Forecasting Vancouver Real Estate Prices

Blog by Arnold Shuchat | January 23rd, 2013

Relying solely on statistical analysis relating to Housing Price Indices, listing inventory levels and absorption rates may not be a completely accurate means of getting a handle on Lower Mainland Real Estate Prices.

A stockbroker once told me that he wouldn't be able to find 100,000 shares of a large Canadian public company on the market from between $35-60, when the shares were then priced at around $29. In other words, the company's shares were being tightly held.  When looking at Vancouver real estate, one has to look at it in relation to what makes it attractive to that segment of the market which drove prices up.  That is the Asian buyer.

One cannot forecast this market without making a determination about immigration volumes from that side of the world.  After consulting with one of Canada's foremost immigration lawyers and policiy analysts I have been lead to believe the following:

There are about 1.5 million millionaires in China and many of those people seek a safe haven for and expatriation of their capital to secure same.  Our  real estate and our local scene is such that we are relatively close to Asia and are seen as a gateway; we have a local demographic and infrstructure that in many ways can handle non-English speaking immigrants without culture shock, without tax consequences and with very little perceived risk to them.  There is no doubt that were the gates to open wide with minimal restrictions, local prices would go through the roof.  We simply do not have sufficient inventory to handle that demand.  In financial terms, we are a tightly held penny stock.

Ottawa has seen to it that the housing market has cooled off in order to avoid being stuck with the bill for mortgage defaults as a result of insured mortgages having been issued at high prices.  Immigration volume has been the singlemost effective way to attenuate local demand from the pressures of offshore buyers.  I do not think that the pressure to establish a beachhead here has abated.  I think that for the time being, the valves have been tightened, regulations to address income tax imbalances and residency loopholes are being debated and I think that with a change in government in China, money is being freed up to enhance liquidity where possible and there is a pause.

Market watchers would do well to spend some time watching immigration patterns and volumes as this is predominantly what got us to where we are today pricewise.  We expect a return within the next 20 months of some of this immigration demand.