Crucial factors driving price growth in Vancouver

The seemingly uncontrollable growth in Vancouver’s real estate prices over the past few years has been subject to much debate, and opinion on the ultimate cause varies widely depending on whom one talks to. In a breakdown piece for MoneySense, senior editor and licensed realtor Romana King outlined the key factors driving this phenomenon.
 
Most notable among these is the effect of foreign capital entering the market at an unprecedented rate. King noted that data from various observers like David Ley points at an inescapable conclusion: When it comes to price growth, the volume of offshore investment is as important as the number of owner-occupiers.
 
“Through his analysis, Ley discovered that in the last 25 years, there’s been an almost 1-to-1 correlation between Vancouver’s rising real estate prices and the surge in international immigration and offshore investors to this West-coast city,” King wrote in her analysis.
 
“The biggest contributor to these rising housing prices is that these immigrants not only arrive with great wealth, but continue to earn high incomes outside of Canada,” King said, adding that these foreigners’ greater purchasing power—a portion of which is allegedly involved in money laundering—is pushing domestic buyers out of the picture.
 
Another reason for Vancouver’s inflated prices is the proliferation of industry practitioners who engage in corrupt behaviour such as “shadow flipping”, where a sales contract is assigned to multiple potential buyers before the closing of the deal.
 
“Fast money, unscrupulous people, and a general malaise when it comes to defining and enforcing bad conduct has taken its toll on the city,” King said, citing cases where the penalties imposed on erring real estate agents amounted to just small change—an average of just $4,850 per offender—compared to the commissions earned in less-than-ethical transactions ($22,500 on a $1.78-million property).
 
Most importantly, King pointed at the crucial lack of regulation that has set embarrassingly low bars of entry for would-be professionals. Over 12,400 real estate agents operate in the Vancouver area alone as of 2016.
 
“It’s too easy to become a realtor in British Columbia, so the level of compliance is going to be a problem. The No. 1 way to increase public protection is to have more than a 10-week online course to get your licence,” King quoted Real Estate Board of Greater Vancouver committee member Keith Roy as saying.

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COMMENTS

  • by Daryl 2016-04-27 5:31:29 PM

    The deliberate blindness continues. No mention of Canadian factors: artificially low interest rates, Harper's $600 billion taxpayer bailout of banks with CMHC mortgages, nor the continued easy mortgage lending caused by loose transactional banking rules that allow banks to create unlimited amounts of money in the system through mortgages and other debt, and allows ridiculously low bank reserve ratios. Much like Trump in the states, it seems that Canadian "experts" are quick to spot foreign culprits while remaining blind to our own banking regulatory issues. Recently, this magazine published the CMHC foreign ownership findings:

    "Highlights from the report include;
    In the Toronto CMA, the share of foreign ownership is less than 2% for buildings completed before 1990 and 7% for newer constructions completed since 2010. This effect is even more pronounced in Toronto Centre where about 10% of the newer stock is owned by foreigners.
    In the Vancouver CMA, foreign buyers’ share rises from less than 2% for properties built before 1990 to about 6% for those completed since 2010."

    Tell me again how all the blame belongs on the 6% foreign ownership in Vancouver? Are the 94% of owners who are Canadian, using cheap Canadian bank money printed out of thin air not worthy of some accountability?

    Isn't it time to stop the debt-based money scam that is modern banking and follow the lead of Iceland to return the power of money creation to the government? If you are fed up with housing prices out of touch with reality, lay the blame where it belongs, on the doorstep of banks who create debt fueled bubbles repeatedly to enrich themselves at Canadian's expense. Private banks led by the BIS have pocketed over $1 trillion in interest on Canadian dollars since 1974. It's time to stop the scam.

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