In a breakdown piece for the South China Morning Post
, Zeppelin Real Estate Analysis managing director Stephen Chung noted that the influx of foreign funds belied the amount of thought that Chinese nationals put into their investments.
Overseas buyers do not necessarily have sales volume and prices in Canada’s most in-demand cities—namely, Vancouver and Toronto—as their primary considerations, Chung said.
“Despite the cost, this does not mean their real estate is riskier than most, or more over-valued than most,” he stated.
“The mortgage rate trend is the key. If mortgage rates remain (historically) low, the real estate market might continue to survive or even thrive, but watch out for QE trends and changes, if any,” Chung advised would-be investors.
The executive of the HK-based consultancy added that the risk of a bubble burst, which is dependent on the income-to-mortgage-payment ratio, should not discourage Chinese nationals from considering Canadian markets.
“The risk is there but not evenly distributed. British Columbia and Ontario occupy the first and second top risky spots, with the former a long way ahead,” Chung said.
“Based on a 75 per cent mortgage payable over 30 years at 2.5 per cent and taking into account household income and income tax, there is not much to be concerned about – save for British Columbia where mortgage payments as a percentage of household income before tax stand at about 36 per cent,” he explained. “Post-tax, this rises to 49 per cent. Other provinces and territories appear reasonable.”
While the flow of overseas money into Canada’s real estate markets does not appear to be ceasing any time soon, a recent analysis published in a Chinese publication actually revealed a more circumspect approach among foreign investors.