The Mysterious Vancouver Housing Bubble

The fact that Vancouver is currently in the midst of a housing bubble is very much un-mysterious. House prices are up 21% over the last year and 188% over the last decade. The average house in Vancouver is 11.1 times the average annual income, double the national average.
The mystery lies in what the driving force behind the bubble is. Anecdotal evidence suggests that investors from China are showing up in Vancouver with briefcases of cash, ready to overpay for property as a result of recent real estate restrictions in China. Unlike the foreign investments, data supporting these claims is in short supply and the numbers that are out there do not agree with one another.
According to Colliers International, 29% of all Vancouver home buyers are from China. One of Vancouver’s high-end brokers recently suggested that up to 90% of all homes sold for $2 million or more were being purchased by individuals from China. Landcor Data Corp. has pointed to evidence that 74% of $3 million-plus homes sold in the area were to Chinese buyers, up from 46% in 2008.
Those suggesting that the bubble is not being propelled by outside investors have their data as well. One research firm has pointed out that only 0.4% of all houses sold went to foreign investors (of any nationality) while only 0.5% of the entire housing stock in the Vancouver area is owned by foreign investors.
The interesting twist, if it wasn’t interesting already, is that these investors are not beholden to changes in Canadian mortgage rates, which means the Bank of Canada may have its hands full in trying to control this bubble before it bursts.