Photo: Gord McKenna/Flickr
Before we get to answering our headline, first, a little background…
On Tuesday, Canada’s Immigrant Investor Program (IIP) was scrapped after being in place since the mid-1980s. The program allowed wealthy immigrants (worth at least $1.6 million) to fast-track their visa applications in exchange for a five-year, $800,000 loan to the Canadian government.
The program was so popular that in 2012 it had to be suspended due to a backlog of wealthy immigrants from mainland China looking to move to BC.
But the government said the program wasn’t doing what it was created to do — bolster the economy — so they axed it. Now, with the program gone for good, all the tens of thousands of applications will be thrown out and the applicants’ loans refunded.
The announcement came four days after the South China Morning Post published an eyebrow-raising article entitled: Vancouver facing an influx of 45,000 more rich Chinese. According to the piece, the Chinese queue for BC under the scheme was “about six times the combined annual applications from all nationalities to the investor migrant programs run by the US, Britain and Australia.”
This, of course, begs the question: What effect will the end of the IIP have on the Vancouver housing market?
The CBC spoke to West Vancouver real estate agent Clarence Debelle who said he’s concerned the move will negatively impact luxury home sales:
“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.
“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”
Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate, too spoke of the effect the end of the IIP could have on the high-end housing market. From the Vancouver Province:
“My opinion is it could dampen demand in a particular number of high-end locations,” said Somerville, a professor with the Sauder School of Business.
“All things being equal, the level of immigration to BC will probably decline.”
Immigration lawyer Richard Kurland told CTV that 3,000 families a year were using the program to come to BC:
“That means no more 3,000 buyers of new residential high-end real estate in Vancouver. That’s going to have a dramatic effect on the demand for housing,” Kurland said. “When prices fall at the high end, it percolates down the system to medium and low-end residential property in Vancouver.”
The question remains as to how much local housing prices could be affected.
“Any time there’s a reduction in demand, that isn’t great for the real estate market,” said realtor Lorne Goldman.
Bob “Condo King” Rennie of Rennie Marketing also says the move could impact luxury sales, but not significantly. As Metro Vancouver reported:
Rennie suggested that the end of the program will only impact the top 20 per cent of local real estate sales. Of the 20 per cent of homes that sell for more than $2.1 million, he suspects about 35 per cent are currently snapped up by foreign investors, but readily admits there is no way to know for sure because of the lack of federal data keeping.
“The statistic that you should know is from 2006 to 2012, 69 per cent of all home sales in Greater Vancouver have been to people that already own a home,” [Rennie] said.
“Only 31 per cent of sales have been to first-time buyers, or new immigrants from offshore, so 69 per cent of the market is pretty stable.”
Meanwhile, Canadian Immigration Minister Chris Alexander told the South China Morning Post on Wednesday that “there was absolutely no concern” that the IIP was contributing to Vancouver’s sky-high house prices. According to the February 12th article:
“We have only been admitting 5,000 or so people under this program and our entrepreneur program in recent years,” [Alexander said]. “These represented … less than 2 per cent of overall immigration.”
However when asked to clarify if he believed rich migrants played any role in the housing market, he demurred.
“Not this program [the Immigrant Investor Program]. Certainly the presence of Asians in our [property] markets and the status of Canada as a safe haven – a stable jurisdiction with low taxes and a highly respected, well-regulated financial sector – that has attracted investment of all kinds, and we’re proud of that.
“It would be wrong to identify those trends with the Immigrant Investor Program, which has been responsible for a decreasing share of our overall immigration, and which wasn’t even necessarily bringing people into Canada.”
It is of course worth noting that while the Vancouver housing market remained stable as a whole through 2013, luxury home sales — those priced from $2 million and up — rose 36 per cent compared to 2012.