We’ve all heard the theory that property prices in BC are being driven up by ‘all the foreign buyers’, but the data released yesterday just doesn’t support that theory. According to the Province, only 3.3% of purchases in BC between June 10th and June 29th involved foreign nationals. That number is no doubt surprising to many, but if you’ve been worried about a housing price meltdown this should give you some comfort. Even if you zoom in on the Metro Vancouver area, there were over 5,000 transactions recorded but only 5.1% of those involved foreign nationals.
Why is this important to us in the Comox Valley?
In short, it’s a good leading indicator (more data over a few years is needed to draw long-term conclusions) that the price levels in Vancouver and Victoria are not being significantly driven up by foreign buyers, which in turn means they are not as ‘shaky’ or unreliable as many people feared, which means that the trend upwards will likely continue as long as Canada’s economy overall continues to do okay. For the Comox Valley, this means for the next few years we should continue to see the overflow effect of people selling their properties in Vancouver (cashing out) and relocating to our beautiful and more reasonably priced part of the West Coast, and this will continue to push up property prices in our area until our municipalities and builders are able to increase the supply of housing to meet the demand.
Here’s some background and the longer explanation if you’re interested.
Over the last 5 years prices in Vancouver and Victoria have been surging higher and higher, and many have speculated that a driving force behind the increases was foreign nationals investing in BC Real Estate. The concern with this scenario (if it was true) is that the demand from these investors who are earning their money outside of Canada (in China, for example) could drop off quickly if there was a slowdown in China’s economy and could thus cause prices to fall as drastically as they’ve risen. These investors are less invested in the area and more likely to ‘cut and run’ at the first sign of property prices decreasing, causing a cascade or panic in the market.
But the data released by the Province yesterday just doesn’t support the story. With only 3.3% of purchases in the province (5.1% in Metro Vancouver) involving foreign nationals, it seems to indicate a much more simple supply/demand issue is causing the price inflation. In other words, the West Coast is a beautiful place to live and there are simply more Canadians wanting to live here than we’re producing new properties to accommodate. If this is the case, the long-term outlook for prices in Vancouver and Victoria should be an eventual equilibrium as more properties are built (increasing supply), and that we don’t have to worry about an economic slowdown in China having a catastrophic knock on effect to real estate prices.