New funding from Ottawa to help remedy what economists call an "astonishing lack of data" about international investment in Canadian real estate amounts to less than the down payment on an average detached house in Vancouver, despite signs the country's most expensive housing markets are witnessing a significant influx of foreign buyers.
Responding to Tuesday's federal budget, National Bank of Canada economists Peter Routledge, Parham Fini and Paul Poon estimate that the Liberal government's promise of $500,000 for Statistics Canada to study the issue of foreign investment in the housing market amounts to just 27.5 per cent of the average $1.8-million price of a detached home in the Greater Vancouver Area. (It equates to just 18 per cent of the $2.87-million average price of a detached house in the City of Vancouver, or less than the required minimum 20-per-cent down payment.)
Still, they say the funding, enough for Statscan to spend one year examining ways to collect data on international buyers, is a welcome change to help address what has become a "politically delicate" issue in a country that prides itself on having an open economy and immigration system.
In an analysis that is likely to add fuel to that political debate, the economists conducted their own research showing that as many as one-third of all home purchases in the Vancouver region last year and 14 per cent in Toronto came from buyers in China.
Without any Canadian-specific data on foreign investors to go on, the economists came up with their estimates by extrapolating from two international surveys of realtors and buyers.
One is an annual report on the level of foreign home-buyer investment by the National Association of Realtors, based on surveys of real estate agents in the United States. It estimates that Chinese investors bought $28.6-billion (U.S.) of real estate in the U.S. housing market between March, 2014, and March, 2015, a seven-fold increase from the $4.1-billion they spent in 2009.
The second is a multiple-choice survey by the Financial Times of 77 wealthy Chinese investors who had bought real estate outside of China. Of those, 33.5 per cent said they bought homes in United States, while 11.7 per cent invested in Vancouver and 8.3 per cent in Toronto.
Combining the two surveys, the economists estimate that Chinese investors spent roughly $9-billion (Canadian) on home sales in the Greater Toronto Area last year, or 14 per cent of all total sales volume in the region.
In the Greater Vancouver Area, they estimate Chinese investors spent $12.7-billion – or 33 per cent of total sales. That figure, they say, lines up with research from B.C. urban planner Andy Yan, who found that 66 per cent of all sales of 172 detached homes in three west-side Vancouver neighbourhoods within a six-month period were to buyers with non-Anglicized Chinese names.
The economists admit their survey is somewhat unscientific, but say such attempts highlight the importance of collecting better data on the influence of foreign investment, and even immigration, on housing market affordability.
"The estimated share of purchase volume seems high," they wrote, calling their study a "back-of-the-envelope attempt at gauging the significance of capital inflows from mainland China on the local residential real estate markets in Toronto and Vancouver."
Despite the added funding for Statistics Canada, the federal government can't act alone in trying to shed light on foreign investment in the housing market, the economists say. They called on provincial and municipal governments, which control the lion's share of information about their local housing markets, to "add their financial resources" to Ottawa's data collection efforts.