Seller Beware: The Impact and Consequences to Date of Asian Investment in Metro Vancouver's Real Estate Market

By McCarthy, William | Real Estate Issues, Summer 2011 | Go to article overview

Seller Beware: The Impact and Consequences to Date of Asian Investment in Metro Vancouver's Real Estate Market


McCarthy, William, Real Estate Issues


INTRODUCTION

NO CITY ON EARTH'S RESIDENTIAL REAL ESTATE MARKET HAS been more affected by a targeted and concentrated Asian investment, particularly that from China, than Vancouver, British Columbia. While only the perspective of time will define the consequences of this growing control over large segments of the regions housing markets, its impact on affordability and the regions overall economy is not positive. What are the lessons for other regions seeking the quick fix of offshore investment, in particular those learned from the Vancouver experience? The circumstances that have made Vancouver the epicenter for Asian investment cannot be readily duplicated, and evidence increasingly indicates that they should not be.

This rapid and unplanned rise of Asian investment in Metro Vancouver has led to, contributed to, and greatly accelerated the following:

* A virtual destruction of traditional housing affordability models. By the second quarter of 2011 the average price of a detached home in Vancouver was $843,300 (which would currently purchase only a modest residence). To fund this average residence now requires an impossible 95.5 percent of household income. Canada's largest bank now raises the possibility that in Vancouver "home ownership is becoming a far-fetched dream." (1)

* A corresponding rise in overall local household debt to unsustainable levels;

* A severe shortage in affordable rental stock;

* A speculative real estate economy superseding much of the traditional mixed-use and balanced economy as a taxation driver;

* Provincial and local governments that increasingly involve themselves in the real estate market, dependent on the taxation and fees, and in the process distorting the risk/reward property development matrix;

* Wordy, expensive and unproven green initiatives being used to partially justify land use policies and high housing costs;

* Evidence that foreign investors may have no permanent commitment to local communities other than their financial involvement, nor an interest to assimilate.

On June 15, 2011, Mark Carney, the governor of the Bank of Canada (the equivalent of the chairman of the U.S. Federal Reserve), spoke before the Vancouver Board of Trade to once again warn Canadians about the bank's growing concern over this country's overheated housing market and unprecedented levels of personal and household debt. With the average Canadian spending 147 percent of annual income (on par with the U.S. and the worst of Europe), (2) and most of this debt tied to housing costs, the governor has consistently warned Canadians not to rely on ever-escalating housing prices to keep them solvent.

That Carney chose to speak in Vancouver was no coincidence. It was a deliberate attempt to warn Canadians and, in particular, Metro Vancouver residents, that their debt was unsustainable and that with interest rates eventually rising and continued global economic challenges, the vulnerability of this region of Canada was particularly troublesome:

  While Canadians have seen the value of
  their real estate holdings rocket
  upwards some 250 percent in the last
  twenty years, vastly outpacing increases
  in consumer prices and incomes, it hasn't
  necessarily left the country better off.
  Some people in this room may have been
  enriched by recent developments, their
  children and neighbors may have been relatively
   impoverished. (3)

While Carney acknowledged that Vancouver has always been Canada's most expensive housing market, even with its heavy Asian investment, the housing fundamentals and trend lines were negative. Furthermore, the Bank of Canada would not provide future stimulus or policy to extradite this or any other Canadian market should Canada experience the bursting (or leaking) of its real estate bubble. "We cannot manage monetary policy for a specific housing market or specific region. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Seller Beware: The Impact and Consequences to Date of Asian Investment in Metro Vancouver's Real Estate Market
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.