Andy Yan’s study of 172 multi-million dollar homes in Vancouver’s Dunbar neighbourhood touched a nerve earlier this week.
To some, it was definitive proof that Vancouver’s real estate market is being driven by money from mainland China. To others, it was an example of local media’s obsession with a racially-charged narrative that obscures other factors behind Vancouver’s housing affordability crisis.
Yan, an urban planner who works at Bing Thom Architects and teaches at UBC, analyzed land title and assessment information for 172 detached homes in Dunbar at the request of MLA David Eby. It’s a neighbourhood that has seen particularly heated real estate activity. The median price for the homes studied was $2.64 million, compared Vancouver’s median detached home price of $1.1 million.
For the study, Yan specifically isolated “non-anglicized Chinese” names listed on land titles. Among his findings were that 66% of the buyers of the 172 homes in the study had non-anglicized Chinese names, indicating they were likely recent arrivals from mainland China, according to the study.
Unlike other jurisdictions, data on foreign ownership of real estate is not tracked in Canada.
Names analyses are often used when social science researchers study population flows, Yan said, adding his study was peer-reviewed by five people before publication. But it’s that part of the study that has drawn criticism that it has racist overtones, including from Vancouver’s mayor.
What Yan reads into his own work is a story not of race but of wealth, the flow of money across international borders and the role banks play in facilitating transfers.
“This isn’t a story of China, it’s a story of money,” he said. “It’s this weird sense that money is no longer connected to what you do and where you live, it’s just this constant flow.”
In Metro Vancouver, foreign investment has been increasingly concentrated in residential real estate over the past two decades. This can be traced in the ballooning price of a certain type of residential real estate — detached houses — seemingly unconnected to a rise in the value of other types of property, local incomes or economic growth, Yan said.
There is a public perception that mainland Chinese homebuyers are buying Vancouver houses with cash, but in the properties Yan studied this was not the case: 82 per cent of the properties in the Nov. 2 study had a mortgage, while 69 per cent of mortgaged properties held mortgages from three banks: HSBC, CIBC and RBC.
Yan thinks the role banking plays in facilitating the international flow of money should continue to be researched. He referred to a 2007 study by Vancouver-based academics Wei Li, Alex Oberle and Gary Dymski that examined the role HSBC has played in providing banking services to Chinese immigrants.
The study describes how in Vancouver, HSBC designed its services for immigrants from China, Taiwan and Hong Kong. That included helping middle-to-high income immigrants as they made a new life in Canada, as well as facilitating capital flight from Hong Kong in the mid-1980s as reunification loomed.
“It’s not just about money from all over the globe, it’s also the fact that there’s a system in Vancouver that’s as Canadian as maple syrup that’s connected to these housing transactions,” Yan said.
“Unfortunately it lands in an area that affects all of us.”
London, New York, Sydney, Hong Kong and Singapore have also seen an increase in wealthy immigrants investing in real estate. But those cities have cushions Vancouver does not, Yan said: policies that limit foreign ownership or capture tax benefits, robust social housing programs and higher locally-generated incomes.
In contrast, Vancouver median incomes remain among the lowest among Canadian cities, while home prices in the region are the highest in Canada. The way government structures are set up in Canada means that Canadian municipalities are relatively weak and rely on other levels of government to set policy.
“Some of the regulations around land and property is provincial jurisdiction,” he said. “What happens when the province has to create policy, then expand it everywhere from downtown Vancouver to Dawson Creek?”
Yan noted that many other researchers have been studying the “effects of global money and how it flows through the world.”
“It’s a flight to safety and stability,” he said. “In New York, it’s a lot of money from the Middle East and Russia.”
In New York, that’s fuelled the construction of luxury condominium buildings, with units priced anywhere from $25 million to $75 million.
A 2013 study on the effect of foreign demand on London home prices found that when emerging economy countries are experiencing risk (political or economic instability, for instance) there was a rise in the number of wealthy citizens from those countries seeking visas through the United Kingdom’s investor immigrant stream.
Those immigrants are seeking a safe haven for themselves and their money, and are often choosing a city or neighbourhood that already has a high population of other immigrants from the same country, according to the study.
Capital flight out of China has accelerated in recent years, to the point that authorities in China have capped the amount of cash that can be converted to US$50,000 per year. A recent Bloomberg story detailed the many methods wealthy Chinese nationals use to get money out of the country, often to invest in real estate in the United States, Australia or Canada.
“Perhaps we need to really modernize our institutions to really take advantage of this global capital,” Yan said. “We’ve never really thought about the updates that we need to give to our government or public policy — are we really capturing the wealth that’s generated through this?”
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