And now for the five scary bits, that will assuredly magnify the impact of those lost purchasing households.
1. Investor migrants are rich, so they buy more costly properties, and it’s the price of expensive detached homes that fuel Vancouver’s market. Condo and townhouse prices rose by a third from 2005 to 2012, but detached prices doubled. Under the most recent IIP benchmarks, principal applicants must have been worth a minimum of C$1.6 million. Compare that to the Vancouver average household worth of C$662,600 (Environics Analytics).
2. Some IIP households buy more than one property in Vancouver.
3. Some high-value purchases have a cascade effect through the market. For example, when a Chinese investor immigrant pays C$3 million for an elderly widow’s rancher on Cambie Street, that sale triggers the purchase of a three-bedroom townhouse in Kitsilano and down payments on condos for her two adult children. Such things happen - not always, but sometimes.
4. Now for one of the two biggest concerns. Our calculations so far only cover actual arriving immigrants. But how many of the 65,000 would-be immigrants who were dumped from the IIP queue last week had already bought in Vancouver? Of the applicants from 2009-2011 who made up the bulk of the backlog, 62.8 per cent were bound for BC. That’s an estimated 11,866 households. Not only have these households been removed from the pool of future purchasers, it’s reasonable to assume that some will soon be liquidating existing Vancouver holdings.
5. The final unknowable is human nature. Already talk of an impending disaster in the market is a feature of Chinese-language forums. How many non-IIP owners will head for the exits too, and how fast will they do so?
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