Sourced from the Vancouver Sun:
It’s a well-known fact that Chinese buyers have a significant impact on the Canadian real estate market, particularly that of Vancouver. As we’ve seen in cities such as London, foreign buyers, especially Chinese investors, have in some ways shaped the housing market. In Vancouver, it seems to be that when the Chinese market goes down, so does the housing market.
Recently, one could say that luxury properties have been hitting the shelves–but not flying off. The luxury penthouse apartment at Hotel Georgia decreased its price from 35.4 to 20.8 million, and many other apartments in luxury developments have had to decrease their prices in the recent months. During the height of Chinese overseas purchasing, about one-third of all real estate investments in Vancouver and Toronto were made by Chinese nationals. Going with the market, developers have marketed condos aimed at an international market, but the burst of China’s housing bubble has led to a downturn in foreign investment, spelling change for the Vancouver market. Between 2016-2019 Chinese investment in the Canadian and Australian market increased 6 times, and although foreign investment is still going strong, and Canadian condo specialist Jordan Scrinko has estimated that, at the peak of Chinese overseas buying, one third of property investments in Vancouver were made by people from China, with a similar figure for Toronto.
Although the majority of the advertisements for high-end and medium-end Vancouver condos are still distributed in both Chinese and English throughout East Asia, there are indications that "China shock" is lessening and becoming unpredictable. As Steve Saretsky points out, the average cost of a property in Greater Vancouver has decreased by just 3.6% from two years prior (although it has decreased by 7.5% in Greater Toronto). If not for the swift increase in the population due to foreign migration, values would be lower. Still, Saretsky claims there is a lot of hammering on opulent condos. The higher Chinese property prices went (valued at US$50 trillion), the more wealth was generated that could then be invested in other property markets around the world,” Peregrine wrote in a 50-page report. China's real estate market has "fallen precipitously" over the past ten years, according to Michael Peregrine of Santiago Capital. In addition, "more downside to come." Now the boom, which was fuelled by debt, is giving way to a bust. “Canada will be at the forefront of Chinese selling,” Peregrine says, “particularly since both the federal and provincial governments have been instituting various forms of foreign buyer restrictions and vacancy taxes, albeit with loopholes.” According to Peregrine, "Toronto condo sales are already down 85% from their peak volume in 2022."
But even with all of this financial devastation, the flow of Chinese money hasn't stopped entirely. According to Henley and Partners, which assists the wealthiest individuals on the planet in taking advantage of different nations' laws that grant citizenship in exchange for investment, China continues to have the largest proportion of millionaires in the globe who are attempting to emigrate to other countries. Canada is the fourth most desired country for international multimillionaires ready to pay for a so-called “golden passport.” They can become permanent residents in Canada through the federal Liberals’ new Start-Up Visa program and Quebec’s immigrant-investor scheme. Furthermore, Juwai, which records the preferences of over six million Chinese residents worth more than $1 million USD, reports that in early 2023, Canada emerged as this wealthy cohort's third most preferred country for real estate investment.
That has a significant effect on a nation like Canada, whose population is less than 3% of China's. Given that Vancouver and Toronto have by far the greatest immigrant populations with origins from China, the effect of changes in demand can have a direct effect on the market.
Trans-Pacific volatility is currently present in the Canadian condo market, and according to Hutchinson, a large number of the exorbitant condos that are currently for sale in Vancouver were first "sold in presentation centers offshore." Hutchinson thinks the majority were purchased as pre-sales. They were intended to be flipped, and now a lot of speculators are currently stuck. Even while they might suffer greatly financially in the end, there's a chance that others will gain, which could have a knock-on effect on prices.
The full effect of foreign investment is yet to be seen, as well as the full effect of China’s bust on Vancouver’s housing market.