Mainland Chinese 'dominating' high-end Vancouver real estate market

12/08/2015

Local real estate company Macdonald Realty Ltd says buyers with cash from mainland China accounted for 70 per cent of the firm’s sales in 2014 of single-family homes, condos and townhomes over $3 million in Vancouver, including the west side, east Vancouver and the downtown core.

It also says such buyers in the same areas accounted for only 21 per cent of similar property purchases between $1 million and $3 million, and just 11 per cent when prices were below $1 million.

Last year, Macdonald released a different snapshot of its 2013 city of Vancouver transactions. Looking at only single-family homes and ignoring different price ranges, it found 33 per cent of these sales went to buyers from mainland China.

This fresh and more detailed data comes as debate has been heated about the exact impact of money from mainland China on local home prices.

The focus has been both on wealthy investors in mainland China, but also, by some estimates, the 45,000 residents and Canadian citizens with roots in mainland China who moved to Vancouver via immigrant-investor programs.

Macdonald vice-president Dan Scarrow, who is based in Shanghai, says his firm’s new numbers back up the many anecdotes being bandied about by real estate agents and lay observers.

“This is why if you go to an open house in Dunbar, you can see it,” Scarrow told a downtown luncheon sponsored by the CFA Society on Tuesday.

But they also underscore what some players in the real estate and development industry have been saying about the limited extent of the impact, according to Scarrow.

“There is no conspiracy to cover the eyes of the public about the impact of Chinese money on the local real estate market,” he said.

“It is mainland Chinese buyers who are driving the luxury market. They are dominating. There is an affordability crisis for the (local) upper middle class who are no longer able to buy in this market. But you don’t see this in other markets such as for (cheaper) condos, where prices have been flat or trailing.”

He generally dismissed the idea of a trickle-down effect of money from mainland China at the high end forcing prices up in other areas as local buyers turn to the suburbs and other cities for affordable options. “It’s a function of (having) not enough houses. It doesn’t matter if they are locals or (mainland) Chinese. There is population growth. We are not building enough.”

With the average cost of a detached house in Vancouver hitting $2.23 million and little official government data about who is buying real estate in Vancouver, emotions have been high about what can be done.

Scarrow suggested the city could raise property taxes, which currently are below 0.5 per cent, compared to one per cent in Toronto and between two to three per cent in some U.S. cities.

Macdonald’s studies in both years involved identifying the number of buyers it believed were making purchases with cash from mainland China by looking at their last names. The Chinese names of buyers with roots in Hong Kong (in Cantonese) or in Taiwan (in Mandarin) or in mainland China (in Mandarin) all have slightly different spellings when translated into English. Scarrow agrees there is room for some distortion, but with little other way to measure the situation, it’s a useful snapshot, he said.

He added the company is uniquely positioned, having been based in Vancouver for 70 years, but being one of the only Vancouver firms to have an on-the-ground presence in Shanghai. “We have a good handle on both. Most people know one or the other, but we are in the middle,” he said.