Sensationalist account of foreign investment

by Justin da Rosa16 May 2016
McLean’s published what may be the most comprehensive take on foreign investment to date, and its grim view is one that a veteran broker finds slightly dubious.

In an opus just shy of 5,000 words, the feature – which is showcased on the front page of national weekly affairs magazine’s May 16 issue – paints a dire picture.

"A surge of money from China is pricing young families out of the market and tearing communities apart," the cover reads. “It’s also making many Canadians rich and helping keep the economy afloat.
Inside the real estate chaos – and what could happen next.”

To be sure, the authors worked hard to include all the available data on foreign investment, and drew their conclusions based on that – and a great deal of anecdotal evidence.

However, the problem is with the data being cited, according to Dustan Woodhouse, a Vancouver-based broker with Dominion Lending Centres.

The article cites National Bank Economist Peter Routledge’s suggestion that a third of Vancouver’s home sales last year went to foreign buyers from mainland China. He arrived at that estimate by using U.S. foreign investment data and a survey of less than 80 property owners.

“77 people who came to your one bank – you cannot extrapolate 33% of all real estate in Vancouver was purchased by foreign buyers using such a small sample size,” Woodhouse said.

The article also referenced an academic case study, entitled “Ownership patterns of single family home sale on selected west side neighbourhoods in the city of Vancouver,” by city planner Andy Yan. Released late last year, the study found that 70% of buyers in west-Vancouver neighbourhoods over the past half-year are likely from mainland China.

That study employed name analysis methodology commonly used in public health, political science, and Asian American studies to identify the origin of names. According to that methodology, “non-anglicized Chinese” names suggest newer immigrants or Chinese nationals.

Again, Woodhouse finds that data questionable.

“That study was based off 66 title searches. He bases it on whether they have mainland Chinese names,” Woodhouse said. “That is offensive and it is useless data.

“People who emigrated here from China, even two generations ago, often give their children traditional Chinese names,” Woodhouse continued. “And even those children will give their children, second generation Chinese, traditional names.”

The McLean’s piece also referred to CMHC’s most recent estimate that 10% of new-build condos have been bought by foreign nationals, as well as a recent Canadian property exhibition in China, which drew a great deal of interest from potential buyers, especially when it came to Toronto and Vancouver properties.

The McLean’s article is comprehensive and, if nothing else, it proves more reliable data is needed to better understand the influence foreign money is having on real estate in Canada.

Before we have that, though, it may be a bit early to refer to it as “real estate chaos.”

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