Canada Real Estate Prices Driven Up By Chinese Buyers17 May, 2011, 19:55. Posted by Zarathustra
Tags: Canada, Economy, Real Estate
It has been pointed out that Canada’s real estates are quite overvalued on various measures, including price-to-rent ratios.
Today, Bloomberg ran this story that Chinese buyers are driving up real estate prices in Vancouver. Similar kind of stories are certainly not new for people like myself, who are based in Hong Kong. Indeed, Chinese buyers from the Mainland were blamed for driving real estate prices in Hong Kong, making properties unaffordable to general public. True, we did see buyers from China who bought real estate in Hong Kong, mostly in the high-end segment of the market.
The Bloomberg’s story reads:
Buyers from mainland China are leading a wave of Asian investment in Vancouver real estate as China tries to damp property speculation at home. Good schools, a marine climate and the large, established Asian community as a result of Canada’s liberal immigration policy make Vancouver attractive, said Cathy Gong, who moved from Shanghai to the Shaughnessy neighbourhood on Vancouver’s Westside about three years ago.
Of course, I have always been rather sceptical about such story, wondering how long it can last. As I have pointed out earlier, it was the Japanese who were investing in the global real estate market in the late 1980s. Of course, the trend did not last, and there is little doubt that the trend today will not last forever as well. The question is when.
The Chinese economy has been slowing down slightly as the impact of monetary tightening starts to emerge. No one can say with 100% certainty about what kind of landing (soft or hard) the China’s economy will face. Even though the government has every reason to hope for a soft-landing, there is no reason why a hard-landing is impossible. Just like the case I made for Hong Kong real estate, should the Chinese economy slow down significantly, the pace of Chinese buyers pouring into other markets like Vancouver will be slowed down or even stopped.