinese start disposing of their properties in Vancouver...................This is what the article should have addressed!
Hi BCSailor: You are correct that strong correlations do not always provide evidence of causality, but they may provide evidence of a link. It's possible that there is a convincing (but hidden) non-causal link between immigration and house prices...do you have a suggestion what it might be? Or it might simply be that Vancouver home prices are indeed causally connected to immigration.
Hi daily: I'd be wary of any expert who says a market will definitely go up or down. Professor Ley, however, has been one of the few experts brave enough to provide a substantial analysis of what has been happening in the past, by highlighting the strong correlation between Vancouver prices and international immigration to the city. That's important to help people make up their mind about what might happen in the future. There is a lot of substance in what he says.
If the professor compared other city centres like Calgary (or Regina) where prices have gone up even as high as similar Vancouver homes or perhaps at some proportional increase then more can be said.
That comparison has been made by many people. Vancouver's housing market is more than twice as unaffordable as in Calgary where price increases are offset by increased income. Vancouver's housing market is globally exceptional in terms of unaffordability. In this respect, it is only surpassed by Hong Kong. Nowhere else in Canada comes close.
The question is, will chinese stop buying property in Canada even if they don't immigrate? its a good investment, they are also investing in UK and most of them don't immigrate, immigration is not a solution. Plus high property prices is not a problem in Canada, you can continue to build start a second city center and develop other parts. Come on guys, we are 34 millions in a country bigger than the US where they have 400 million people and we are worry for space this is ****
I work at the same institution as Professor Ley, but still I must critique the "evidence" presented in the graph. Perhaps there is more elsewhere in the study, but Figure 5.8 does not provide evidence of anything.
A correlation of 0.94 or 94% looks impressive, but those who know statistics will understand that in the analysis of time-series data, one cannot just correlate the level of something (house prices) and the level of something else (immigration). It is very easy to get very high correlations. Don't believe me. Just try computing the correlation of the house prices with your age. I did. Guess what--the correlation is 94.5%. Evidently, my age predicts Vancouver house prices better than net immigration. Obviously, you can put in anyone's age and the result would be the same.
The correct analysis needs to look at the *change* in house prices vs. net immigration or *change* in house prices vs. change in net immigration.
Many rich chinese immigrants never had any real skills other than cooking properties in HK or China. This is what they do for a living. Naturally when they go to vancouver they will cook prices there too.


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