patrick.net

Foreign ownership main culprit for unaffordable housing in Vancouver, a top destination for Chinese funds, ‘unimpeachable’ study says.

A study found a near-perfect 96 per cent correlation between detached housing unaffordability and foreign ownership rates across 14 Vancouver municipalities

The Canadian city has for decades attracted waves of millionaires and money from mainland China, Hong Kong and Taiwan

A study has found long-sought evidence linking foreign ownership to extreme housing unaffordability in Vancouver, a Canadian city that has attracted waves of Chinese capital and millionaire migrants.

The white paper by Josh Gordon, an assistant professor at Simon Fraser University’s school of public policy, found a near-perfect 96 per cent (or 0.96) correlation between various metro Vancouver municipalities’ price-to-income ratios (a common measure of unaffordability), and the proportion of their detached houses in which at least one owner was a non-resident.

A leading researcher who was not involved in Gordon’s study said its findings were “unimpeachable”: the more that a Vancouver municipality was favoured by non-resident owners, the more unaffordable its detached houses tended to be.

“When I plugged the numbers in it blew my mind … I mean, holy smokes,” said Gordon of the strikingly close correlation.

“This is compelling evidence that when it comes to the extreme ‘decoupling’ [of prices from local incomes] seen in the Vancouver housing market, foreign ownership is the primary culprit,” the paper said.

Vancouver’s housing has long been considered among the world’s most unaffordable. The city ranked second – behind only Hong Kong – in the latest Demographia study of unaffordability in 309 cities around the world, with a price-to-income ratio for all housing of 12.6.

But among detached houses, the ratio is about 25 or 30 to one, in areas popular with Chinese buyers including the City of Vancouver, Richmond and West Vancouver.
Gordon’s paper was not peer reviewed before publication last week, but it was checked afterwards by University of British Columbia geography professor David Ley, who has studied Vancouver real estate unaffordability for decades.

The calculations, based on 2016 data, were also checked by Andy Yan, director of the City Programme at Simon Fraser University, who sat with Gordon as he reproduced the results.

Ley said of Gordon’s “unimpeachable” argument and conclusions: “Such a high correlation is rarely seen in social science research … It indicates a very strong relationship. So it is the presence of non-resident buyers that is forcing up prices.

“But there’s a qualifier here because it forces up prices relative to incomes … we can more accurately say that non-resident demand shapes affordability.”
The so-called “r-squared” value, depicting how much of the variations in unaffordability could be predicted by non-resident ownership in 2016, was 93 per cent.

https://www.scmp.com/news/china/money-wealth/article/3016074/unimpeachable-study-calls-foreign-ownership-primary-culprit