The Hongcouver | Vancouver’s C$1.26m question: Will axing investor migrants kill home prices?
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 the second-most unaffordable property market in the world, where a dumpy bungalow can have almost triple the asking price as a castle on the other side of the country.
The following column makes uncomfortable but necessary reading for anyone with holdings of Vancouver real estate.
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.
