American dollars, not Chinese yuan, is the main foreign currency buying up Victoria property This means that not only are foreign buyers buying up available inventory, they’re buying the houses whose supply is hardest to top up since, of course, Victoria only has so much land. Those higher priced properties are disproportionately single family homes instead of condos. In Victoria, the average price for homes purchased by foreign buyers is 13% higher than homes bought by locals. Remember also that foreign buyers tend to purchase higher end properties. As BMO’s Chief Economist put it, “while many downplay this factor (‘it’s only X% of the buyers!’), Economics 101 will tell you that the marginal buyer sets the price.” This is why an out-of-town buyer has a lot more effect on market pricing than a local buyer. So, the supply of houses effectively goes down and, like any product in shorter supply, the prices go up. When someone from outside of Victoria buys a house, that house gets removed from the market and nothing is added. Aunt Joe’s net effect on the supply/demand balance? Zero. When your bike lane-maddened Aunt Joe sells her house in Downtown Victoria and buys in Oak Bay, she takes one house off the market but adds one at the same time. However, not all buyers are created equal. Vancouver’s rate of 10% foreign ownership may not sound like a big deal, since it of course means that 9 out of 10 buyers are still local. Yes, even a small amount of foreign buyers can dramatically jack up prices Below, some background as to what foreign money is doing to Victoria real estate. So as Vancouver grapples with the aftermath of one of the most explosive housing price increases in modern history, it’s worth asking whether Victoria is being hit by the same forces. Meanwhile, a massive racket to launder money through Vancouver real estate has been making everything worse, with estimates of the impact ranging from a mild $100 million to a concerning $2 billion to a headline grabbing $5 billion (even if that was a wild guess). Before the foreign buyers tax was introduced in 2016, foreign buyers made up around 10% of all buyers in Vancouver and up to 16% in municipalities like Richmond. Here, we asked him to answer one of the Capital Region’s most burning real estate questions: Is foreign capital to blame for the increasingly unaffordable Victoria real estate market?Īs you’ve probably heard, Vancouver is in a bit of an affordability crisis, and a lot of it is due to foreign capital. Leo Spalteholz, creator of the blog House Hunt Victoria, is one of Victoria’s foremost real estate experts.
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