Foreign buyers have little impact on housing prices, says economist Cameron Muir

Cameron Muir, chief economist of the B.C. Real Estate Association.

Cameron Muir, chief economist with the B.C. Real Estate Association, has a very different take on the Greater Vancouver housing market than the take demonstrated in many media reports.

For starters, he sees no evidence that foreign buyers are inflating overall housing prices, in Vancouver or elsewhere in the region. Nor does he believe that interest rates will rise anytime soon. He also expects the red hot housing market, particularly for detached homes, to continue well into 2016.

He was the guest speaker at the annual meeting of the Antrim Balanced Mortgage Fund, held Wednesday at Newlands Golf Club in Langley. The Langley-based company operates a mortgage investment corporation which holds over 650 mortgages, the vast majority of them in Greater Vancouver, and has 4,500 shareholders.

Full disclosure: I am an investor in the fund and have been dealing with Antrim Investments, the parent firm, for more than 20 years. The return on the investments my wife Bonnie and I have made with the company over the years is one reason that I was able to retire from my full-time job this year.

Muir pointed out that the B.C. economy is among the strongest in the country, despite declines in commodity and oil and gas prices. The weaker Canadian dollar has helped B.C.’s more balanced economy to do quite well thus far in 2015.

Consumers are one of the main drivers of the B.C. economy, and the housing market is a key part of that consumer spending. Thus far this year, consumer spending is up by 11 per cent in Greater Vancouver. The weaker dollar is almost certainly a factor in that as well, as fewer B.C. residents are shopping in the United States and more Americans are shopping here.

Home sales in the area covered by the Real Estate Board of Greater Vancouver (REBGV) are likely to reach an all-time record this year, he said. It is important to point out that Metro Vancouver is served by two real estate boards, and this often skews statistical reporting.

The REBGV serves the entire Metro area except for North Delta, Surrey and Langley. That area is served by the Fraser Valley Real Estate Board, which also serves Abbotsford and Mission, which are part of the Fraser Valley Regional District. Muir said that about 25 per cent of the population in Metro Vancouver lives in Surrey, North Delta and Langley.

He went over home sales and housing starts over the past 25 years, and stated that the biggest story at the present is the lack of inventory – particularly for detached homes, which are the most “in demand” type of housing for many potential buyers. The detached home supply is not growing, largely due to redevelopment and price point. Prices have increased substantially.

“There is not enough inventory,” he said, adding that 44 per cent of REBGV listings lead to sales. Despite what that sounds like, this is a high number. In a more typical year, there would be far more homes on the market than number of sales.

As for foreign investment affecting prices, he said there is simply no statistical evidence that foreign buyers, particularly from China, have tilted housing prices upwards. There is a lack of detailed data. But the studies that have been done thus far have concentrated on buyers with Chinese names. Yet 20 per cent of the Metro Vancouver population is of Chinese origin, with most living here for decades or even longer.

Muir said only two per cent of all sales in Metro Vancouver involve properties worthy more than $3 million. From January to August of 2015, the average selling price for a housing unit of all types was $814,000, with 70 per cent of all sales below $800,000 and a further eight per cent between $800,000 and $1 million.

He also said it is important to realize that detached homes, while declining as a percentage of the overall market, are in reality often duplexes, triplexes or fourplexes. It is likely that only a minority of them actually house just one family. These multi-family homes thus bring in more income, and buyers can afford higher prices due to the cash flow the homes generate.

While prices for detached homes have risen strongly in the past year, in Surrey and Langley as well as other parts of the region, the prices for apartments and townhouses have only risen modestly.

He sees prices for detached homes continuing to rise in 2016, and interest rates staying at their current low levels for some time to come. An influx of people due to inter-provincial migration, related to B.C.’s strong economy and ongoing weakness in Alberta, will also act to keep prices either stable or rising.

His bottom line: “Housing prices in Greater Vancouver are driven by people who live, work and raise their families here.”