Foreign ownership cannot fully explain price spikes - study

The latest research by a B.C.-based academic argued that the long-running upward trend in home prices in Canada’s most active real estate markets could be attributed to the marked increase in foreign investment and ownership recently, although not as a decisive factor.
According to an upcoming study helmed by Andrey Pavlov, real estate finance professor with the Simon Fraser University’s Beedie School of Business, a correlation exists between Vancouver housing prices and the now-defunct Canadian Immigrant Investor Program.
“Following the program’s suspension, we found home prices in neighborhoods and market segments favored by foreign investors declined substantially relative to the overall market,” Pavlov stated, speaking to Allen Tung of SFU News.
“This allowed us to conclude immigration does have a measurable impact on real estate prices,” the researcher added.
The study, which was conducted in collaboration with UBC business professor Tsur Somerville, noted that the effects of the foreign capital that was funneled into Canada though the Immigrant Investor Program should be comparable to those of direct overseas investment in Canadian homes.
Pavlov emphasized that foreign money is just one part of the complicated equation, which includes “record low interest rates, tax rules that strongly favour real estate over pretty much any other investment, highly insufficient transportation infrastructure in Vancouver, a cumbersome and unreasonable permitting process in Vancouver, and the Canada Mortgage and Housing Corporation’s bulk insurance for mortgage portfolios of banks, which removes most of the incentives for lenders to monitor risk.”
Updated figures from the Real Estate Board of Canada showed that the benchmark price for a single detached residential property in Vancouver is currently standing at over $1.4 million.

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