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Another day, another guesstimate about how much the Chinese are buying in Vancouver. Data analysis here

March 24th, 2016 · 7 Comments

Oh brother, economists doing calculations on the backs of envelopes to throw another Douglas fir on the bonfire of Vancouver real-estate hysteria. Isn’t there some kind of Hippocratic oath about doing no harm?

Anyway, for those who didn’t see it, some bank economists put a few numbers together to declare that a third of all Vancouver real estate was bought by high-net-worth Chinese investors last year. The story has quickly spread, with various levels of helpful information about how they calculated the numbers. Story 1 from Bloomberg here, story 2 from the Globe, and story 3 from the Vancouver Sun. The bar graph below also appeared in my Twitter feed, not sure from from where.

And it’s sure to attract some analysis. As alert readers will note, this comes from a sample of 77 high-net-worth Chinese investors who agreed to answer a survey saying where they had bought property. The Sun story spells out that that could mean offshore investors or residents and immigrants to the country. Since 11 per cent of them said Vancouver was their real-estate choice, that would mean nine of the 77. Nine.

Then the economist calculations pegged their purchases at $12B Canadian, I guess by dividing the total amount of presumed sales around the world to Chinese people by 77, and concluded that these nine people’s answers could be extrapolated to say that one-third of the total sales in Vancouver’s market last year were to high net worth Chinese buyers. But a quick check shows that that the $38.5 billion they’re referring to is the number for residential resales for the Real Estate Board of Greater Vancouver. So that’s not the total in sales for the Lower Mainland. About 10 to 15 per cent of sales (developers selling their own condos, etc.) happen outside the board’s MLS system. It also doesn’t include the $11 billion in sales from the Fraser Valley real-estate board, which includes Surrey, Delta and Langley, or the 10 to 15 per cent of non-MLS sales there.

But, whatever, one more factoid for the mill.

Additional note an hour later: Alert Twitter observers have noted it’s one-third of dollar value, not one-third of units. If rich folks are buying very expensive places, they could well be buying much less than a third of everything that sold. A further note: Joanne Lee-Young’s story in the Sun has the best explanation for the methodology the economists used, something about guesstimating the level of buying in Canada based on levels of buying in the States. (Just read it, I couldn’t possibly summarize the contortions.)

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