Vancouver Housing Bubble & Chinese Investors
I came across a chart recently published by Bloomberg. It overlaid the average Vancouver house price with China’s GDP. Lets take a look:
Interesting correlation isn’t it… Bloomberg are suggesting that what is occurring in China, have as much effect on our Vancouver house prices, as domestic economic policy. The graph establishes a direct correlation between China’s GDP and Vancouver House Prices. If this trend is set to continue, then apparently Vancouver’s real estate prices are soon set to rise.
However, as we know correlation does not imply causation, and we know that Vancouver’s unique housing market has many other influencing factors, but if this comparison has any bearing, then the Chinese buyers that have been waiting in the shadows will be back sooner rather than later.
Over the last 12 months, we have seen a definite reduction of the number of Chinese looking to purchase Real Estate here in Vancouver, and this has compounded to an already weakening market. The reason for this is restrictions that the Chinese government has pout in place to cool their overheating property market. In 2009 policy was introduced to help regular citizens own their own home, so if a purchaser had a 30% downpayment, they were able to purchase their primary residence. However, if they wanted to purchase a second property, for investment, for example, a 60% downpayment was required. Not surprisingly, as a result property prices in major cities dropped considerably. In Beijing, this decline was between 30-40%.
As a result, Chinese investors had much less cash available to invest in properties in China and abroad.
Historically we see Chinese New Year as a time when investors make a trip to Vancouver and often seek to purchase units here. Last year, that activity was noticeably absent.
If we examine the impact that the Chinese housing market has on GDP, we can attribute 11% directly to the real estate industry, if we include spin off industries like furniture and appliances, then we are looking at around 22-25% of GDP. If we see the government of China relax their intervention on the real estate market, then we will see assets becoming more liquid as investors move back into the market place, and as a result we will see them return to Vancouver to find a place to park their cash.
We see that the Chinese policy has impacted investors cash flow in the short term, we also see that the attitude towards Vancouver Real Estate has not changed, and in the long term, investors are remaining very bullish with regards to the Vancouver Market.
With the new leadership in China, we may well see a relaxation of these policies, and a renewed interest and availability of Real Estate investing in China and therefore allowing Chinese to purchase real estate here in Vancouver.
Give me a call today to discuss this, and lets put a plan in place for you to reach your real estate goals: Adam Chahl +1 778 385 6141