Effect of the Immigrant Investor Visa Program in BC
The Government of Canada announced earlier this week that they were eliminating the Immigrant Investor Visa Program designed to fast track immigrants Permanent Residency in Canada with a $800,000 interest free loan to the Canadian Government – thus allowing wealthy immigrants to purchase Real Estate (which immigrants see as a good investment).
After a review of the program, it was discovered that of the 59,000 pending applications – 45,000 of them were from Mainland China, most of whom decide to reside in Vancouver and the surrounding area. In the last few years, this has led to an increase in the number of wealthy Buyers purchasing Real Estate in Vancouver, West Vancouver and Richmond, thereby driving up the prices with interest and Buyers. Many Vancouver residents can’t compete with wealthy Immigrants in terms of the Real Estate Market, especially now that Vancouver is the second least affordable city in the world based on Median Income vs Median Property Prices (least affordable city is Hong Kong).
How fewer mainland Chinese buyers will affect real estate prices in Vancouver
There’s much speculation at this point, but one thing to consider is that a majority of the Westside of Vancouver, Richmond, West Vancouver is supported by these Mainland Chinese Buyers. The effects on the East Vancouver Real Estate Market won’t be as noticeable but there will be some ramifications, notably in the trickle down effect. Most of the “Off Shore” Buyers buy the most expensive property in Vancouver (including West Vancouver), allowing those Sellers to buy other property, which then allows those owners to buy something else, and so on… This could lead to less activity in the Vancouver Real Estate Market, and less activity leads to some decline in prices. How much of a decline? Short term or long term? We’ll have to keep our eye on the market.
Of course, the East Vancouver Detached House Market has seen a lot of interest in the last year from Westside Buyers moving East to take advantage of the more affordable prices. This has lead to an increase in the number of high end homes being built on the Eastside and we don’t expect this activity to slow down. Earlier this year, BC Assessments saw increases in the assessed value of Eastside Detached Homes, Half Duplexes and Townhomes, where almost every other type of property in the city saw a decrease.
The new condo market is also heavily supported by “Off Shore” Buyers who purchase pre-sale units in new developments, which not only supports the development of the new towers, but leads to a busy construction industry helping the local economy. If new developments don’t get enough pre-sales, projects can be put on hold or cancelled since the Developer needs the pre-sales to secure their financing. However, if the condo market can go ahead with the sales, this opens up opportunity from current Vancouver residents to purchase units at fair market prices. Hopefully developers will re-focus their attention on building affordable units for the current Vancouver population.
Interestingly, in the last few years the Government put a hold on new Investor Visa applications, yet we’ve still seen an increase in the Vancouver Real Estate Market. It’s not as temperamental (and “ready to burst”) as many people believe. The Vancouver Real Estate Market is busy right now with lots of interested Buyers ready to move. Along with the Government’s changes to Property Transfer Tax for First Time Home Buyers, we should see a strong Spring Market.