Wealthy Chinese buyers might not be affecting Canadian home prices as much as many analysts suspect, says an observer
The consistent price growth observed in Vancouver housing for several years now might be painting a misleading picture of the market’s actual situation, according to an industry observer.
In an August 22 piece, Business Insider markets correspondent Myles Udland noted that the conventional wisdom of wealthy Chinese buyers primarily affecting the median price in Vancouver—which has grown from around $1.3 million in 2010 to nearly $1.9 million by the end of 2015, according to data from RBC Capital Markets—holds little water.
“Buyers seeking a safe place to park assets outside of China, however, are likely to be far less price-sensitive than traditional homebuyers. This is how markets start to look bubbly: uneconomic buyers dominate,” Udland wrote.
“Another factor potentially driving Vancouver prices higher, though, is that when priced in yuan rather than Canadian dollars, home prices in the region haven't risen nearly as aggressively over the last decade,” he added. “Seen this way, then, the rise in Vancouver home prices for the market's most aggressive buyers hasn't been, well, as aggressive.”
Udland cited an analysis by Matthew Barasch of RBC Capital Markets, which argued that Vancouver’s situation has also been observed in other markets worldwide, and thus is not sufficient cause for undue alarm.
“[We] do not believe that just because prices have risen a lot means that Vancouver home prices automatically meet the definition of a bubble that is set to burst, leaving bits and pieces in its wake,” Barasch stated in a client note.
“Further, we wonder if Vancouver is indeed a bubble, whether or not we are surrounded by bubbles worldwide as Vancouver is hardly an exception in terms of soaring prices brought about by significant foreign inflows and the lowest bond yields in a millennia.”
“[Just] because Vancouver's bubble-looking markets look like a duck and act like a duck doesn't mean they're not a platypus,” Udland said.
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In an August 22 piece, Business Insider markets correspondent Myles Udland noted that the conventional wisdom of wealthy Chinese buyers primarily affecting the median price in Vancouver—which has grown from around $1.3 million in 2010 to nearly $1.9 million by the end of 2015, according to data from RBC Capital Markets—holds little water.
“Buyers seeking a safe place to park assets outside of China, however, are likely to be far less price-sensitive than traditional homebuyers. This is how markets start to look bubbly: uneconomic buyers dominate,” Udland wrote.
“Another factor potentially driving Vancouver prices higher, though, is that when priced in yuan rather than Canadian dollars, home prices in the region haven't risen nearly as aggressively over the last decade,” he added. “Seen this way, then, the rise in Vancouver home prices for the market's most aggressive buyers hasn't been, well, as aggressive.”
Udland cited an analysis by Matthew Barasch of RBC Capital Markets, which argued that Vancouver’s situation has also been observed in other markets worldwide, and thus is not sufficient cause for undue alarm.
“[We] do not believe that just because prices have risen a lot means that Vancouver home prices automatically meet the definition of a bubble that is set to burst, leaving bits and pieces in its wake,” Barasch stated in a client note.
“Further, we wonder if Vancouver is indeed a bubble, whether or not we are surrounded by bubbles worldwide as Vancouver is hardly an exception in terms of soaring prices brought about by significant foreign inflows and the lowest bond yields in a millennia.”
“[Just] because Vancouver's bubble-looking markets look like a duck and act like a duck doesn't mean they're not a platypus,” Udland said.
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