Global pandemic restrictions might fundamentally alter the relationship between foreign demand and housing prices
The single most important factor that would affect Vancouver’s sky-high housing prices is the coronavirus pandemic’s impact on immigration, according to veteran markets observer Douglas Todd.
With immigration accounting for roughly 85% of Metro Vancouver’s population increase in recent years, the global travel restrictions currently in force will almost certainly take a significant chunk off this growth metric, Todd said.
“Start with the drastic drop in tourist numbers. With borders virtually closed to international travellers, investors who relied on short-term rentals like Airbnb to hold onto their properties have been left in the lurch. Many Airbnb hosts will likely be forced to sell,” Todd said. “Citizenship ceremonies have been cancelled during COVID-19 confinement and the processing of would-be permanent residents is being held back.”
Government measures to limit the impact of this slowdown might also prove insufficient.
“The BC NDP government has tried to respond … by strengthening the surcharge on foreign property buyers and by introducing the speculation and vacancy tax, which has an impact on ‘satellite families’ in which the breadwinners earn their incomes outside the country and therefore aren’t subject to Canadian income taxes,” Todd said.
And despite the optimistic post-coronavirus scenarios offered by multiple observers, predicting the long-term impact on the relationship between immigration and housing prices will be trickier.
“This pandemic is sure to affect the choices of would-be immigrants,” Todd said. “And it will also affect people who might buy urban Canadian properties with money earned offshore, which is the gasoline that has been accelerating Vancouver’s already-unaffordable housing costs.”
