The Effect of Chinese Investment Capital Upon the Vancouver, Canada Housing Market

In 2015, $1,000,000,000,000 ($1 trillion) USD left China which set a new historic record for the amount of currency exported from China within a single year. This dump of currency directly coincided with the July 2015 real estate jump of 30% – 40% of Vancouver, Canada the Greater Vancouver Area and the Fraser Valley. Many economists and financial experts working in China have correctly predicted a growing problem in which the financial bubbles that have been created in China have caused investors to become spooked and therefore cash out of these bubbles to put their income into hard assets around the world. This creates a bubble in other markets which are international, which would lead to the plausible conclusion that the Vancouver, Greater Vancouver Area, and Fraser Valley real estate markets are now bubbled in that they have taken the place of many Chinese companies valuations and debts (e.g. stocks and bonds) within the Chinese market. It is estimated that 90% of condominium sales in Vancouver are due to speculative buyers who are often offshore and never set foot in the asset they purchase yet they are paying top dollar, making home costs surge ever further for those who actually live and work in said market. Some of this activity is thought to be due to the ability to create offshore tax havens by owning property outside of one’s country of residence. Most of the condominiums built in Vancouver are single bedroom units, which act as safety deposit boxes for investors as families cannot physically fit into such tight quarters and therefore these units are designed so that the only people purchasing them will be investors and single individuals if they can afford it. It has been said that Vancouver is a manufacturing city which manufactures condominiums; the only caveat is that the exports manufactured stay put making future condominiums worth even more as there is less and less space available to build continuously with consistency. The resource of land is finite and unless buyers are willing to move further out from this hotspot economy, they will be forced to rent or live in less than acceptable living conditions, and sometimes both

The Vancouver, Canada Housing Market and the Greater Fool Theory

The Fraser Valley is the fastest growing suburb in Canada. The housing market in Vancouver, British Columbia is by far the most expensive in Canada, even more so than in Toronto, Ontario which for a long time was the most destabilized market in Canada. The most expensive region of Vancouver to live in is West Vancouver. 65% of residents of Vancouver and the Greater Vancouver Area which includes the Fraser Valley are homeowners. Fundamentally, the Vancouver housing market is easy and cheap income, and from that, lots of it. The chasing of returns on a speculative basis has no basis in reality in terms of what an assets (e.g. a physical property) true valuation is but it is justified on the notion that it does not matter what a buyer pays now, as another buyer will pay more in the future. This is referred to as the “Greater Fool theory” in that the next person will cover the cost of the last person. This model is for obvious reasons unsustainable