Monday, September 7, 2015

$8.48 Billion Into The Vancouver Housing Market

Where have the residential real estate equity gains been made in Canada recently?


Over the last three years the ranking goes*: 

1. Toronto (+21.94%) 
2. Calgary (+17.88%) 
3. Vancouver (+13.92%) 



But recently the numbers tell a different story.

Vancouver is leading over the last 6 months and is beginning to close the gap with Toronto and Calgary. With the price of oil dropping, the Calgary home price index has effectively been flat over the last 12 month period. During the last 6 months, the home price index ranking is as follows*: 

Vancouver (+9.17%)
Toronto (+7.54%) 
Calgary (-0.62%) 

What is giving Vancouver the financial fuel to support these home price trends? 

As of July 2nd, 2015 the Province of BC announced the “Provincial Nominee Program” was accepting applications again after taking a 90-day pause**. The focus is now on “high-impact workers and entrepreneurs”, described to align better with BC’s labour market and development priorities. 

Vancouver has seen positive population growth similar to Toronto, with strong inward flows of “economic immigrants”, of which approximately 2/3 are coming from Asia, 1/5 from Europe and Africa, and the rest from the Americas***. 

The total population change in BC from 2013 to 2014 was +31,519****. BC received 21,452 “economic class” immigrants which made up approximately 2/3 of the total. Seven thousand (7024) of these came from the “Provincial Nominee Program" alone in 2014. The vast majority - 86.1%*** of those coming to BC are choosing to live in the Lower Mainland, which continues to provide positive market support there. 

Lets try a simplistic calculation by making the assumption that all of the Provincial Nominee Program (PNP) applicants bought a home at the Vancouver average price of $1.2 million (based on the Greater Vancouver average in June 2014). If this was the case, then the total amount of home purchasing power flowing from the PNP would be $8,428,800,000 or $8.43 Billion. 

This wave of new money flowing into the region will continue to apply pressure to an already premium priced housing market. For as long as the PNP is in effect and the immigration into BC carries this economic class into Greater Vancouver, the home price index will be supported by it. With the recent announcement that the average home price in Greater Vancouver is now up to $1.42 million as of June 2015, the trend seems to be continuing. 

* - Data from The Canadian Real Estate Association Home Price Index http://homepriceindex.ca/hpi_tool_en.html 

** - Announcement details for the Provincial Nominee Program http://www.welcomebc.ca/Immigrate/About-the-BC-PNP/About-the-BC-PNP/News-and-Announcements.aspx 

*** - Data from Welcome BC Immigration stats http://www.welcomebc.ca/welcome_bc/media/Media-Gallery/docs/immigration/PermanentResidentsReport2014.pdf 

**** - Population growth stats from http://www.bcstats.gov.bc.ca/Files/7b7c178e-da8e-468c-922b-0faae039c8db/2014Sub-ProvincialPopulationEstimates.pdf