The following column makes uncomfortable but necessary reading for anyone with holdings of Vancouver real estate. Since Canada’s government last week announced that it was axing the Immigrant Investor Programme (IIP) , there has been plenty of speculation about what that means for housing in the second-most unaffordable city in the world - according to Demographia ’s* study of 378 cities around the world in nine major markets - where a dumpy bungalow can have almost triple the asking price as a castle on the other side of the country. The average price of a detached home in greater Vancouver? C$1,259,775. High property prices are the defining factor of life in this city. Yet despite a wealth of punditry, few have tried to actually calculate the potential impact of the demise of the millionaire migration scheme, which has brought tens of thousands of rich Chinese and others to Vancouver. So here goes. From 2005 to 2012, the federal IIP brought 36,951 rich people to British Columbia. That’s an average of 4,619 per year, representing 1,340 households at current averages under the scheme. A 2011 study showed 90.4 per cent buy homes, suggesting 1,211 actual purchasing households per year have been removed from the Vancouver market by last week’s decision (since almost the totality of BC investor migrants live in its largest city). This is equivalent to only 4.25 per cent of the 28,524 residential sales in greater Vancouver last year. At this stage it’s crucial to note that reducing the sheer number of sales doesn’t necessarily move a market down (the worst week of the 2008 stock market crash saw record trading volume in New York). But extracting buyers who pay above prevailing prices certainly does. And I can think of six “known unknowns”, five of which will undoubtedly increase the impact of those 1,211 lost households. First the relatively good news - for owners, anyway. We don’t know how many would-be IIP arrivals will find some other way of getting to Vancouver. Some will. Most probably won’t, because if options other than a years-long queue for the costly IIP existed, they would have taken them. And now for the five scary bits, that will assuredly magnify the impact of those lost purchasing households. Investor migrants are rich, so they buy more costly properties, and it’s the price of expensive detached homes that fuel Vancouver’s market. Condo and townhouse prices rose by a third from 2005 to 2012, but detached prices doubled . Under the most recent IIP benchmarks, principal applicants must have been worth a minimum of C$1.6 million. Compare that to the Vancouver average household worth of C$662,600 (Environics Analytics). Some IIP households buy more than one property in Vancouver. Some high-value purchases have a cascade effect through the market. For example, when a Chinese investor immigrant pays C$3 million for an elderly widow’s rancher on Cambie Street, that sale triggers the purchase of a three-bedroom townhouse in Kitsilano and down payments on condos for her two adult children. Such things happen - not always, but sometimes. Now for one of the two biggest concerns. Our calculations so far only cover actual arriving immigrants. But how many of the 65,000 would-be immigrants who were dumped from the IIP queue last week had already bought in Vancouver? Of the applicants from 2009-2011 who made up the bulk of the backlog, 62.8 per cent were bound for BC. That’s an estimated 11,866 households. Not only have these households been removed from the pool of future purchasers, it’s reasonable to assume that some will soon be liquidating existing Vancouver holdings. The final unknowable is human nature. Already talk of an impending disaster in the market is a feature of Chinese-language forums . How many non-IIP owners will head for the exits too, and how fast will they do so? To be sure, there is no way of telling how much these five factors will come into play. But let’s make some conservative assumptions regarding the first three. Imagine that homes bought by IIP households cost twice as much as the average residential sale; considering that the rich Chinese who make up 81 per cent of Vancouver’s investor migrants are concentrated in expensive neighbourhoods of Richmond and the Westside, that’s not a stretch. Now imagine that each home-purchasing IIP household buys not one, but two properties (over how many years? Irrelevant, since the effect will be annualised over time). And let’s say that an IIP purchase triggers another purchase that would not otherwise have occurred in 25 per cent of cases. The annual effect of the extraction of those 4.25 per cent of sales doesn’t look so insignificant anymore. On a dollar basis, our scenario balloons the figure to 21.25 per cent in lost sales per year. This estimate applies across the entire market; the effect will be magnified in the Westside and Richmond. The impact of those pre-migration sales to IIP applicants is almost too worrying to factor in - so I won’t, and the same goes for considering human nature. Predicting property prices is a mug’s game, especially in Vancouver, where pundits have been wrongly predicting a collapse for years. But those downplaying the significance of the IIP’s scrapping must ask themselves whether a counterweight can be found for the factors outlined here, even if my maths isn’t perfect. That’s the C$1,259,775 question. [*Update: This story has been updated to include a link to the latest Demographia study and to describe its scope] The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. 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