Foreign investor data revealed

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It may be a small-scale study, but the statistics are sobering: One association says a large portion of buyers in Vancouver over the past six months are likely mainland Chinese.

An academic case study, entitled “Ownership patterns of single family home sale on selected west side neighbourhoods in the city of Vancouver,” by city planner Andy Yan, found that 70% of buyers in west-Vancouver neighbourhoods over the past half-year are likely from mainland China.

The study employed name analysis methodology commonly used in public health, political science, and Asian American studies to identify the origin of names. According to that methodology, “non-anglicized Chinese” names suggest newer immigrants or Chinese nationals.

The study found that 70% of homes purchased in the area over the six-month period were done so by people with non-anglicized Chinese names.

Not exactly the most concrete evidence, but the author of the study is confident in the methodology.

“There may be some mis-categorizations as an Anglicized Chinese name could be someone who is a new immigrant and a non-Anglicized Chinese name could be a locally born citizen, but after an external review, we feel this is minimal,” Yan writes in the study.

The most interesting finding for brokers, perhaps, is that most of the properties were purchased with mortgages – defying conventional thinking that these foreign-owned homes are usually purchased outright.

According to the study, only 18% of the 172 home purchases were not mortgaged by banks.

It may not come as a surprise to some brokers, though.

“I had a request from a foreigner who wanted to purchase 20 condos and I was able to find a lender for that buyer,” Walid Hammami, a broker with Dominion Lending Centres, told MortgageBrokerNews.ca. “I didn’t go through with the transaction … in the end I didn’t want to get involved.”

Click here to access the study.
  • Dustan Woodhouse on 2015-11-04 11:25:15 AM

    The study is of such incidental volume (172 transactions in a market with 50,000 this year) focusing on a very small niche of the market (ultra high end homes) that it is the proverbial butterfly flapping its wings with the media creating a storm with erroneous headlines such as '70% of Vancouver homes sold to Mainland Chinese'. A truly ridiculous headline when one reads the details.

    172 homes in one westside neighbourhood
    3M$ and up detached homes only
    buyers with 'non-anglicized' names

    I have three sets of clients currently with non-anglicized names that were all born here 40+ years ago. Yes their ID has a mainland Chinese name, but you would never know this unless you requested their ID. And to these folks this study, the hype around it, and the twisting of the content into hyperbolic headlines has the feel of a witch hunt.

    Supply & Demand people, it really is that simple.

  • Walid Hammami on 2015-11-04 1:24:13 PM

    Dustan, We don't know the real answer at the end. But the worries are definitely legit.

    We could end up like some countries in Europe where you pass down your mortgage for 2 to 3 generations.

    The inflation is not even between revenue and goods prices, it is further accentuated in home prices where the affordability is no longer there.

    One of the consequences is that if people think the mortgage criteria are not fair they will not be deterred. After all "an unjust law is no law at all".

    I am not saying I grasp everything regarding this situation, but we need to look deeper than skin level.

    BTW great book :)

  • Sean Jang on 2015-11-04 1:52:07 PM

    Agreed that the media is responsible for erroneous headlines. Still, the study is useful on many fronts.

    The selected properties represent over $550m in transactions, and over $100m in foreign investment injected into Vancouver's economy in a 6-month span. The data accounts for all detached home sales over this period across the whole of Westside Vancouver. Also, $3M represents the average sale price for this data set (not the minimum). Real estate activity in this area impacts affordability throughout the city.

    The researcher notes that although the Name Analysis Method is imperfect, it is widely used in academic research, and was suitable given the data that is publicly available. It begs the question why better data is so hard to come by?

  • Ron Butler on 2015-11-04 3:46:32 PM

    Sorry Dustan, I cannot completely agree, supply and demand: yes, 100% true, that's how a housing market works period.

    Foreign buyers are incidental: no, not true. Property buyers with economic interests unrelated to the communities they purchase properties in have an effect on that the value dynamics of that marketplace.

    If the wealthy of the world, the "one percenters" and I do NOT care what country they are from; pick a place they want to buy properties, whether it is Vancouver, Toronto, LA, New York, London, Miami, the place does not matter, once they decide to own those properties and they buy in those cities, they alter the dynamics of those marketplaces. That is a fact. I cannot even tell you if it is right or wrong but I know it is true.

    I know anecdotal information is always supposed to false but honestly, not always. The last 3 house on my street that sold were purchased by families who did not previously live in Canada. In all 3 cases the houses were either tear downs and the spec builder sold them or they were old houses and the new owners tore them down and a contractor built a new house. Sale or build prices were $2.4 to $3.0 Million. 3 houses on one short street. Clearly this will influence the pricing in a marketplace.

    Before some cities in Canada became "world cities" the economics of the local communities controlled the real estate market, local incomes, local sensibilities, local measures of wealth. Right now in the GTA and the Lower Mainland there are influencers who earnings come from outside of the local communities and they do not need to buy 100% of the houses to alter the pricing dynamics, they just need to buy enough of the houses often enough.

  • Kevin on 2015-11-04 4:24:09 PM

    @Dustin You are simply wrong Dustin, if you were not then how do you explain that Vancouver's most expensive neighbourhoods also have the lowest declared annual incomes? Did you know that Shaunessy, according to CRA statistics, reports a lower average income than East Van?

    It has been proven in more than one study that the majority of the income not being declared is offshore income.

    Secondly, you are misquoting the study... they freely admit that they took a small sampling of a larger area and did it only as a representation of a specific area of the city. There were NOT 50,000 homes sold in those specific areas in the time of the study - there aren't 50,000 detached homes in those three areas. You can't make numbers up to discredit a study, it does not work that way.

    I also noted that an unusual number showed the owners as housewives or self employed - more than 1/2 of them in fact. Interesting point that supports the study released which looked at the average declared income. It also explains why the social assistance rates and the GST rebate rates, etc are so unusually high in those areas.

    Far as I'm concerned... if you can't prove your income - you should not get the mortgage. This sense of entitlement is sick. I don't want to pay taxes or declare my income but I want all the benefits as thought I do pay them, and I should be able to buy a multi million dollar home.

    I'd love to see the CRA do a comparison audit on every single self employed person and hold them accountable when there is a huge disparity between what they declare for taxes and what they claim they earn when applying for credit.

    There is an old law in Canada... something to do with tax evasion...

  • Kris G on 2015-11-12 7:17:17 PM

    I would have to say that this study is hardly indicative of the entire Vancouver or Lower Mainland market. I think that is what Dustan is referring to also.

    70% of a smaller area of high value real estate is not carrying over to equal 70% of all Van or Lower Mainland purchases.

    All increases in purchases will have a spreading effect, though more like a ripple in the water weakening as it leaves the epicenter.

    We have some clients with no income but high net worth due to creating businesses, selling them and retiring too. These folks should clearly not be denied financing either.

    Bottom line is that this "study" whether the micro numbers/area sample are correct or not IS misleading and fear mongering.

    70% of my neighbors are not foreign investors, though I guess I wouldn't mind living with that postal code!

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