Vancouver Housing Prices are NOT caused by foreigners

A recent article titled "Vancouver housing prices tied to China’s economic growth", Barbara Yaffe quoted two "experts" (David Ley and Robin Wiebe) who will tell anyone who will listen that "housing prices here [in Vancouver] are tied inextricably to purchase activity by foreign buyers." You'll find the use of words like "coincide," "relationship," and "exceptional correlation" between 1) periods of faster growth in China and growth of Vancouver's housing market, 2) house sales and housing starts and GDP growth in China, and 3) international immigration to Vancouver and the city's property prices. Nowhere do we see the words "cause" or "leads to."

Correlation is mostly meaningless, especially when you're using it in the way that David Ley does (see Figure 5.8). One commenter says:

I work at the same institution as Professor Ley, but still I must critique the "evidence" presented in the graph. Perhaps there is more elsewhere in the study, but Figure 5.8 does not provide evidence of anything.
A correlation of 0.94 or 94% looks impressive, but those who know statistics will understand that in the analysis of time-series data, one cannot just correlate the level of something (house prices) and the level of something else (immigration). It is very easy to get very high correlations. Don't believe me. Just try computing the correlation of the house prices with your age. I did. Guess what--the correlation is 94.5%. Evidently, my age predicts Vancouver house prices better than net immigration. Obviously, you can put in anyone's age and the result would be the same.

You can see more examples of ridiculous correlations at spurious correlations, like "US spending on science, space, and technology correlates with suicides by hanging, strangulation and suffocation" (0.992) and "Divorce rate in Maine correlates with Per capita consumption of margarine" (0.993).

Repeat after me: correlation does not imply causation.

Also lacking in the Yaffe article was any serious discussion of the more obvious causes of housing price increases, such as interest rates, 0% down mortgages and 40 year amortizations in the mid 2000s, and the effect of CMHC default insurance. These all have a real effect on housing prices. There was a singling out of Vancouver, and no discussion of all the other Canadian cities that have experienced similar relative price increases, and no mention of all the non-foreign buyers owning multiple condos (and renting them for very little profit), thus speculating on price increases on the value of the home.

The effect that interest rates have is huge. The Bank of Canada bank rate was 6% at it's peak of the tech bubble (2000)! then the tech bubble burst and the Bank of Canada started slashing the interest rates to as low as 0.5% (2009); a swing of 5.5%! The bank variable rates are a bit more than that, I'm getting 2.2% which is about the lowest they've ever gone. So let's say 2% and 7.5% for a spread of 5.5%. To make things even crazier, throw in the 40 year mortgage which was available for a little while:

Effect of amortization period and interest rate for a $500,000 home:
$3650 monthly payment (at 7% for 25 years)
$1500 monthly payment (at 2% for 40 years)

That's with no change to down payments. Add in the effect of lower down payments (increased leveraging) due to lower requirements + CMHC default insurance, people owning multiple properties (more leveraging and speculation), and people buying more house than they can afford (if interest rates increased but they assume house value will only go up), and you have a recipe for the bubble we have today.

Finally, Vancouver has experienced the same growth in housing prices that the rest of Canada has.

All figures below are from (which actually measures same house sale pairs over time, not just "average home prices"). I downloaded the spreadsheet and calculated the total percentage increase in the index from early 1999 (data is spotty before then, some cities go back to 1990, others don't).

Winnipeg 305%
Edmonton 290%
Quebec City 285%
Vancouver 276%
Calgary 272%
Montreal 259%
Toronto 242%
Victoria 231%
Hamilton 229%
Ottawa 225%
Halifax 217%

So is the "foreigner effect" happening everywhere in Canada? Or maybe the increases are due to something other than foreigners? During a bubble people are often quoted as saying "it's different this time" or "it's different here." They always end up being wrong.



You can concentrate more on imagining the sort of business you require and organizing your business as opposed to setting resources into so much silly stuff. Princess bed

Great  post, you have pointed out some  fantastic  points , I  likewise  think  this s a very  wonderful website

Parc Life

คาสิโนออนไลน์ตลอด 24 ชั่วโมงเปิดให้บริการโดย gclub มือถือ เป็นการถ่ายทอดสดสัญญาณจากปอยเปต ซึ่งช่วยให้การเดิมพันของคุณได้เดิมพันกับคาสิโนออนไลน์แท้แพ้อันดับ 1 ของภูมิภาคเอเชีย ของภูมิภาคเอเชียคุณ ของภูมิภาคเอเชียคุณจะมั่นใจไปกับการเงินของคาสิโน มากกว่า 1 พันล้านบาทต่อเดือน หากคุณพร้อมที่จะเล่นคาสิโนออนไลน์คุณสามารถใช้ทางเข้า gclub หรือ gclub มือถือเป็นทางเข้าสำหรับการเดิมพันคาสิโนออนไลน์ตลอด 24 ชั่วโมงสำหรับเว็บไซต์ของเรา เว็บจี ยังคงเปิดให้บริการสำหรับนักท่องเที่ยวหรือผู้ที่ต้องการเดิมพันเนื่องจากปัญหางานด้านข้อกฎหมายในประเทศไทยทำให้คาสิโนในไทยหรือค่าสิโนไทยไม่สามารถที่จะเปิดให้บริการได้เหมือนประเทศเพื่อนบ้านหรือจากคาสิโนที่ปอยเปตแต่คุณสามารถเข้าใช้งานได้โดยตรงผ่านระบบเว็บไซต์หรือระบบออนไลน์ฟรีระบบคาสิโนออนไลน์ซึ่งคุณจะได้เครดิตฟรีหากคุณทำการค้นหาคาสิโนออนไลน์แจกเครดิตฟรี

สำหรับผู้เล่นคาสิโนออนไลน์ที่ติดต่อเข้ามาใหม่หรือทำการสมัครใหม่แน่นอนคุณจะได้รับเครดิตฟรีในการวางเดิมพัน หรือคุณจะเลือกเป็นโบนัสในการเล่น หรือเลือกรับเป็นส่วนลดในการเล่นถ้าคุณมียอดการเล่นสะสม คุณสามารถได้รับโบนัสในยอดเล่นกันสะสมได้ซึ่งเรามีเกมให้คุณสามารถตรวจสอบได้ผ่านทางเข้า gclub และแน่นอนสำหรับผู้เล่นหน้าใหม่คุณอาจจะหา วิธีหรือเทคนิคในการโกงบาคาร่า เรายังมีวิธีและเทคนิคในการโกงบาคาร่า ทำให้ผู้เล่นได้เปรียบแต่ทั้งนี้ส่วนหนึ่ง ผู้เล่นจะต้องมีความพึงพอใจในส่วนที่ตั้งไว้ เช่นตั้งเป้าหมาย 200 บาท เมื่อผู้เล่นได้ยอดถึง 200 บาทก็ควรที่จะเลิก คนที่จะระงับยังและชั่งใจในการเล่นเพื่อไม่ให้ เสียแผนการเล่น หรือเสียการเดิมพันหรือเสียการครอบครองแผ่นที่เราคิดไว้ในการเล่นคาสิโนออนไลน์

Mowgli (Neel Sethi) who was raised since his birth in the middle of the wolves was made to leave the jungle due to a fearsome tiger Shere Khan, who consistently remained after him to attack. showbox app

Interesting topic for a blog. I have been searching the Internet for fun and came upon your website. Fabulous post. Thanks a ton for sharing your knowledge! It is great to see that some people still put in an effort into managing their websites. I'll be sure to check back again real soon. Advokat Stavanger

Thanks a ton for sharing your knowledge! It is great to see that some people still put in an effort into managing their websites. I fppund this article helpful oneline i.e Kik for PC

I like you site very much, i know how life can get in the way of things, but keep up the good work, it is appreciated juegos friv gratis online.

I feel really vivacious to have seen your page and suspect such a mix of all the in like way coordinating conditions looking. fujitsu acy 100

It joins mind blowing and critical posts. I've evaluated an essential bit of them in like way got such a fabulous aggregate from them. grow tent

Great info! I recently came across your blog and have been reading along. I thought I would leave my first comment  Buy ESO Gold . I don’t know what to say except that I have.

Nowadays, it is all possible with the application of Showbox, as it proves an unlimited collection of movies and TV shows, from which the user can select his favorite choice of media. Showbox

Really impressed! Everything is very open and very clear clarification of issues. It contains truly facts. Your website is very valuable. Thanks for sharing. ddos tool

Good post but I was wondering if you could write a litter more on this subject? I’d be very thankful if you could elaborate a little bit further. Appreciate it! visit site

Hey There. I found your blog using msn. This is a very well written article. I’ll be sure to bookmark it and come back to read more of your useful info. Thanks for the post. I’ll definitely return.

I was surfing net and luckily ran over this site and discovered extremely fascinating stuff here. Its truly enjoyable to peruse. I delighted in a ton. Much obliged for sharing this magnificent data. roof lanterns

It does not matter which iPhone/iPad you have and the version of iOS you are running right now. Any of these methods will help you install MovieBox and enjoy the unlimited movie streaming and downloads. Movie Box

The announcement follows the recent deal between Disney and Hotstar that announced last month. The latter gives Hotstar access to films made under four different studios - Marvel, Pixar, Lucasfilm, and Disney itself - plus television content thanks to Disney's ownership of ABC Studios. hotstar movies


Add new comment