For foreign buyers, Vancouver housing is a bargain as city becomes a ‘U.S. dollar play’

Vancouver’s eye-popping housing industry is seemingly defying gravity, with sales in January rising nearly 32 percent – the 2nd busiest January on record.

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With prices in Metro Vancouver slowly creeping up to the $2 million mark, the searing pace of housing within the city has many worried.

But the state of the market makes sense if you look at the market like a U.S. dollar play, say economists Derek Holt and Dov Zigler of Scotiabank. Because a lot of the marketplace has been fuelled by foreign buyers, a lot of whom purchase in U.S. currency, the Canadian dollar price surge constitutes a lot of sense.

The Canada Mortgage and Housing Corp. estimates that foreign buyers own 3.5 percent of the condos in Metro Vancouver, up from 2.3 per cent in 2014.

But Holt and Zigler called those estimates “ridiculously low ball.”

A much higher foreign investment rate would explain the surging prices and purchasers in the market even as wages remain stagnant in Canada and also the economy slows.

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The pair explain that in U.S. dollar terms, Vancouver still remains affordable to foreign buyers and actually is really a bargain when compared with another cities within the Pacific Rim such as Sydney, Hong Kong and Bay area.



The buyers who are out of luck are Canadian buyers purchasing homes with domestic currency. The space between home prices in U.S. dollar terms and Canadian dollar terms is at its widest in more than a decade.

“A strong USD has kept Vancouver’s house prices relatively affordable if your are entering the marketplace like a buyer with funds in U.S. dollars,” the economists write. “Which has pushed Canadian dollar house prices over the top over the past couple of years. This can be taken as you piece of evidence that it’s U.S. dollar flows that are driving Vancouver real estate regardless of what are likely ridiculously low balled estimates for foreign buying.”