Vancouver is one of the most in-demand places in the world to live, but owning a home in the city is growing increasingly difficult as the price of a detached house has now reached $1.4 million dollars, according to the Real Estate Board of Greater Vancouver. Chinese buyers in particular have been in the spotlight for contributing to the upward trend, and animosity against them is rising.
The National Bank of Canada estimates that buyers from China made up about one-third of Vancouver’s housing market last year. However, that’s a “back of the envelope calculation”, according to the bank, as Canada simply hasn’t been keeping track of foreign investment.
“There are very little facts available,” Thomas Davidoff, director of the Centre of Urban Economics and Real Estate at the University of British Columbia’s Sauder School of Business, told NBC News. “That’s been a frustration. The government is in denial — they’ve just started to collect data, and even that might be intentionally lousy.”
According to Davidoff, Vancouver is a power magnet for people who are looking to avoid taxes. The combination of a low property tax, a plummeting Canadian dollar, and the absence of a sales income tax for citizens who claim non-residency makes Vancouver ideal for foreign buyers. Buyers that, Davidoff said, the Canadian government doesn’t want to lose.
“What’s nasty about the market today is that there’s resentment towards Chinese people,” he said.
It’s animosity fueled by recent reports that blame Chinese investors for Vancouver’s housing crisis. Town hall meetings have been called and petitions have been signed to try to limit foreign investment within the region.
“It’s a sensitive issue in Vancouver because of the perception of foreign investment inflicting high prices,” Benjamin Tal, deputy chief economist at the Canadian Imperial Bank of Commerce, told NBC News.
The term “foreign investor” might invite images of a person sitting in China with very little knowledge about Vancouver, but Tal says the average Chinese home buyer is purchasing the home to live in the city, become part of the society, and will thus have a higher level of attachment to the property.
“It’s usually a husband sending money from China to the wife and kids who live here,” he said. “These people aren’t flipping houses, they’re not trying to make money. It’s a significant amount of people, but they’re mostly immigrants – and they’re often confused with investors.”
Vancouver is an attractive place for Chinese immigrants, in many senses. Its pre-existing large Chinese population provides a familiar environment for newcomers, along with clean air, great schools, and a stable political system, according to Ian Young, the Vancouver correspondent for the South China Morning Post.
“There’s this uniquely Asian fear that at any moment, anything can go to hell in a hand basket, whether it’s war or political upheaval,” he told NBC News. “So a Canadian passport is a very valuable hedge against this. Placing your kids, your cash, and sometimes your wife offshore is a protective measure.”
China’s love affair with Vancouver is evident in media as well, with reality shows like HBIC TV’s "Ultra Rich Asian Girls" using the city as a luxurious backdrop. The program follows the daughters of China’s super rich, as they pursue modeling careers, jet off to private islands, and purchase million-dollar Vancouver homes on a whim.
“Vancouver’s known as the best place to live,” Kevin Li, the producer of the show, told NBC News. “I think that comes with a cost.”
Li was born in East Vancouver to a working class family, and has his own experiences in Vancouver’s housing market.
“I was able to save enough to buy my own condo, and then a house,” he said. “And because of rising property prices, I was able to leverage that to buy a second condo as an investment. Some people are able to take advantage of this situation, but people who aren’t in – they maybe have a challenge.”
It’s a challenge that’s becoming a quite the spectacle with Vancouver’s sky rocketing prices.
“I’ve called it a bit of a freak show,” Young said. “We’ve reached this point where median home prices are 11 times what median incomes are. It’s not just the prices, but the crazy unaffordability and the speed of this spike.”
Young says the widening gap is due to the fact that domestic incomes in Vancouver are completely detached from prices, which is because buyers in the top end of the market don’t make their money in Vancouver — they’re earning their wages in China. They’ll pay a large amount of money for a property, and the local recipient of that cash will go on to purchase another home, as the impact of the foreign buyer trickles down from top to bottom.
According to Tal, the situation grows worse with a discrepancy in supply and demand. With the surge of immigrants landing in Vancouver, the supply end of the housing market can’t keep up with the numbers. While housing values are appreciating, he says a lot of developers are sitting on the land, waiting for the value to rise even higher.
Young argues that nationality shouldn’t be part of the conversation, but rather, where these home buyers are earning their money, and where they’re paying their taxes.
“There’s always an undercurrent of fear of ‘others’ whenever someone is being defined by ethnicity,” Young said. “In Vancouver, that’s been fueled by this deliberate attempt to minimize what’s happened by the political leaders and people in the industry.”
“People get confused when they talk about ‘Chinese investors’, but at the end of the day we’re simply talking about people who want to buy homes for their family,” he continued.
Davidoff and his colleagues at the University of British Columbia and Simon Fraser University recently proposed a housing affordability fund to support local residents and have called on the local government to take action to address the issue. Their plan would target those who don’t pay income tax, mostly owners of vacant properties in Vancouver. He says there would be no mention of nationality in his plan.
“It’s unfortunate people have resentment towards people looking out for their families — and the government is inviting that,” he said. “It’s not their fault.”
Davidoff blames the local and federal government’s inaction as a key factor in progressing the housing crisis to a point where Vancouver could be a “playground for the rich” for years to come.
“Investment from people around the world, like China, is an opportunity — it’s only bad if politicians don’t look out and make sure everyone wins. They’ve flunked that here,” he said.
In terms of Vancouver’s future, Tal says the skyrocketing incline in prices won’t be stopping anytime soon.
“We’re expecting more people from China, not less,” he said.